Despite the remaining uncertainties, the Group expects an improvement of its results in the second half of the year 2020 but below the levels achieved in the second half of 2019.
Bobst new industry vision to shape the future of the packaging world was unveiled in June and the Group is adapting its organisation to implement it. The machine business units are being merged, and the Group executive committee has been reduced from five to four members.
During the first half of 2020, consolidated sales amounted to CHF 523.8-million, representing a decrease of CHF 213.0-million, or -28.9%, compared with the same period in 2019. Volume and price variances had a negative impact of CHF 199.2-million, or -27.0%.
The exchange rates had an overall negative impact on sales of CHF 23.9-million. The evolution due to the conversion of foreign currencies for consolidation accounts for CHF -21.4-million, or -2.9%, and the transactional impact on sales volume from Swiss operations accounts for CHF -2.5 million, or -0.3%.
An improvement of CHF 10.1 million, or +1.4%, came from a change in scope of consolidation due to the acquisitions of Yancheng Hongjing Machinery, Dongtai, China, completed 6 January 2020, and of Cito-System, Schwaig, Germany, completed 8 April 2020.
The reduction of consolidated sales was partly due to lower backlog at the beginning of the year and lower order intake compared to the first six months of 2019, but mostly due to the impact of the Covid-19 lockdown. Most machine installations and service interventions scheduled for the second quarter of 2020 could not be performed as planned due to travel bans, which had a significant impact on revenue recognition.
The operating result (EBIT) reached CHF -25.1-million compared with CHF 14.8-million for the same period in 2019. The impact of the Covid-19 lockdown, which led to a lower utilisation of the industrial capacities and to significantly lower sales compared to the level achieved in the same period of 2019, led to the reduction of the operating result (EBIT). Measures such as short-time work, hiring freeze, cost reduction and cost containment reduced the negative impact of the Covid-19 pandemic, but could not compensate for the negative impact by far.
In sheetfed business, total bookings in the first half of the year were impacted by Covid-19 and uncertainty in the global economy with a 31% decrease compared to the same period of 2019. Despite this situation, most mature markets have posted bookings in line with our expectations, but this has not offset the strong negative impact on business in several emerging countries. In the first half of the year folding carton activities have been more active than corrugated board and laminating.
Sales are down 35% in the first half of 2020 compared to the previous year, due to lower backlog at the beginning of the year compared to 2019 and to the impossibility of shipping machines during the lock down period. The delay cumulated during the lockdown has heavily impacted our supply chain and the impact will not be fully recovered in the second half of 2020.
Since the month of May, we have seen a promising increase of project pipelines in both emerging and mature markets and the outlook for year-end has improved in terms of bookings. Nevertheless, there is still a lot of uncertainty in the upcoming months which may impact the full year result.
In web-fed business, a significant number of shipments and installations of equipment in the first half-year needed to be postponed due to Covid-19 pandemic restrictions and temporary closing of our sites and customers’ factories. It is expected that a noteworthy catch-up of shipments can be achieved in the second half-year which will generate an important increase in sales. However, the full year 2020 sales are expected to be lower than in previous year.
Whilst the Chinese market recovered rapidly after the Covid-19 pandemic lockdown, other markets were going through a slowdown of equipment investments. However, as the pandemic created intense packaging demand for the high consumption segments such as food, pharma and home and personal care, market activities may considerably evolve in the second half of the year. As the current unstable economic situation strongly affects some market players, customers may put more value on choosing a solid business partner.
In line with the new Group strategy to reduce its presence at industry tradeshows, several virtual events were organized to launch and promote our new solutions in the market.
First half-year sales for the business unit services were 10% below the same period in 2019 (excluding the Cito acquisition). The second half of March saw the unfolding of Covid-19, impacting business volumes of both sales of parts and services as the mobility of field service technicians was significantly reduced. Asian markets were the most impacted and China had the worst decline in the region. In Europe and North America, the impact was less significant, showing greater resilience.
The business unit services expects to see a gradual return to normal demand for the second half of 2020, provided that global health conditions do not deteriorate further in its key regions and markets (particularly in North America). The business unit services will continue to support customers despite adverse conditions, thereby protecting the high level of satisfaction observed. The focus for the remainder of 2020 will therefore be to secure the supply chain for spare parts and to further optimize service interventions, including remotely when possible.
Outlook for the second half of 2020
In June, Bobst unveiled its new vision for the packaging industry and launched a new range of machines and solutions. The Bobst vision is shaping a new reality where connectivity, digitalisation, automation and sustainability are the cornerstones of packaging production. Bobst continues to deliver best-in-class machines, and is now adding intelligence, software capabilities and cloud-based platforms, to make packaging production better than ever. At the heart of this vision is Bobst Connect, an open architecture cloud-based platform delivering solutions for pre-press, production, process optimisation, maintenance and market access. It ensures an efficient dataflow between digital and physical worlds. It will orchestrate the entire production process from the client’s pdf to the finished product.