Mikron Machining Solutions

The Machining Solutions business segment looks back on an extremely difficult 2020 financial year that was heavily impacted by the COVID-19 crisis. In the main sales market of the automotive industry, demand for the Mikron Machining division’s manufacturing systems had already reduced  before the outbreak of the pandemic, which further worsened the situation and also severely impacted the service and tooling business for many months. One bright spot is the increase in sales in these areas towards the end of the year – including from the automotive industry.

Business Performance

The Mikron Machining Solutions business segment operates as two divisions, Mikron Machining and Mikron Tool. Due to structural changes in the automotive industry and related shift towards electric vehicles, the Mikron Machining division began 2020 with a very low order backlog. The outbreak of the COVID-19 pandemic further slowed demand for Mikron’s highly productive manufacturing machines in all sales markets. For example, the closure of schools in many countries even led to a freeze on investment in the writing instruments industry. During the first half of the year, the Mikron Group decided to concentrate the machine manufacturing business in the Mikron Machining division at the Agno site in response to reduced demand from the automotive industry for metal-cutting machines. Mikron Machining Solutions implemented the restructuring program initiated in the spring as planned. Throughout the year, short-time working was also implemented in many areas at most sites and included the phase out of the Mikron 6×6. At the Rottweil site, Mikron Machining Solutions continues to run the service business and the business of the Mikron Tool division.

As a supplier of industrial consumer goods, the Mikron Tool division is also relatively directly affected by global economic developments, although not as severely as the Machining division. In particular, the short-term closure of many plants in the automotive industry resulted in a significant drop in sales of special tools for Mikron Tool in the first half of the year. In the standard tools business, which is broadly diversified across markets, Mikron Tool was able to keep order intake stable throughout the year. During the pandemic, the division succeeded in maintaining delivery worldwide without interruption thanks to fully integrated digital production and logistics processes, a flawlessly functioning home office and two perfectly complementary production sites. During the plant closure imposed by the authorities in Switzerland, Mikron Tool was able to supply its customers in full from the German plant.

Order intake and order backlog

In 2020, the business segment achieved an order intake of CHF 96.0 million (previous year: CHF 119.4 million, -19.6%). This significant decline is largely due to the lack of demand in the machinery business. Towards the end of the year, demand for tools and services began to pick up.

At CHF 38.2 million, the segment’s order backlog at the end of 2020 was at the low level of 2019 (CHF 38.1 million, +0.3%). With its restructuring program, the Mikron Machining division significantly reduced its capacity and cost base in the year under review. At the Mikron Tool division, existing capacities were largely maintained in anticipation of a market recovery in the foreseeable future.

Sales and EBIT

The business segment achieved sales of CHF 96.3 million in the year under review (previous year: CHF 151.5 million -36.4%). Of this, 15% came from Switzerland, 47% from Europe, 17% from Asia and 19% from North America.

The lack of sales in the machinery business severely impacted Mikron Machining Solutions’ profitability in the year under review. Restructuring costs in the Machining division had an additional impact on the business segment’s results. Before restructuring costs, Mikron Machining Solutions posted EBIT of CHF -13.6 million. Taking restructuring costs into account, EBIT came to CHF -21.6 million (previous year: CHF 1.1 million), with the tools business as a whole achieving a pleasingly positive operating result.

Innovations and strategic projects

The market launch, further development and completion of the new rotary transfer machine platform MultiX was driven forward despite the adverse conditions. The future-oriented platform offers customers completely new possibilities. After the MultiX had already won an innovation award at EMO 2019, Mikron also received the coveted “Best Industry Award 2020” for it in the production technology category. A first customer installation took place in 2020 and further machines will be delivered in early 2021. With the new Mikron miTool monitoring system, which can be installed both on new machines and on equipment already used by customers, Mikron Machining is also making technological progress in digitalization. The system, which has already been tested in practice, is another element that helps customers increase their productivity.

Mikron Tool continuously advanced its product development strategy in the 2020 financial year and launched further high-performance tools for stainless steels and difficult-to-machine alloys. In some cases, also for completely new applications. In addition, Mikron Tool intensified its cooperation with strategic partners in order to open up access to new markets, for example in medical technology. At Mikron Tool, too, direct customer contact was severely hampered, and often even impossible, for virtually the entire year. Thanks to consistently functioning digital processes, all activities – from order discussions to worldwide deliveries to customers – were always possible from the home office. The newly offered webinars also gave customers a direct insight into the technology center. In this way, the performance of existing and new products could be impressively demonstrated to them despite contact prohibitions.

Employees

As a result of the restructuring measures implemented as planned in the Machining division, the number of employees in the Machining Solutions segment decreased from 707 employees (full-time equivalents) to 545 (-22.9%). On average, 20-30% of the segment’s employees worked reduced hours. In the year under review, Mikron Machining Solutions employed a total of 45 apprentices and trainees.

Outlook

Despite initial signs of recovery in demand for tools and services at the end of 2020, the outlook for the segment at the beginning of 2021 remains uncertain. Mikron Tool is well positioned for the potential further increase in demand and will be able to benefit quickly from a market recovery. Restructuring in the Mikron Machining division is essentially complete, with capacity reduced and concentrated at one site. The new platform won major international innovation awards and is proving its capabilities with lead customers. New digital services and products are available and have already proved successful in practice. However, it is currently difficult to estimate how quickly demand will recover, particularly from the important sales market of the automotive industry, in the Machining division.