From the Sector

Net result impacted by operating losses and high impairments in North America

In 2019, Autoneum grew organically by 2.5% and has thereby significantly outperformed the declining market. In Swiss francs, revenue rose slightly to CHF 2 297.4 million. However, as previously communicated, operational inefficiencies in North America and impairments on fixed assets in that region had a particularly strong impact on profitability and led to a net loss of CHF –77.7 million. The Board of Directors therefore proposes that no dividend bedistributed for the 2019 financial year. Based on the new turnaround program launched in North America at the beginning of this year, significant profitability increases are expected for 2020.

2019 was an extremely challenging year for the automobile industry. The continuing weakness of the global economy, ongoing trade disputes and the increasing regulation of mobility impacted vehicle demand negatively. But 2019 was also a year of change for Autoneum internally. An in-depth analysis carried out by the new Group Management in the fall showed a need to reevaluate the Group’s performance over the short- to medium-term. In Business Group North America, the operational and commercial problems have proven more extensive than originally assumed. As a result, the turnaround program launched in spring 2019 was replaced at the beginning of 2020 with a dedicated and far more comprehensive program for the North American sites.

Revenue growth despite a shrinking global market
As a result of weak demand, the number of light vehicles produced worldwide fell again sharply in 2019 compared to the previous year; whereby the decline of almost –6% was much steeper than in 2018. Thanks to numerous production ramp-ups and a favorable model portfolio, Autoneum generated organic revenue growth1 of 2.5%, despite the global market cooling. Revenue consolidated in Swiss francs rose by 0.7% from CHF 2 281.5 million to CHF 2 297.4 million.

Profitability2 impacted by operational inefficiencies and impairments
Operational inefficiencies in North America and impairments on fixed assets in this region were the main reason for the – first-ever – negative net result in 2019. In addition, the sharp drop in automobile production in Europe and China as well as associated lower utilization of production capacities in the affected Business Groups also burdened the Group’s profitability. EBITDA excluding IFRS 16 effects decreased to CHF 126.0 million (2018: CHF 197.2 million), which corresponds to an EBITDA margin of 5.5% (2018: 8.6%). One-time charges from impairments in the amount of CHF –68.0 million had a negative impact on EBIT, reducing it to CHF –32.9 million (2018: CHF 114.1 million). Without these one-time charges, EBIT amounted to CHF 35.0 million. The EBIT margin 1 Change in revenue in local currencies, adjusted for hyperinflation. 2 The figures for the 2019 financial year include IFRS 16 effects. Autoneum Management Ltd . Media Release . March 4, 2020 Page 2/5 excluding impairments was at 1.5% in 2019, and taking those into account the margin decreased to –1.4% (2018: 5.0%).

The National Council of Textile Organizations (NCTO) issued the following statement regarding the expected passage today of the U.S.-Mexico-Canada Agreement (USMCA) by the U.S. House of Representatives.

“Passage of the USMCA in the House today will mark a significant step forward in advancing the trade deal through Congress and we urge the Senate to pass it swiftly,” said NCTO President and CEO Kim Glas. “Mexico and Canada are the two largest export markets for the U.S. textile industry, totaling nearly $12 billion last year, and several provisions in USMCA will help producers expand and build new business in the critical Western Hemisphere supply chain.”

NCTO worked with the administration during negotiations on USMCA and successfully lobbied for several provisions and improvements that were subsequently incorporated in the trade deal that will close loopholes and strengthen U.S. Customs enforcement.

“We expect U.S. textile companies to export more to the region and invest more in the U.S. when USMCA is implemented,” Glas said. “Textile executives from North Carolina to New York have said they will seek to take advantage of the modifications in the trade deal and build new business in areas such as pocketing and sewing thread, as a result of stronger rules of origin and Customs enforcement.”

The USMCA updates and modifies the North American Free Trade Agreement (NAFTA) and makes significant improvements, including:

• Creation of a separate chapter for textiles and apparel rules of origin with strong customs enforcement language.
• Stronger rules of origin for sewing thread, pocketing, narrow elastics and certain coated fabrics.  Under the current NAFTA, these items can be sourced from outside the region – USMCA fixes this loophole and ensures these secondary components are originating to the region.
• Fixes the Kissell Amendment Buy American loophole, ensuring that a significant amount the Department of Homeland Security spends annually on clothing and textiles for the Transportation Security Administration is spent on domestically produced products.

Emphasis on Process, Third-party Validation and Outcome-based Testing

Angelica, one of the nation’s largest healthcare linen providers, now has 23 laundries that have earned the Hygienically Clean Healthcare certification. This is reflective of  their commitment to Best Management Practices (BMPs) in laundering as verified by on-site inspection and their capability to produce hygienically clean textiles as quantified by ongoing microbial testing. Angelica’s locations are throughout the United States, and the laundries now carrying the certification are located in Phoenix, AZ; Colton, Fresno, Los Angeles, Orange, Pittsburg, Pomona, and Sacramento, CA; Holly Hill and Safety Harbor, FL; Rockmart, GA; Chicago, IL; Somerville and Worcester, MA; Durham, NC; Henderson, NV; Batavia, NY; Lorain, OH; Pawtucket, RI; Columbia, SC; Ooltewah, TN; and Dallas and Houston, TX.

The Hygienically Clean Healthcare certification confirms the organization’s continuing dedication to infection prevention, compliance with recognized industry standards and processing healthcare textiles using BMPs as described in its quality assurance documentation, a focal point for Hygienically Clean inspectors’ evaluation. The independent, third-party inspection must also confirm essential evidence that

• Employees are properly trained and protected
• Managers understand regulatory requirements
• OSHA-compliant
• Physical plant operates effectively

To achieve certification initially, laundries pass three rounds of outcome-based microbial testing, indicating that their processes are producing Hygienically Clean Healthcare textiles and diminished presence of yeast, mold and harmful bacteria. They also must pass a facility inspection. To maintain their certification, they must pass quarterly testing to ensure that as laundry conditions change, such as water quality, textile fabric composition and wash chemistry, laundered product quality is consistently maintained. Re-inspection occurs every two to three years.

This process eliminates subjectivity by focusing on outcomes and results that verify textiles cleaned in these facilities meet appropriate hygienically clean standards and BMPs for hospitals, surgery centers, medical offices, nursing homes and other medical facilities.
Hygienically Clean Healthcare certification acknowledges laundries’ effectiveness in protecting healthcare operations by verifying quality control procedures in linen, uniform and facility services operations related to the handling of textiles containing blood and other potentially infectious materials.

Certified laundries use processes, chemicals and BMPs acknowledged by the federal Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services, Association for the Advancement of Medical Instrumentation, American National Standards Institute and others. Introduced in 2012, Hygienically Clean Healthcare brought to North America the international cleanliness standards for healthcare linens and garments used worldwide by the Certification Association for Professional Textile Services and the European Committee for Standardization.

Objective experts in epidemiology, infection control, nursing and other healthcare professions work with Hygienically Clean launderers to ensure the certification continues to enforce the highest standards for producing clean healthcare textiles.

“Congratulations to Angelica on their certifications,” said Joseph Ricci, TRSA president and CEO. “This achievement proves their commitment to infection prevention and that their laundries take every step possible to prevent human illness.”