PCB | March 17, 2009

Schweizer Electronic focuses on a wider product portfolio

evertiq spoke to Dr. Marc Schweizer about the future development of the company. The company sees positive growth in the market of small and medium-sized enterprises in the industrial electronics and medical sector.

How much and in what areas does the current economic situation affect your company?
The global economy is in a surprisingly sharp decline and shows a simultaneous contraction in all regions. The decline has affected the majority of industries. In many countries, the state had to back the banking system from a possible collapse – the granting of loans has stopped. Even if the financial crisis should have peaked already, a large part of the inevitable dampening effect on the economy, on the private consumption and the labour market is still underway. News should continue to be mostly unpleasant for quite a while.

Schweizer Electronic – unfortunately – cannot escape this development. Although our company is now better positioned than most of its competitors, the global drop in PCB demand does not pass unnoticed. We have designed a central scenario for Schweizer Electronic and possible alternative scenarios for the coming years.

All scenarios have one thing in common: by further optimising the product portfolio, increasing productivity and implementing cost reduction programs (while ensuring the development potentials), we continue to lower the break-even-point for Schweizer Electronic and maintain a flexible and scalable production. Should customer demand increase, Schweizer Electronic is capable of offering capacities very quickly.

How far have you come with the initiated cost-cutting program? Are there already visible concrete results?
Yes. In the fiscal year 2008, we have increased staff efficiency and productivity significantly through the implemented measures, which also improved our cost base. The savings from these measures will have their full effect in the fiscal year 2009, while the expenditures were processed in 2008.

In summary, the fiscal year 2008 for Schweizer Electronic was characterised by two very heterogeneous phases. The first three quarters were characterized by steady improvement in the earnings situation. The increase in sales (Q1 to Q3: +15% from last year) was realised by the consistent restructuring and cost cutting measures. The operating profit was above our expectations.

The violent disruption of the global economy had a negative influence on the outcome of the fourth quarter of Schweizer Electronic. The decrease in revenues compared to the fourth quarter of 2007 was partially compensated by the fast business response (short-work in our production centres from November).

You are looking for sites / partners in low-wage countries. In Asia or in Eastern Europe?
We look for partners in Asia – both in China and other Asian countries. Our negotiations with strong partners have continued to schedule and are shaping up very promising.

How did the collaboration with Contag develop? In what areas are the two companies now working together?
Positive. The development of cooperation is shaped in a tailor-made project organisation. This makes it possible – in an easy way – to establish and maintain the necessary contact between staff. The goal is to provide our customers with a quality performance from engineering concepts through to prototypes, qualification samples up to production runs.

We put particular importance on the various working teams – established with employees from both companies – to use synergy effects from prototyping and series production. We see many benefits for our customers and we get very positive feedback. The fact that our customers can keep their current contacts has played a major part too.

How much does the automotive sector contribute to the sales of Schweizer Electronic?
The year 2008 shows a significant improvement in customer portfolio for Schweizer Electronic. We were able to increase the sales in the industrial electronics sector to over €30 million; it has doubled if you compare it to 2007. The largest contributor to this development is the photovoltaic sales increase. The share of automotive electronics in total has decreased to 57% (PY: 67%) over the same time period. This significant improvement in our portfolio as well as other factors, gives us the confidence that we can limit the affect of the sales slump.

Are there segments / industries that your company would like to enter?
Yes. We continue to follow our strategy roadmap. Firstly, we will continue to grow internationally with our top customers in the automotive, photovoltaic and electronics industry. However, our market penetration concerning small and medium-sized enterprises in the industrial electronics and medical goes as scheduled.

In addition, we launched our first product – the SEAGsens system – an RFID-based measuring device for temperature monitoring for the medical industry.

What about investments in 2009? If so, where will they be made?
"We have to manage the difficult balancing act between saving and important investment for the future." The year 2009 calls for a strict spending discipline. At the same time, however, we will continue with our strategy roadmap, future projects and innovation efforts. Schweizer Electronic will expand its product range in 2009 by providing sourcing from low cost countries.

We have – through internal transfers and new appointments – strengthened our sales and consulting resources and plan to further expand in 2009. In addition to the intensive support for our existing customers and key accounts we will be able to support small and medium-sized businesses expansion.

Staff numbers are currently a very difficult topic. How is Schweizer Electronic dealing with this subject?
We have reacted to the sales slump at the end of 2008 very soon and have implemented far reaching measures in early November 2008; measures that have affected all divisions and departments. We have discontinued temporary employment contracts and have discontinued contracts with agency workers. In addition, we have implemented short-work from November 1, 2008.

Other cost adjustments are now in implementation. In addition to consistent cost discipline and other measures, further job cuts might be required – its scope and implementation is affected by the economic development.

Many large PCB companies had to file for insolvency in the last two months. How do you see the further development in Germany?
The European PCB industry is highly fragmented and the consolidation process has pick up considerably since early 2009. Companies that have operated well in recent year – until early 2009 – have been temporarily sent into a tailspin due to the sharp decline in the economy. The access to bank loans or private equity has become much more difficult. Due to the current risky situation we will see a further market adjustment.

How will the development for Schweizer Electronic continue?
The decision that we already made at the end of 2007 have strengthened the strategic and operational position of Schweizer Electronic. Several factors make us confident that we can limit the effects of the expected sales slump:
• our strong customer base, which is characterized by a high proportion of existing customers
• already developed markets in the photovoltaic industry, which still is characterised by growth
• the increasing needs of our customers, to develop new products and solutions jointly with us
• our flexible production capacity and short transport times, which has been focused on the short-term planning of our customers
• the forthcoming enlargement of our product range through the sourcing from low cost countries

Its healthy financial position and performance, the high potential for innovation, a highly skilled workforce and the wider establishment of Schweizer Electronic will help us to overcome the current situation. We will continue to strengthen our competitive position – even in these difficult times.

Thank you for the interview.


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