In the 2020 financial year, which was strongly impacted by the COVID-19 crisis, the Mikron Group’s sales declined from CHF 327.6 million to CHF 257.8 million (-21.3%). While the Mikron Automation business segment held up well particularly in its main market – the pharmaceutical and medtech sectors, the Mikron Machining Solutions business segment suffered considerably owing to the general mood of uncertainty and low demand for machining systems especially in the automotive industry. Both business segments incurred substantial restructuring costs in the first half of 2020. The measures taken had a positive impact already in the course of the second half. Order intake, net sales and EBIT improved compared with the first half. At the end of 2020, the Mikron Group’s order backlog of CHF 161.6 million was already higher than the corresponding figure at the end of 2019 (CHF 157.4 million, +2.7%). The Group’s EBIT for 2020 amounts to CHF -4.7 million before restructuring costs and to CHF -20.8 million after restructuring costs (2019: CHF 14.1 million). Overall, Mikron is facing the current challenges in a stronger position, with a significantly improved cost structure and with secured liquidity.
Group business review
The two business segments Mikron Automation and Mikron Machining Solutions both look back on a difficult business year. While Mikron Automation held up well overall, due to the good positioning in its main sales market of pharmaceutical and medical technology, the Machining Solutions segment was more affected by the COVID-19 crisis. Demand for machining systems in the automotive industry, its main sales market had already fallen sharply before the outbreak of COVID-19. The pandemic further worsened the situation and also severely impacted the service and tooling business.
The extensive restructuring programs were implemented consistently and rapidly in both business segments. Restructuring cost of CHF 16.1 million burdened the results in 2020 while the reduced cost base showed positive effects already in the second half-year. In the Mikron Machining Solutions business segment, capacity was significantly reduced, and production of manufacturing systems concentrated at one site. In the Mikron Automation business segment, the Berlin site will be closed by mid-2021.
Both business segments have systematically continued digitalization at all levels and further increased data security. An external data attack was successfully repelled in the reporting year.
The COVID-19 pandemic
The COVID-19 pandemic has affected the various Mikron locations in different ways. Measures Mikron has taken in response to the COVID-19 crisis include:
Even in crisis-ridden 2020, Mikron Automation continued to establish itself as a leading technology and assembly solution supplier in the European, US, and Asian pharmaceutical and medtech industries. The business segment also succeeded, for example, in rapidly and efficiently implementing new automation solutions for the manufacture of COVID-19 test device systems. In contrast, order intake from the automotive industry remained significantly too low. As the medium-term outlook does not suggest any particular improvement in this respect, Mikron has decided to close the Berlin site, which works exclusively for the automotive industry, by mid-2021, after completion of the customer projects still in progress.
The Mikron Machining Solutions business segment operates as two divisions: Mikron Machining and Mikron Tool. The Mikron Machining division saw a decline in demand from the automotive industry already before the outbreak of the pandemic, which further worsened the situation and also severely impacted the service and tooling business. Encouragingly, sales increased again in these areas towards the end of the year. The tool business of Mikron is well positioned in all respects for an upturn in the market.
Order intake and net sales
The Mikron Group reported order intake of CHF 267.3 million in 2020, representing a decrease of 7.3% compared with the prior year (CHF 288.5 million). The Mikron Automation business segment increased its order intake to CHF 171.5 million (previous year:
CHF 169.2 million, +1.4%), while the Mikron Machining Solutions business segment saw a decline to CHF 96.0 million (previous year: CHF 119.4 million, -19.6%).
Posting annual net sales of CHF 257.8 million, the Mikron Group fell 21.3% short of the prior-year’s result of CHF 327.6 million. While Mikron Automation’s net sales of CHF 161.7 million were 8.7% behind the previous year’s figure, Mikron Machining Solutions recorded net sales of CHF 96.3 million (2019: CHF 151.5 million, -36.4%). Europe remains Mikron’s most important market, with approximately 46% of total net sales in 2020 (2019: 54%). With a share of 37%, North America is now quite close behind (previous year: 25%). The strongest market segment is by far the pharmaceutical and medtech sector with 56% (previous year: 38%). The automotive industry contributed 14% (prior year: 30%) to total net sales.
Capacity utilization and order backlog
While the Mikron Automation business segment enjoyed good capacity utilization – apart from the Berlin site – throughout the 2020 financial year, this was not the case for the Mikron Machining Solutions business segment. During the first half of the year, the Mikron Group decided to concentrate the machine manufacturing business in the Machining division at the Agno site in response to reduced demand from the automotive industry for metal cutting machines and implemented a comprehensive restructuring program. The Mikron Tool division was able to supply its customers in full from Rottweil (Germany) during the plant closure in Agno imposed by the authorities in Switzerland.
At CHF 161.6 million, the Mikron Group’s order backlog at the end of 2020 was 2.7% higher than the prior-year figure. While the Machining Solutions business segment reported an order backlog at the level of the previous year (+0.3%), the Automation segment increased the same figure by 3.4%.
