Oerlikon Sees Profit Rising Above Guidance as Textiles Stabilize

OC Oerlikon Corp AG (OERL), the Swiss maker of textile machinery that announced the sale of a solar unit to Tokyo Electron in March, said profits may rise further than earlier guidance as a slumping textile market stabilizes.

“The bottom line and the top line can improve on our guidance,” Michael Buscher, chief executive officer of Pfaeffikon, Switzerland-based Oerlikon, said in a phone interview. “We are confident we can increase profitability further compared to 2011,” he said. Buscher didn’t give more detail on how much profitability could improve.

Earnings before interest and taxes in the first quarter rose 7 percent from a year earlier, excluding the one-time sale of property from the textiles unit, to 113 million Swiss francs ($125 million), Oerlikon said today in an e-mailed statement. Sales rose 6 percent from a year earlier to 961 million francs. The Ebit margin, or Ebit as a percentage of sales, was 12 percent.

Oerlikon set a 2012 Ebit margin target of about 11 percent and forecast sales and order intake to decline by as much as 5 percent when it reported full-year earnings on March 5.

Job Cuts

Oerlikon has climbed 8.5 percent since the 2011 results were reported, trading at 8.53 francs on April 27. That gives the company a market value of about 2.7 billion francs.

Order intake in the first quarter dropped 12 percent from a year earlier, led by a 19 percent decline at the textile unit. Buscher said the fall was due to an “exceptionally high” first quarter last year. He said he’s confident about orders for the unit, “based on the strong start to the year and in the context of our discussions with customers.”

Buscher said demand from China, which generates 53 percent of Oerlikon’s textile sales, is stable, with “smaller markets like Indonesia and Turkey helping to push growth.”

Demand for machinery to spin natural fibers like cotton has stabilized and should rise this year, after falling through most of 2011, Buscher said. The peak of the textiles industry was at the end of 2010 and beginning of 2011, as companies re-stocked after the financial crisis, Buscher said.

Demand for man-made fiber machinery to spin nylon and polyester held up better last year and continues strongly, according to the CEO. “We can see good orders for man-made fibers through to 2014,” he said.

Textile Division

Artificial fibers make up about 45 percent of revenue for the textile division, with 40 percent coming from natural materials, Buscher said. The remaining unit revenue comes from components for textile machinery. Oerlikon competes with Rieter Holding AG (RIEN), China Textile Machinery (600610) Co. and Lakshmi Machine Works Ltd. (LMW) in textiles.

Oerlikon agreed to sell its solar business to Tokyo Electron Ltd. (8035) of Japan for 250 million francs, the company said in March. The transaction is expected to close this summer, the company said in today’s statement.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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