*** Plutos – Switzerland Fund Update *** Feeling the pulse: first indications for 2025 ***
The Plutos Switzerland Fund starts the year strong and increases 8.3% – the broader Small/Mid Cap Index also shows a positive start to the year with +6.5%.
The positive start to the year was triggered by Donald Trump's inauguration and his comments on growth, energy prices and technology. The way for further interest rate cuts by the Fed and thus also by the ECB seems open. While the job reports initially gave cause for concern, the inflation and sentiment figures provided relief. The Fed must take weaker labor market data in the USA as an opportunity not to further hamper the economy with interest rates that are too high.
The momentum and sentiment of many Swiss stocks is improving, as the FY24 reports published so far have rarely shown a deterioration, but have mostly been a little better than feared - the motto 'no worse is good' could lead to a sharp increase in valuation for many other Swiss stocks on the occasion of the FY24 results. The bottom seems to have been reached, valuations are historically low and we assume that investors will soon become much bolder.
We may be experiencing the long-awaited revaluation of small/mid caps, the end of the underperformance of this asset class. It may seem premature if we are already convinced in January that 2025 could be a good year for Swiss small/mid caps.
But the signs are adding up: the market breadth is increasing, despite some weak FY24 results, cheap quality stocks are now being bought and investors are taking more courageous advantage of opportunities.
The anomaly of small cap underperformance has been present for too long, and many strong, innovative and well-managed Swiss companies, which are often also market leaders, are valued too cheaply.
In our opinion, the recent correction in US tech stocks has led US investors to diversify their portfolios with European stocks. This is the only way we can explain the strong January for the SMI, SPI, DAX, EuroStoxx and CAC 40, while the US indices are trading just slightly higher - capital flows seem underway which anticipate a cyclical upturn in Europe.
Around half of the portfolio constituents gained between 10-20% in January.
medmix was by far the strongest winner within the Plutos Switzerland Fund: until recently one of our problem children, we have maintained the relatively high weighting despite the short-term, heavily burdening performance in order to be able to profit from the 40% rally.
Temenoswas another important performance pillar in the reporting month – we stick to our assessment that the stock is only properly valued at a three-digit level.
Komax, also a stock that cost too much performance and nerves in 2024, finally found a higher valuation with initial FY-24 results that were slightly better than expected.
ams OSRAM grew strongly, but from a base that still has a lot of potential – the FY24 results in early February are likely to surprise positively on the margin level. Comet and VAT suffered only very briefly from the 'DeepSeek' shock and were able to gain ground, as the young Chinese Nvidia competitor is irrelevant for both: chips are still needed and are increasingly so.
Only a small part of the Plutos-Switzerland Fund ended the month in negative territory:
SFS could not entirely convince with its FY24 results, but will of course benefit disproportionately from a cycle recovery – the Heerbrugger company is one of the best that the Swiss stock market has to offer and we, as long-term investors, can cope with the short-term dip in price.
Pierer Mobility recorded initial successes in the ongoing refinancing process. Several investors have submitted financing offers – even though the FY24 result was weak as expected.
DocMorris was not (yet) able to convince with its FY24 results and lagged significantly behind its German competitor in terms of growth for prescription drugs - nevertheless, the share found new buyers at the ridiculously low valuation level.
Due to purely tactical reasons, we sold our entire position in Belimo in January after a very strong performance, in order to be able to use the funds to increase the weighting in stocks that have clearly lagged behind.
With Kuros Biosciences, a new company found its way into our portfolio: Until December 2023, Kuros was a biotech/medtech hybrid and not investable for us - but with the cessation of their biotech activities, Kuros became a pure medtech company. Even after the brilliant share price performance in 2024, the stock still has great potential. Research coverage is still very thin, but is likely to increase soon - without a doubt a possible trigger for a higher valuation of the share.
Swatch Group finds its way back into our selection - albeit only a homeopathic dose. Although the FY24 figures were disappointing, CEO Nick Hayek expects substantial improvements for 2025. The key to this is the continued sales development in China, where Swatch generates around 33% of its sales.