EBIT for the 2020 business year was negatively impacted by one-off expenses in connection with the restructuring measures. In total, restructuring costs of CHF 16.1 million were booked. Due to the significant drop in sales in the Mikron Machining Solutions business segment and the lack of volume at the Berlin site in the Mikron Automation business segment, the Group’s EBIT (before restructuring costs) of CHF -4.7 million in 2020 was significantly lower than in 2019 (CHF 14.1 million). The Automation business segment, whose results are strongly negatively impacted by the Berlin site, posted EBIT (before restructuring costs) of CHF 9.1 million (2019: CHF 12.9 million). EBIT before restructuring costs for the Mikron Machining Solutions business segment, at CHF -13.6 million, was also well below the prior-year figure of CHF 1.1 million. After restructuring costs, which include the redimensioning of the Berlin site and capacity adjustments in Agno and Rottweil, Group EBIT stands at CHF -20.8 million. The loss for the 2020 business year is CHF -22.1 million (2019: CHF 8.8 million).
Financial result, income taxes and profit
The financial result was lower than in the previous year and amounted to CHF -2.3 million (2019: CHF -0.5 million), CHF -1.1 million of which was related to net exchange rate losses (prior year: CHF -0.2 million). Interest on and valuation of bonds to optimize financial results were netted against other financial expenses such as fees for bank guarantees. Profit before taxes amounted to CHF -23.1 million (prior year: CHF 13.6 million), on which income taxes of CHF -1.0 million (prior year: CHF 4.9 million) were booked as expenses. The tax expense was significantly lower due to fewer one-time effects than in the prior year and according to the overall lower profitability of the Group. The income tax rate is also still distorted by tax losses not capitalized. Mikron’s net earnings for 2020 were CHF -22.1 million, compared to CHF 8.8 million in the prior year. Net earnings per share for the year 2020 came to CHF -1.35 (prior year: CHF 0.54). At the General Meeting on 23 April 2021, the Board of Directors of the Mikron Group will propose no distribution to the shareholders.
The investment property in Nidau (Switzerland) generated net income of CHF -0.7 million (prior year: CHF 0.2 million) including an impairment of CHF 0.5 million based on an update to the third-party market value assessment performed at the end of 2020. The non-operating result excludes the financing costs of the mortgage of CHF 9.0 million. Since August 2019, around 60% of the building has been vacant because one of the lessees moved out. Various development ideas for the property are currently under evaluation. The costs included for the planning and evaluation of the future development of the investment property amount to CHF 0.2 million for 2020 (prior year: CHF 0.6 million).
Balance sheet, financing and equity ratio
Overall, the Mikron Group’s balance sheet remains strong. Mikron is free of net debt and reports a healthy equity ratio.
Cash and cash equivalents plus current financial assets of CHF 40.4 million significantly exceed interest-bearing liabilities of CHF 24.1 million. The current financial assets of CHF 2.0 million are mainly invested in Swiss franc bonds with a residual maturity of less than one year. The net cash position remained at a high CHF 16.3 million or 6% of net sales (prior year: 7%).
Net working capital amounts to CHF 22.8 million (prior year: CHF 41.8 million) or 9% (prior year: 13%) of net sales. The reduction was mainly supported by lower inventories and the increase of short-term provisions.
Totaling CHF 112.4 million, non-current assets increased by CHF 0.9 million. In line with strategy, investments of CHF 12.0 million (prior year: CHF 18.5 million) were made in production equipment and a building extension for the tool and automation business and a number of IT projects to improve efficiency and security. The total amount of expenditure for new product development and enhancements (capitalized and not capitalized) was about 2.5% of net sales. Amortization and depreciation totaled CHF 10.4 million (prior year: CHF 8.3 million). The long-term financial liabilities of CHF 10.1 million mainly relate to finance leases for production equipment and the mortgage for three production facilities.
Since June 2020, Mikron has been able to draw on a CHF 50.0 million credit agreement with a bank consortium which is available for bank guarantees to secure advance payments from customers and for fixed advances that are currently not being used. An additional CHF 20.0 million of the mortgage can be drawn under this credit agreement for two production sites in Switzerland. The credit agreement will expire at the end of June 2024 and requires Mikron to achieve certain key financial figures (covenants). The Group met these by a comfortable margin. The renewal of the credit agreement has been secured with the existing partner banks. In 2020, a COVID-19 and a COVID-19 plus loan facility of up to aggregate CHF 8.3 million was established at one production site in Switzerland.
In 2020, shareholders’ equity fell to CHF 145.5 million. This represents a solid equity ratio of 53% (prior year: 58%). The decrease of -5% is mostly attributable to the losses in the financial year.
Cash flow from operating activities reached CHF 9.2 million at the end of 2020 (prior year: CHF 7.3 million). A total of CHF 15.3 million (prior year: CHF 11.3 million) was used for investment in non-current assets.
