Segment Access Solutions APAC

Despite strong negative impact from Covid-19 pandemic on sales, EBITDA margin kept at a good level

Operational performance

AS APAC achieved total sales of CHF 402.4 million in the financial year 2019/20. Organic sales for the full financial year 2019/20 were 8.5% below previous year’s level as the second half of 2019/20 was severely impacted by the outbreak of the Covid-19 pandemic. Segment EBITDA reached CHF 54.8 million, which is 20.5% lower than a year earlier (CHF 68.9 million). Nevertheless, the EBITDA margin was at 13.6% (previous year 14.9%) as effective cost management, reduction of personnel expenses, efficiency improvements, and a favorable product mix could to some extend offset the negative effects of substantially lower volume.

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As part of the Group-wide cost savings and restructuring program to address the ongoing Covid-19 pandemic-related substantial volume contraction and to maintain operational and financial efficiency, AS APAC has initiated specific measures to adjust capacities and costs. Measures impact all regions of AS APAC and will include a reduction of around 500 full-time equivalents, most of this being effective already at the end of financial year 2019/20.

Market development

In AS APAC, the second half of the financial year 2019/20 was heavily impacted by the Covid-19 pandemic and its fallout.

The major impact in the third quarter of 2019/20 came from China, where the lockdown in various provinces had a strong negative impact on local demand, whereas production and supply chain could be maintained at a reasonable level. The commercial business, which is a major driver for the segment’s performance in China, held up well in 2019/20 versus a strong basis from previous year despite the Covid-19 impact. Therefore, organic sales for China for the financial year 2019/20 were only slightly below previous year.

In the fourth quarter of 2019/20, all major markets across ASEAN region were severely impacted by Covid-19, which not only led to lower local demand but also to bottlenecks in production and supply chain. The biggest negative impact for the business from Covid-19 was attributable to region South Asia, especially India. Fourth quarter sales of our organization in India came close to a standstill being down by roughly 90% compared to previous years’ level. However, the Pacific region and particularly Australia have yet been less affected by the impact of Covid-19 and even experienced organic sales growth for the financial year 2019/20, with growth supported by a strong Services business.

Similarly to previous year, sales were still impacted by the ongoing trade conflict between China and the USA, which negatively affects dormakaba’s OEM business in China (Wah Yuet) for the US market. AS APAC has initiated countermeasures such as starting to shift capacity to Chinese domestic customers and insourcing production to compensate the top-line shortfall.

Outlook

Barring newer waves of Covid-19 outbreaks, AS APAC expects an improvement in the first half of financial year 2020/21 versus the second half of financial year 2019/20. However, there will be a continued negative impact of Covid-19 as some regions are still in lockdown respectively hit by a second wave of the coronavirus such as Australia. Therefore, sales for the first half of 2020/21 will be below a comparable base that was not affected by Covid-19.

The segment will continue to adjust its cost base to compensate for lower demand due to the fallout of the Covid-19 pandemic.

The segment will focus on new and innovative products, like dormakaba 9160, a new face recognition terminal, which can be easily integrated with automatic doors or physical access systems thus enabling touchless access to buildings and rooms. This terminal will be launched in China in the first half of the financial year 2020/21 and for further markets in the second half of 2020/21.

Another product particularly attractive for the Chinese market is IC 800, a cost-effective digital door lock with basic fingerprint functions for the retail and project channel which will be launched in the financial year 2020/21.

Key figures - segment AS APAC

 
Segment sales (in CHF million) - AS APAC