Oerlikon Seeks Efficiency Gains as Orders Decline at Gears Unit

OC Oerlikon AG (OERL) Chief Executive Officer Michael Buscher said the Swiss maker of gears and textile machinery plans to make deeper savings after orders at its gears unit dropped in the third quarter.

Oerlikon is constantly assessing its “manufacturing footprint” and wants more supply-chain savings from the drive systems unit, Buscher said in an interview in Zurich today. The unit’s orders fell 16 percent in the quarter on slowing demand across industries from mining to construction.

When asked whether Pfaeffikon-based Oerlikon will consider selling part of the textile division, where the natural-fibres sub-unit is contributing weaker margins, Buscher responded: “There is no reason now to make any kind of speculations. We are concentrating on operational improvement.”

Third-quarter earnings before interest and taxes fell 10 percent from a year earlier to 111 million Swiss francs ($119 million), as the margin of Ebit to sales dropped to 11.6 percent from 13.1 percent, the company said in a statement today. Oerlikon got 65 percent of the quarter’s total revenue from the textiles unit, where the Ebit margin was 10.9 percent.

The company confirmed an overall Ebit margin target of about 12.5 percent for the year.

Oerlikon shares dropped 1.3 percent to 9.43 francs as of 4:07 p.m. in Zurich.

The manufacturer may make changes to the textile division and make acquisitions for the coating and vacuum divisions, Patrick Laager, an analyst at Credit Suisse, wrote in a note to investors today.

Oerlikon is selling a solar division to Tokyo Electron Ltd. (8035) for 250 million francs. Buscher has also sold two Italian manufacturing plants for drive systems this year and in August appointed a new head for the vacuum unit to restore flagging margins at the business.

Buscher said in June he would make “clear decisions” if units failed to meet targets for the return on net assets.

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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