A net loss led to an operating free cash flow (excl. changes in financial assets) of CHF -5.8 million (prior year: CHF -3.5 million). The Group is aiming to achieve positive operational free cash flows over the longer term. This goal was reached over the past five years in aggregate.
Cash flow from financing activities amounted to CHF 2.6 million in the year under review (prior year: CHF 3.4 million), mainly stemming from the draw-down of mortgages and repayment of financial leases.
Share performance and return
At the end of 2020, the share price stood at CHF 5.40 (prior year: CHF 6.76 per share). The precise share performance is available at all times on the Mikron Group website.
Based on the year-end share price, the Mikron Group is valued at CHF 90.2 million. Since this amount is lower than the Mikron Group’s shareholders’ equity, a test of potential impairment losses was carried out. The strategy outlook and impairment tests on material assets (in some cases with valuation reports from third parties) attest to the value of the shareholders’ equity.
Corporate Financial Statements of Mikron Holding AG
Mikron Holding AG is the legal owner (directly or indirectly) of all subsidiaries of the Mikron Group, the owner of the Mikron trademark and the treasury center for the Mikron Group. The CFO and a small Group finance team are employed by the separate management company, and costs are charged back to Mikron Holding AG. Excluding the net finance result of CHF -25.7 million (prior year: CHF -3.3 million), the trademark fees charged to the companies nearly covered the costs incurred. Other than in 2019 (none), a dividend income of CHF 4.5 million from subsidiaries was booked this year.
The financial statements of Mikron Holding AG show a solid equity ratio of above 62%.
The Mikron Group focuses on the needs of its customers, with the aim of establishing and cultivating strong, long-term relationships with them. All strategic and operational initiatives and activities are triggered by Mikron’s mission to increase customers’ industrial productivity. As in previous years, Mikron actively contacts customers to systematically ask for their opinion and feedback. Customer feedback conveys a positive picture overall. Besides high-performance turn-key production systems and excellent “Crazy” Tools, Mikron offers its customers a broad range of after-sales services fostering long-term partnerships. Mikron asks for and receives suggestions for improvements and refinements in its strategic planning in the form of targeted initiatives, product and process enhancements, and investments in new product developments.
Mikron operates in a demanding, highly cyclical and global market, and is exposed to globally active and locally specialized competitors. The key to success is highly skilled and motivated employees who are willing to assume responsibility and work together constructively. This allows the Group to respond to the rapid changes, diverse customer requests and complexity inherent in the business. About every two years, an independent consultancy for personnel and organizational development assesses the level of employee satisfaction.
Mikron aims to attract and retain employees with the right level of technical qualifications who are able to work in dynamic interdisciplinary teams, have a broad set of language skills, and are willing to travel and work abroad – even if this was only possible to a very limited extent in 2020. Mikron continued to invest in training and education and conducted numerous virtual seminars. New apprentices and trainees were taken on, and the management and leadership training program as well as specific project managers’ training continued. With very few exceptions, all employees were trained in the application of our Code of Conduct.
As at the end of the 2020 financial year, the Mikron Group overall numbered 1,331 employees (FTEs), representing a decrease of 10.4% (prior year: 1,486 employees). The reduction is due to the job cuts made in the Mikron Machining division and the redimensioning of the Berlin site. In parallel with the workforce reduction, short-time working was implemented to some extent in the Machining Solutions segment.
The number of apprentices decreased from 110 employees to 94 employees at the end of 2020. Around 63% of the workforce is employed at the companies in Switzerland, approximately 13% in the European Union, 15% in the US, and 9% in Asia.
Employees’ remuneration is based on their role, performance, specific knowledge or value to Mikron (languages, special technological expertise) and experience. Men and women are paid equally for performing equal work. Women account for around 10% of Mikron staff and most of them perform tasks in internal service functions. The economic performance and regional differences of the individual companies are also taken into account. It is Mikron’s aim to compensate its employees fairly and in a comparable way to similar internationally active companies.
Innovation and key investments
Several development projects continued in 2020. In the year under review, a total of CHF 6.5 million (prior year: CHF 10.4 million) was invested in the development or enhancement of new products or product platforms. These figures include personnel expenses, material costs and other operating expenses, and represent 2.5% of net sales (prior year: 3.2% of net sales). This does not include daily innovation activities which are triggered by customer projects and are required to develop new specific assembly or machining processes. Details of the main innovation projects in both business segments can be found here and in the segment reports, here and here.
Today, Mikron offers all kind of digital and connectivity-related services and solutions commonly summarized as “Industry 4.0”. In recent years, such technologies have been systematically developed, tested and integrated into existing and new products, processes and service offerings.
The Mikron Group acknowledges its responsibility towards people and the environment. Its Sustainability Report is guided by the globally recognized principles of the Global Reporting Initiative (GRI). The Group’s aim in this respect is to ensure transparent, standardized, and comparable reporting. The full report is available on the website at www.mikron.com.