OC Oerlikon sees lower margins as key polymer unit faces rising costs

By Enrico Sciacovelli and Johannes Toft Thyssen

(Reuters) -Swiss industrial group OC Oerlikon on Tuesday forecast lower margins for 2023 as its key polymer business combats rising costs tied to inflation and a slow recovery from COVID-19 lockdowns in China, sending its shares down more than 4%.

The polymer business, the group's biggest division by sales, has taken a hit as China struggles to rebound after lifting its strict pandemic restrictions. Last year it generated almost two-thirds of its revenues in China.

The unit's core earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 26.8% to 56 million Swiss francs ($60.6 million) in the fourth quarter, while sales slid 10.4% to 378 million francs.

The company said it planned to cut 800 jobs from the polymer business, with finance chief Philipp Mueller adding in a call with reporters that the layoffs would mostly affect its assembly and manufacturing plants in Germany.

It expects sales of around 1.4 billion Swiss francs ($1.51 billion) for the polymer unit in 2023 and a further slight decline in 2024, Mueller told reporters.

OC Oerlikon predicted an operating margin of 16% to 16.5% in 2023, down from 17.1% last year.

It forecast group sales this year of around 2.8 billion francs at constant exchange rates, compared with 2.9 billion in 2022. Executive chairman Michael Suess said in a statement the group also expected lower sales in 2024.

Its shares fell around 4% in morning trade, and are down by roughly 30% year-on-year.

The company also said its board would propose an ordinary dividend of 0.35 Swiss francs for 2022.

($1 = 0.9248 Swiss francs)

(Reporting by Johannes Toft Thyssen and Enrico Sciacovelli in Gdansk; Editing by Tom Hogue, Milla Nissi and Jan Harvey)