The Surface Solutions Segment, the larger of the two Oerlikon segments, contributed 57% to Oerlikon’s sales and 64% to Group EBITDA in 2019. The segment, comprised of the brands Oerlikon Balzers, Oerlikon Metco and Oerlikon AM, delivered a performance in 2019 broadly in line with challenging markets.
CHF 1 468 million
CHF 1 488 million
CHF million
Orders for the segment were CHF 1 468 million, down 6.7% from the prior year’s CHF 1 574 million. Segment sales came in 1.5% lower to CHF 1 488 million from CHF 1 511 million in 2018. At constant exchange rates, segment sales were CHF 1 509 million, showing a stable year-over-year performance despite challenging markets. EBITDA was CHF 234 million, or 15.6% of sales, compared to CHF 283 million, or 18.6% of sales in 2018. The lower year-over-year EBITDA margin was attributed to high operating expenses related to investments and to CHF 13 million of exceptional expenses, primarily for the restructuring program. Excluding exceptional expenses, EBITDA margin was 16.6%. The restructuring program is expected to yield significant improvements to the segment’s operating profitability and returns in the medium term. EBIT was CHF 65 million in 2019, or 4.4% of sales (2018: CHF 144 million, or 9.5% of sales).
The overall market served by the Surface Solutions Segment is about CHF 5.7 billion. Over the next five years, the segment’s market is expected to grow to about CHF 7.4 billion. Aerospace, automotive, tooling, general industries and energy are the segment’s primary markets.
The automotive industry contracted in 2019 due to the uncertainties in global trade policies, political turbulence and increased tariffs. Despite market weakness, Oerlikon made progress in launching new technologies and securing deals with leading automotive customers.
In 2019, Oerlikon Balzers closed a deal with ZKW China, a strategic partner to the automotive industry, to switch to BALITHERM PRIMEFORM for the coating of automotive headlamp molds. For high-performance motor vehicles, they introduced BALIQ CARBOS and BALIQ CARBOS STAR coatings that offer a combination of high hardness, low friction and low roughness for applications with extreme contact pressures and sliding velocities.
Oerlikon Metco launched the DiscCover Jet brake disc solution, which merges the competencies of thin-film and thermal spray. The first solution launched uses mechanical activation with nitriding surface treatment combined with HVOF spray technology and followed by atmospheric plasma spray for the top coat. An audit for the coating of turbochargers was completed, resulting in Oerlikon Metco being appointed the official supplier of this technology for Volvo Trucks. In addition, Oerlikon Metco secured a deal with a major German auto manufacturer in China for its SUMEBore technology with the enhanced RotaPlasma system.
Oerlikon’s sustainable alternative technology to e-plating for coating plastic auto parts, ePD, is gaining inroads with automotive customers. In 2019, the first INUBIA I6 enhanced inline equipment was installed in China.
The move toward electric vehicles is providing new opportunities for Oerlikon for coatings during production such as for molds, batteries and for auto components such as hybrid gear boxes, brakes and gears, as well as for sustainable ePD metallic coatings. In 2019, Oerlikon Metco obtained the patent in China for the coating application and tooling for heating devices in electric cars.
Global economic uncertainties and lower investments in equipment also impacted the general industries and tooling markets. Sales in the semiconductor business was sluggish in 2019, but recovery is expected in late 2020, driven by demand for 5G, mobile devices, consumer electronics and the increasing popularity of wearable devices and connectivity.
For tooling customers, Oerlikon Balzers launched a number of technology solutions. For instance: BALIQ AUROS is a coating solution that boosts the performance and improves process stability of tapping tools; INNOVENTA kila, the successor to INNOVA, is a coating equipment that offers the flexibility to coat large or small quantities of tools and components. Among deals secured in the tooling market by Oerlikon Balzers was an agreement with China Dongguan TUSA Precision Cutting Tools for thin-film equipment.
Oerlikon Balzers also provides coatings for consumer goods and medical devices such as household appliances, watch components, surgical robots and tools. In 2019, an INUBIA B12 for chrome-like PVD coatings was installed at Jaquar, a company selling bathroom fixtures and lighting worldwide. For the medical sector, Oerlikon Balzers launched the BALIMED portfolio of coatings to enable low-friction, wear resistance, antiglare and biocompatibility for medical and surgical tools and equipment.
