Lockdowns and Extended Chinese New Year Affect Oerlikon MMF Segment’s Q1 Business Performance

Oerlikon Manmade Fibers Segment suffered setbacks during the first quarter of this year, with orders impacted by lockdowns and the extended Chinese New Year in China.
The current assessment is that the 2020 planned delivery schedule for the segment will be maintained; new contracts exceeding CHF 600 million were awarded, with deliveries in 2022/2023.
Dr. Roland Fischer, CEO of the Oerlikon Group, says, “Our manmade fibers business continues to be very well positioned, driven by long-term, strategic customer investments in the filament value chain in China. As a result of the COVID-19 pandemic, we are seeing strong global demand for our meltblown technology that is used for producing surgical face masks. To support this demand that is expected to grow further, we have ramped up our production capacity and significantly reduced the delivery time of these systems. In addition to selling our equipment globally, we are supporting local and international businesses with nonwoven materials. For example, we are now producing in Germany more than 100,000 m² of fabrics per month for the manufacture of over one million face masks each month to protect lives.”
Oerlikon Manmade Fibers Segment received new large contracts for filament spinning systems from three of the world’s leading manmade fiber producers in China. The three projects have a total value of more than CHF 600 million. A very small proportion of these projects will be recognized in the order intake in 2020, and the majority will be accounted for in 2021 and 2022. Despite the new contracts, the segment posted a 51.4% fall in the first-quarter order intake to CHF 144 million, partly due to the delay in financial clearance in China as a result of shutdowns.
First-quarter sales for the segment decreased by 19.3% to CHF 205 million, attributed to the lockdown in China and lower demand for equipment and systems for special filament (carpet and industrial yarn) and plant engineering (polymerization, staple fibers and nonwovens), particularly in North America, Europe and Asia. Following lower sales, the EBITDA margin declined to 8.9%. EBIT for the first quarter was CHF 11 million (Q1 2019: CHF 27 million), and the EBIT margin was 5.5% (Q1 2019: 10.7%).
During the first quarter, the segment took over the majority stake in Teknoweb Materials s.r.l., which was established in 2017 as a joint venture to extend the nonwoven production system portfolio to include the attractive market for disposable nonwovens. Due to the COVID-19 pandemic, strong global demand for Oerlikon’s meltblown (nonwoven) technology used for producing surgical face masks has been noted. Demand is expected to grow in the upcoming quarters, driven by government regulations and the need for greater self-sufficiency and reduced reliance on imports for critical medical items. To support this growth, the production capacity for meltblown technology has been ramped up, and the delivery time for these systems has been reduced significantly.
Production in China was closed toward the end of January and in February (extended Chinese New Year and lockdowns). Operations started up gradually in March, and have returned to full capacity since the end of that month. Despite shutdowns in Europe, the segment operated at full speed in Germany, achieving a record production of winders in March in Remscheid, Germany.
The key challenge in Europe has been to secure the supply chain in the challenging COVID-19 environment. The segment has succeeded in balancing the situation, and is confident of being able to fulfill the planned delivery schedule for 2020. The mid-term outlook for the segment remains unchanged based on current assessment, and the project pipeline has been extended, with deliveries reaching into 2023.