Swatch has been on our watchlist for some time and we believe that now is the right time to buy - we can deal with Nick Hayek's unorthodox communication and accept that he is not your run-of-the-mill manager. But we also see the improving Chinese economy, the historically unprecedented valuation difference to Richemont and the simple comparison basis for 0815 as attractive. The share is trading 2025% below book value and has now reached the negative sentiment peak.
“The real key to making money in stocks is not to get scared out of them. The person that turns
over the most rocks, wins the game. And that's always been my philosophy”.
Peter Lynch, philanthropist and former fund manager (1944)
Feeling the pulse: first indications for 2025
It may seem premature that I am already convinced in January that 2025 will be a very good year for Swiss small/mid caps.
But the signs are adding up: the market breadth is increasing, despite some weak FY24 results, cheap quality stocks are now being bought and investors are becoming bolder.
An important key is the outlook for European equities: optimism on global markets, including outside the US, is reviving.
In Europe, investor confidence should be boosted by lower interest rates, better growth signals from China, a changed attitude towards regulation, falling bond yields and, in particular, favourable valuation differences with US equities.
In addition, falling natural gas prices and a weaker euro are reducing financial pressure in Europe. Another very important trigger is the upcoming political change in Germany.
In my opinion, the US tech correction has led investors to diversify their portfolios with European stocks. I cannot explain the strong January for the SMI, SPI, DAX, EuroStoxx and CAC 40 any other way, while the US indices were trading only marginally higher - capital flows semm underway that anticipate a cyclical upturn in Europe. Perhaps events such as the 'DeepSeek' shock are needed to persuade investors to adopt a more balanced, global asset allocation.
Swiss stocks will benefit from these circumstances, because the anomaly of small cap underperformance has been present for too long, and many strong, innovative and well-managed Swiss companies, which are often also market, cost and quality leaders, are valued too cheaply.
Während SMI and SPI, probably the two most important Swiss indices, to 52-week high or even all-time highs, many are Swiss top values hardly far from their 52-week low, but miles away from the 52-week highs. Lem Holding, VAT, Adecco, ams OSRAM, Kühne+Nagel, Comet, Forbo, Bucher – the list is of course not exhaustive – have enormous potential.
And investors in Switzerland are paid for the risk: a risk premium of 5.8% is significantly more attractive compared to 3.2% in the rest of the world
Like every year, at the beginning of the month I attended the Baader Helvea Swiss Equity Conference in Bad Ragaz – a perfect time to get a feel for the pulse of the companies. Of course, the companies couldn't say anything about the FY24 results, but believe me: if you know the management a little, you can read a lot from the mood.
In general, the top managements left me with a clear, cautiously positive and constructive impression. They see more opportunities than risks and are planning for an economic rebound rather than a further deterioration.
The question of what the election of Trump means to them was mostly answered pragmatically: fortunately, Trump is not an ideologue, but a president who cares about the economy - and that is also good for companies. They also tended to be relaxed about the possible tariffs and duties. Regarding the upcoming German federal elections, the vast majority said that they do not expect any major impetus from a new government.
Swiss companies have done their homework during the crisis and have become even more efficient, leaner and more powerful.
ams OSRAM (IR Dr. Jürgen Rebel) – Positive
No surprises are expected for the final quarter of 2024 and another solid quarter within the guidance confirms the positive trend towards normalization.
The non-core portfolio of EUR 200m should grow by around 2025-3% in 4, supported by the Semi, Consumer, Electronics divisions. This is accompanied by good profitability, a result of the restructuring program. Q125 sales may not be as bad as previously communicated - but above all, profitability should surprise positively with a margin of 13-14%.
Cash flow will still be negative in Q125, but will definitely turn positive in 2025 as a whole. The currently very limited visibility in the automotive segment should improve by the end of Q225 due to order allocation: if the cycle picks up while customers' inventories are low, it will otherwise be difficult for some customers to receive the products on time. Q125 should therefore represent the low point - the industry is in the eighth month of inventory correction.