The aerospace industry faced a slowdown in 2019, although there was still a healthy demand for MRO services from OEMs and their tier 1 suppliers. Oerlikon Metco also noted demand for materials in this market. A deal with Chromalloy for nozzle coatings was signed, and the certification for an additional Oerlikon Metco material for Pratt & Whitney, which will drive future programs and green technology initiatives, was obtained. At the Salzgitter site in Germany, Oerlikon Metco obtained the NADCAP Merit status for coatings – an accreditation for exceptional aerospace suppliers.
To develop enhanced surface treatment solutions for aerospace applications, Oerlikon has entered into a partnership with Safran, the French National Centre for Scientific Research and the University of Limoges to create a joint research laboratory, PROTHEIS, and a technology platform, SAFIR. The focus is to make lighter and longer-lasting REACH-compliant products capable of reducing noise and nitrogen oxide emissions in aircraft.
Asia noted an increase in maintenance, repairs and operations (MRO) activity and higher demand for materials in the power generation sector. Oerlikon Metco improved sales of new thermal spray coating technologies for MRO of gas and steam turbines, including a deal with Shanghai Electric. In Japan, higher material sales were realized, thanks to an agreement with Mitsubishi Hitachi Power Systems.
A decrease in global oil demand in the second half of 2019 slowed maintenance service activity in oil & gas, particularly in North America. The rig count contracted and orders are being pushed into 2020. Additional pipeline capacity in the U.S. and planned increases in refining capacity in 2020 and beyond are expected to provide future opportunities in mid- and downstream segments. Oerlikon Metco has been accepted as a Member Company of the Petroleum Equipment & Services Association.
Growth in the additive manufacturing business has been slower than expected, complicated by delays in capital investments. To increase collaboration and the pace of industrialization, Oerlikon established an additive manufacturing cluster in Munich, Germany, with the Technical University of Munich, GE Additive and Linde, and hosted its third Munich Technology conference, MTC3, which was attended by 1 500 industry representatives.
Oerlikon AM entered into several partnerships in 2019, including with MT Aerospace to accelerate the use of additive parts in the aerospace and defense industries; with United Launch Alliance to provide qualified additively manufactured metal flight components for the nextgeneration Vulcan Centaur rocket; with Hirtenberger Engineered Services to further industrialize series production and prototype parts; and with Siemens for the usage of their digital enterprise solutions to accelerate the industrialization of additive manufacturing.
2019 marked Oerlikon AM’s successful completion of the integration of DiSanto and the first full-year of offering customers additive manufacturing services for the medical device and implant industry. The expansion of production capabilities using new laser 3D printers is driving significant growth for additive manufacturing applications.
The Surface Solutions Segment experienced decreased sales across all regions in 2019 as markets remain challenging. Europe was responsible for the largest portion of sales in this segment, at 45%. China accounted for 11% of segment sales, while India’s portion of sales was at 4%. North America saw higher sales, which accounted for 20% of segment sales, mainly attributed to the growth in sales in the USA.
To strengthen its footprint and serve customers in close proximity, Oerlikon continued to invest in new and expanded surface solutions centers. To meet demand for coatings on cutting and forming tools, Oerlikon Balzers expanded a customer coating center in Dongguan, China, and in Pune, India. In Europe, customer service centers were opened or expanded in Hungary, Germany and Sweden, including an ePD competence center in Bisingen, Germany. In the Americas, new customer service centers were added in St. Louis, Missouri, and in Queretaro, Mexico. For the AM business, a new additive manufacturing production facility was inaugurated in Huntersville, North Carolina, U.S. and a new technology center opened in Shanghai, China.
With the acquisitions of TeroLab Surface GmbH in Langenfeld, Germany, and AMT AG in Switzerland, Oerlikon Metco extended its footprint and product and service offerings for thermal spray applications and turnkey services. Oerlikon Balzers strengthened its footprint in Erkelenz, Germany, with the acquisition of D-Coat GmbH, thereby also gaining thin-film coating expertise particularly for cutting tools.
