OC Oerlikon (OERL) Q4 2023 earnings summary

Executive summary

• 2023 sales and margins weakened amid difficult markets, especially the filament downturn; operational execution, cost actions and Surface Solutions growth supported resilience.

• Strategic transformation is nearing completion, with options under evaluation to separate Polymer Processing Solutions and establish a Surface Solutions pure play.

Financial highlights

• 2023 sales were CHF 2.693bn, down 7.4% reported and 1.5% FX-adjusted; FX reduced Group sales by CHF 174m, or 6%.

• Order intake was CHF 2.457bn, down 17.8% reported and 12.6% FX-adjusted; operational EBITDA was CHF 444m, with a 16.5% margin versus 17.6% in 2022.

• Operational EBIT was CHF 235m, with an 8.7% margin, versus CHF 301m and 10.4% in 2022; Q4 included accounting impacts from portfolio changes.

• Operating cash flow was CHF 199m and operating free cash flow CHF 60m; operating FCF was affected by lower EBITDA and reduced customer advances.

Outlook and guidance

• 2024 Group sales are expected to decline at a high-single-digit rate, with operational EBITDA margin of 15.0–15.5%, driven by the filament downturn.

• Surface Solutions guidance: low- to mid-single-digit sales growth and 17.5–18.0% operational EBITDA margin; pricing supports sales while volumes face weak industrial activity.

• Polymer Processing Solutions sales are expected to decline in the mid-twenties percentage range, with operational EBITDA margin of -11.0%; cost actions are expected to support margins as filament customer economics improve.

• 2024 capex is expected to be approximately CHF 130m; year-end leverage is expected at 2.5x–3.0x operational EBITDA.