Daetwyler Holding AG, the world’s second-largest supplier of rubber and aluminum packaging for drugmakers, is ready to spend as much as 300 million Swiss francs ($271 million) to expand its technical components division in Poland and the Czech Republic.
“We would be ready financially and on the management side,” Chief Executive Officer Paul Haelg said in an interview May 11.
Daetwyler is in contact with several targets and a deal hasn’t happened yet because of differences over prices, the CEO said. Average selling prices in the market are 5 to 10 times the target’s earnings before interest, taxes, depreciation and amortization or 1.5 times its sales, Haelg said.
The Swiss company sold its precision tubes division at the end of 2007 to concentrate on more profitable businesses like pharmaceuticals packaging and technical components, where the market is highly fragmented. In January, it bought Germany’s Reichelt Elektronik GmbH, a distributor of industrial electronics and automation parts with annual sales of about 150 million francs.
Including Reichelt, Haelg expects sales of 1.3 billion to 1.35 billion francs this year and net income of about 80 million francs. In three to five years, he’s aiming for sales of more than 2 billion francs, driven by the pharmaceutical packaging division and the technical components unit, which distributes engineering and electronics components. He targets an operating margin in the range of 10 to 14 percent and net income of 150 million to 200 million francs.
Revenue last year fell 14 percent to 1.11 billion francs, with net income dropping 48 percent to 57.2 million francs.
Daetwyler, which is controlled by Pema Holding AG, has gained 15 percent this year in Swiss trading, giving it a market value of 1.14 billion francs. Distribution of electronics components is its biggest business, accounting for 44 percent of revenue last year. Pema would participate in a capital increase if needed to finance larger acquisitions of as much as 800 million francs, Haegl said.
Haelg, CEO since 2004, said the rubber products division is seeing a “clear” recovery in demand for the molded components, seals and gaskets it makes for high-end cars of Bayerische Motoren Werke AG, Renault SA and General Motors Co.
Daetwyler is following automotive suppliers to China and probably India, Haelg said. The company, based in Altdorf, near Lake Lucerne, is planning to invest a high “single-digit” figure in million of francs this year or next in China to build a factory.
The cables unit for elevators and data transfer in non- residential buildings, pharmaceutical packaging as well as the engineering and electronics components business are also showing “clear” improvements, he said.
“With today’s view we have a visibility of about three months and are positive,” the CEO said.
Daetwyler’s share of the roughly $1.5 billion pharmaceutical packaging market, currently about 20 percent, is growing at the expense of U.S.-based West Pharmaceutical Services Inc., which has 60 percent, Haelg said. France’s Stelmi controls about 10 percent; Daetwyler would look at the closely held company if it were up for sale, Haelg said.
In contrast, the technical components market is not as consolidated yet, according to Haelg. The catalogue segment of the market generates $1.5 billion to $1.9 billion in annual sales in western Europe. Rivals include the U.K.’s Electrocomponents PLC and Premier Farnell Plc. Haelg’s focus for this business is expansion in eastern Europe.
The Swiss franc’s strengthening creates uncertainty regarding the company’s outlook, according to Haelg.
“Until 1.40 we can make it and below it’s not so good,” Haelg said. A euro was worth about 1.41 francs in today’s trading, down from 1.50 francs five months ago. He added there could be a negative effect of about 40 million francs on full- year revenue because of the franc’s gains against the euro.