Recipes from Ems-Chemie to combat shrinking margins

Factory of Ems-Chemie
Ems-Chemie is expanding its workforce and investing. (Image: media service)

The Ems-Chemie Group has recorded a fall in profits. But the management is responding with three clever countermeasures.

The Ems Group, which operates in the specialty chemicals sector, is actually known for its high profit margins.

However, the strength of the Swiss franc and the sluggish economy in the automotive industry and worldwide in general have also had a negative impact on the company led by SVP National Councillor Magdalena Martullo-Blocher.

Decline in margins

Last year, sales fell by 10.4 percent to 2.2 billion Swiss francs, as Ems-Chemie announced today, Friday. In local currencies, the decline would still have been 4.6 percent.

Profit even slumped by 13.8 percent to 461 million Swiss francs. The operating profit margin at EBIT level, which was around 30 percent in good times, fell by 2.5 percentage points to 22.5 percent.

Adjustment of the dividend

In view of the developments, however, the management is responding with three exciting countermeasures. The first is to reduce the dividend, which is unusual. Many companies pay out at least constant dividends despite declining profits.

The Ems-Chemie Group is an exception and is proposing to the Annual General Meeting the distribution of an ordinary dividend of 12.75 Swiss francs (15.75) per share and an additional extraordinary dividend of 3.25 Swiss francs (4.25) per share.

Compared with the previous year, the distribution is therefore down by 4 Swiss francs per share or a 20 percent drop. Earnings per share amounted to 19.56 Swiss francs (22.75) and Martullo-Blocher is also reducing the distribution.

Ems is keeping its own funds high and financing costs low in times of rising interest rates.

Saving energy with a system

The second measure is the consistent development of markets with specialties and innovations. After all, Ems is heavily dependent on the automotive industry and the main markets of Germany, China and the USA.

Despite the economic slowdown, Ems is, for example, continuing the investment program announced in 2021 to increase capacity and energy efficiency at the main site in Domat/Ems by over 300 million Swiss francs, it said.

A large-scale plant with a newly developed manufacturing process that halves energy consumption has just gone into operation, the company explained in the press release.

Energy is a major cost factor and saving energy is a major lever.

Expansion of the workforce

And the third measure is to increase the workforce by around 50 employees, as can be seen from the 2023 annual financial statements.

In bad times, when many companies prefer to cut staff, you can get good people and Ems is launching a sales offensive for the new staff.

If the Ems Group were to reduce its workforce in line with the decline in sales, margins would remain constant, but the Group would miss out on the opportunity to achieve higher margins in the future thanks to its investments and more highly-skilled workforce.


Recipes from Ems-Chemie to combat shrinking margins

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