A conversation with Oerlikon Executive Chairman of the Board, Michael Suess (MS).
Interview with the Executive Chairman
How was 2022 for Oerlikon?
MS: We demonstrated strong execution on our strategy, focusing on growth, diversification and sustainability, despite macroeconomic headwinds.
Our Polymer Processing Solutions Division recorded one of its highest orders and sales and improved its operational EBITDA. Our Surface Solutions Division also saw increases in sales and orders, driven by customers’ demand for efficient solutions. As a Group, we increased orders (+7% to CHF 3.0 billion) and sales (+10% to CHF 2.9 billion), and improved the operational EBITDA (+10% to CHF 498 million, or 17.1% of sales).
What were the key drivers for your robust performance?
MS: We provide solutions to many key sectors, from aerospace, tooling, energy and automotive to luxury, general industries, textile and polymer applications. Basically, there is not a single day when someone will not come into contact with a technology from Oerlikon.
Our strategy for profitable growth is anchored in our well-established positions in these sectors and in our innovative and sustainable technologies, as well as in our high performance culture. With our leading technologies, we hold unique sweet spots in end markets, which serve as high barriers of entry.
In 2022, we strongly executed on our strategy. We expanded our regional structure and business for surface solutions, especially in the Americas, where we grew sales by more than 20%. We strengthened our focus on growth businesses, like luxury, by signing the agreement to acquire Riri, and we exited our inline embedded PVD business, which saw slower-than-anticipated uptake and interest.
We have strengthened our commitment to Switzerland with a plan to establish a new state-of-the-art site at Campus Reichhold, Hausen, for our surface solutions and equipment businesses. The site will house production, office space and an IT competence center and will also serve as a sales and distribution center for the materials product line.
Moreover, we continued to provide sustainable technologies to customers and were pleased to see our sustainability ratings upgraded.
Can you explain why Oerlikon is investing in luxury?
MS: Surface coatings are very much part and parcel in the production of luxury accessories, jewelry and components. These metal pieces need coatings to provide them with wear and erosion protection and give them a glossy finish. In addition, the industry is looking at transiting away from galvanization to more environmental friendly technologies like PVD that is offered by Oerlikon. Moreover, the industry is exploring the use of additive manufacturing to help create bespoke designs and unique pieces in exclusive quantities.
In 2021, we acquired Coeurdor to complement our high-end deco business. In December 2022, we took the next ideal move and signed the agreement to acquire Riri, a leading provider of coated metal accessories for the luxury fashion industry. Combining both will make us a market leader in providing a complete portfolio of luxury metalware for high-end fashion brands.
Tell us more about sustainability at Oerlikon?
MS: Sustainability has always been a core part of Oerlikon’s products, services and operations. We continue develop sustainable products and empower our customers to increase their efficiency and improve their environmental footprint, such as in energy savings, waste reduction or lowering emissions. For example, our BALINIT MAYURA coatings can save up to 80% of materials and our WINGS systems help customers save up to 40% of energy.
Similarly, we made progress in improving our own operational sustainability. To name a few examples: we implemented energy management systems at an additional 22 sites, bringing the total to 54 sites. Together, they account for 68% of the Group’s total energy consumption. We also gained a better understanding of our Scope 3 emission within our ecosystem and along our value chain.
We once again organized our Diversity Conference. This year focusing on disability to raise awareness of the topic, including understanding of “invisible disabilities”, which create unique challenges but may go unnoticed by coworkers and managers. We expanded our employee resource groups, including Pride@Oerlikon, the Women’s Business Council and the Disability & Support groups. Moreover, we hosted official celebrations of International Women’s Day and Pride Month for the first time. We are also a proud signatory of Switzerland’s Equal Voice United Charter to promote gender equality in our organization.
For us, sustainability is a journey, and we are taking actions one-step at a time as we continuously advance (see our sustainability reports for further progress and examples). Everyone has a role to play – from industry and governments to end consumers. And technology, such as those from Oerlikon, will play a vital role to support customers and industries.
Can you elaborate on innovation at Oerlikon?
MS: Innovation is and will continue to be our key strength, and despite the current economic challenges, we remain committed to the planned levels of R&D spending, as well as to activities such as digitalization, which will position us for future successes.
In 2022, we invested 4% of our sales in R&D, and around 73% of this R&D expenditure is in sustainable products. We have also strengthened our capital allocation framework by focusing R&D investments on high-return and growth areas.
