Datwyler to focus clearly on profitable organic growth by scaling its business model

Datwyler, a leading provider of system-critical elastomer components, will give an insight into the growth drivers in its markets and the strategies and innovation of its business units at today’s Capital Market Day. Thanks to the expansion of its production capacities, the most recent acquisitions and the continuous improvement of its core competencies, Datwyler is in a strong position strategically to tap into the attractive potential for profitable growth in the markets it serves.

Intact growth trends and a strong product pipeline
In the immediate future, Datwyler will place a clear focus on achieving profitable organic growth by scaling the business model and production capacities and on strengthening the balance sheet. In the process, Datwyler intends to tap into the potential of its existing customers and markets more effectively, extend the markets it can serve with high-value products, expand into new regions with the Healthcare and Connectors business units and increase the share of revenue generated by new products from the innovation pipeline. The large number of promising new projects with existing and new customers shows that the growth trends are intact in the markets with high barriers to entry that Datwyler serves. For that reason, Datwyler confirms the medium-term objectives communicated to date. In terms of revenue, the company is aiming for growth of 6% to 10% per year. Given the subdued economic environment, the lower end of the target range is likely to be more achievable in the near future. Thanks to economies of scale and the elimination of the most recent one-time effects, the company is targeting an EBIT margin of between 18% and 21% in the future. The lower threshold should be exceeded for the first time in the 2026 financial year. Following a slight recovery in the second half of the year, Datwyler expects to generate revenue of close to CHF 1’175 million and an EBIT margin of close to 11% for full year 2023. The margin is currently well below the target range. This is attributable to the very rapid and almost complete loss of the Covid business and customers’ reduction of their high levels of security stocks, primarily due to post-pandemic effects. This led to under-utilization of the recently extended plants. The temporary increase in energy costs in 2023 is also impacting the margin.

The Datwyler business model enables the creation of strong synergies and, consequently, competitive advantages through overarching research and development, materials expertise and solution design, through uniform production and IT systems, and through central procurement of similar raw materials and production equipment for all business units. Datwyler generates more than two-thirds of its revenue as a principal strategic supplier of global market and innovation leaders in less cyclical markets and technologies that are enjoying long-term growth, such as healthcare, food & beverage, automation and electrification.

“Thanks to our expanded production capacities and our most recent acquisitions, we are in a strong position strategically to resume the profitable growth we have achieved in the past. Our growth potential remains intact due to the megatrends in our markets and our strong project pipeline. The one-time positive Covid effects have now normalized. As soon as our customers have finished destocking and the environment has further stabilized, we will benefit considerably from economies of scale thanks to our advanced investments,” says Datwyler CEO Dirk Lambrecht.

“Strengthening the balance sheet is a major priority for us. The organic growth we are targeting, the increase in our profitability and the lower investments will provide the basis for this. Free cash flow already exceeded earlier levels in the first half of 2023. We will use surplus liquidity to consistently reduce our debt. In the medium term, we are targeting a net debt ratio that is below 1.5 again and an equity ratio of more than 40%,” says Datwyler CFO Walter Scherz.

Healthcare: a strong foundation for gains in market share
For some years now, Datwyler has been pursuing a growth strategy in its healthcare business which aims to increase the share of revenue generated by high-value, high-margin products for modern injectable medicines. To this end, Datwyler has systematically invested in the expansion of its global production presence and of its product portfolio, as well as in market development and technical and scientific customer support. This gives Datwyler a strong foundation from which to outstrip market growth and gain market share in the medium term. Given its strong project pipeline, Datwyler is targeting annual revenue growth in the high single-digit percentage range for its Healthcare Solutions business area once its customers have finished destocking. As the high-quality products are growing significantly faster, their share of revenue will increase continuously.

Mobility: success on the road to e-mobility
In the Mobility business unit, Datwyler has been working successfully on the transformation to e-mobility for a number of years now. By strengthening its presence with local development engineers in key markets, the company was able to acquire leading electric vehicle and battery manufacturers as new customers. The project pipeline is developing encouragingly and the share of acquired customer projects that involve vehicle electrification has this year risen to well above our internal target range for the first time. At the same time, the EBIT margins on these projects are in double digits. For the coming years, Datwyler is targeting annual revenue growth in the mid-singledigit percentage range, with the share of electrical applications increasing at an above-average rate and thus overcompensating for the loss of product lines that are being phased out.

Connectors: leading global provider in an attractive market
With its takeover of QSR in May 2022, Datwyler became the leading global provider of system-critical seals and components for electrical connectors. Powerful megatrends like electrification, connectivity, Industry 4.0 and the Internet of Things are creating long-term growth potential in a wide range of industries. The new Connectors business unit differentiates itself among other things via patented materials such as high-consistency rubber, leading engineering skills and rapid completion of customer projects. Key focuses for the future are the further optimization of production processes on the basis of the uniform Datwyler production system and the opening of a site in Europe in order to significantly expand the European customer base. The Connectors business unit is targeting annual revenue growth in the higher single digits percentage range over the medium term, along with a continuous improvement in margins. The share of high-quality products will increase continuously.

General Industry: digitalization of marketing and business processes
With its system-critical components, the Datwyler General Industry business unit concentrates on high-end applications in a variety of industries. In its capacity as a development partner, Datwyler offers leading material expertise, global production opportunities and outstanding product quality and enjoys longstanding relationships with industry leaders. By digitalizing its marketing activities and business processes, the business unit aims to broaden its market access and accelerate the acquisition of profitable new orders. After the markets have consolidated and customers have finished destocking, this will lead to growth in the mid-single-digit percentage range.

Food & Beverage: industrialization partner to the market leaders
In its Food & Beverage business unit, Datwyler has proven that it can use its core competencies to support bigname firms with the implementation of innovative systems, from prototypes to mass production of several billion parts per year. As an industrialization partner, the company enjoys longstanding, close relationships with the market leaders in the coffee capsule market. Following the growth spurt in recent years, Datwyler anticipates stable annual revenue growth in the low single-digit percentage range. Strategic priorities are maintaining innovation leadership and expanding the product portfolio.