In 2022, we invested 4% of our sales in R&D, and around 73% of this R&D expenditure is in sustainable products. We have also strengthened our capital allocation framework by focusing R&D investments on high-return and growth areas.
Some products launched in 2022 include: a new coating for injection molding and extrusion of filled polymers to reduce abrasion and corrosion resistance, making the coating perfect for applications with glass fiber reinforced plastics and fully recycled materials. In our polymer processing solutions business, we launched a new hycuTEC hydro-charging solution, which increases filter efficiency to more than 99.99%, translating to 30% savings of nonwoven materials for customers. This innovative technology went on to win the biannual Innovation Award at the Filtrex 2022 conference.
Digitalization is another key driver of our innovation. In 2022, we launched multiple digital innovations for customers and for our own operations and supply chain. For example, vConnect allows customers to connect their coating systems to their global production dashboard, giving them a real-time, 24/7 all-round overview of system utilization, material/energy consumption, coating quality and many more data. Oerlikon HRSflow provided an updated user interface for its FLEXflow Control Unit. This HMI 4.0, web-based solution is accessible online through a standard PC or tablet and makes operation even more intuitive and convenient for customers.
Michael Suess taking part in a panel discussion at the Annual Meeting 2023 of the World Economic Forum
What has changed since you took over as the Executive Chairman?
MS: Upon taking on the role of Executive Chairman, we strengthened our corporate governance with the appointment of an independent lead director and introduced a Governance Committee that is responsible for ensuring adequate control mechanisms.
Both division CEOs have additional operational control and accountability. They have been empowered and have more agility and speed of execution in running and growing their respective business, enabling them to adapt faster to global trends.
I also undertook new engagement initiatives with our key stakeholders with the purpose of improving the understanding of strategically relevant governance and sustainability topics. Taking their feedback into consideration, we have expanded our disclosures in our corporate governance and remuneration reports (part of this report) to provide additional transparency and promote better understanding of the company’s policies and procedures. It is my personal ambition to constantly work on improving disclosure and the level of communication with our key stakeholders.
What is Oerlikon adopting in regard to the revised Swiss Corporate law?
MS: The revised Swiss corporate law that was adopted by the Swiss Parliament in 2020 entered into force on January 1, 2023. Pursuant to the new law, Swiss corporations are obliged to revise their articles of association to comply with the new law by the end of 2024.
The Board will be proposing to shareholders various amendments to Oerlikon’s Articles of Association. The details of which will be sent to shareholders together with the invitation to the Annual General Meeting of Shareholders (AGM). These amendments are aligned with the revised law and in line with prevailing market standards in Switzerland and the company’s needs.
Subject to the approval by the AGM 2023 to amend the Articles of Association with respect to increasing the potential maximum number of Board members, the Board of Directors proposes to nominate Inka Koljonen for election at the 2023 AGM. All current Board members will be standing for re-election. Inka Koljonen is Chief Financial Officer at MAN Truck & Bus SE. Her significant experience in strategy and finance in the automotive and aerospace industry – both key sectors for Oerlikon – will further strengthen the diversity and independence of the Board.
Do you intend to continue paying dividends?
MS: Oerlikon is committed to provide attractive returns to shareholders while maintaining financial flexibility to invest in growth. In line with our strategy, the Board will recommend an ordinary dividend of CHF 0.35 per share at the 2023 AGM on March 21, 2023.
What is your outlook for 2023?
MS: We expect polymer processing solutions to see weakness in the filament market in China. Thus, we started in the fourth quarter of 2022 to prepare Oerlikon.
For 2023, Oerlikon expects a mid-single-digit percentage organic sales decrease at constant currencies to CHF ~2.8 billion, reflecting primarily the postponement of customer investment decisions in Polymer Processing Solutions. Depending on the closing date of the announced Riri acquisition, an additional CHF 100 to 150 million of sales is expected. The operational EBITDA margin is expected to be between 16.0% and 16.5%.
Do you have any additional comments you wish to share?
MS: I would like to thank all our employees, the management team and my colleagues on the Board of Directors for their dedication and commitment throughout 2022. In addition, I would also like to thank our partners, customers and our shareholders for their continued trust in Oerlikon.
Looking ahead, even in times of global uncertainty and instability, a clear vision and steady hand will help us navigate a course forward. I am confident that Oerlikon has all the ingredients – innovation, technologies, services and collective talents – for us to find the most productive and profitable way forward to level up our sales game, hunt for new opportunities and fortify our market positions.