Unfortunately, no deal for the sale of Kulim could be reached by the end of the year. Since September, when there were still 10 interested parties, the semi-cycle has worsened and interest has decreased. A solution could be a little more creative than a simple sale. One possibility would be to keep the lease, pass it on and use the building as collateral for a credit line.
The relationship with the top 3 customers has never been better than it is today. Light Socket Ramp (Apple) already had a very positive impact in Q324 and this will probably continue for some time.
The decision for OSRAM shareholders or the squeeze-out could be pending in the second half of 2025 - in the worst case scenario, that would be EUR 700m. At the moment, ams OSRAM has EUR 1.1bn in liquid assets. The redemption of the convertible bond in March will cost EUR 450m and would reduce cash to a low level. The revolving credit would probably be increased - based on the current share price and book value, the IR definitely rules out a capital increase.
My conclusion: The margin in Q125 could be a positive surprise, cash flow is improving and we are not assuming the worst-case scenario for the squeeze-out of OSRAM shareholders. The start-up of the light socket and the bottoming out of the automotive sector should provide the necessary tailwind in 2025 - and the year will also bring a solution for the fab in Kulim. The Plutos-Switzerland Fund is sticking to its position.
Bucher (CFO Manuela Suter) – cautiously positive
After 2022, the order backlog for 2023 was very good and was still quite good in H124 - after that, order intake and order backlog developed weaker.
Bucher sells exclusively through a dealer network - inventories at these dealers are still quite high, but they should normalize in Europe by mid-2025. The US is holding up better than Europe. Prices will come down a bit, so sales in H125 will still be a challenge. In Brazil, there have been price increases of 60% in recent years - this is reflected in sales.
The mood among farmers in the US is not so bad and could help to reduce inventories in the near future.
Bucher still sees itself as the best owner for Emhart Glass, which will face a difficult 2025, and it sounds like the portfolio of five divisions will not be expanded, but also not reduced. 50% of sales are service revenues. Bucher Municipal will continue to have a double-digit margin level. Bucher Hydraulics is probably most affected by a possible wage increase - but the biggest headwind is the global wage increase (especially in the Netherlands, Nordics, Germany, North America).
Bucher has now published the key figures for FY24: Sales and EBIT margin (9%) as well as the outlook for 2025 were in line with expectations, but order intake in Q424 was surprisingly well above the analyst consensus. The Kuhn Group, the largest and most important division, managed to turn the trend around in this regard with +22.4% compared to -22.3% after 9 months. Growth was broad-based and strongest in the livestock industry and regionally in Brazil. This positive development has prompted management to provide stable guidance for 2025 despite negative indicators. Bucher is still valued favorably with an EV/EBIT 2026 of 10.4x (30% discount to tractor manufacturers).
My conclusion: In our opinion, the price of the Bucher share already reflects a difficult H125, but not a possible recovery in H225 ff. The Plutos-Switzerland Fund is holding on to its position, because the stock recovery has only just begun.
Cembra Money Bank (CEO Holger Laubenthal, CFO Pascal Perritaz) – positive
I spent most of my conversation with CEO Laubenthal and CFO Perritaz talking about the 2026 goals.
The ROE target of 15% will be achieved primarily through the significantly lower cost/income ratio (CIR). Put simply, increased automation will lead to cost reductions.
However, the 39% CIR target by 2026 seems somewhat ambitious. It would have to be achieved primarily through lower personnel costs, i.e. fewer than 800 FTEs, but OPEX will also play an important role. International consumer finance companies achieve CIRs of up to 25%-30%, which gives hope for even more potential at Cembra. If the 2026 targets are achieved, the current EPS guidance range (CHF 6.60-7.15) would be too low.
The rising trend in the net interest margin from 5.3% to 5.5% will also continue. Cembra could grow faster at the moment, but would pay for this in the medium term with a lower quality of the loan book - which is understandably not what the company wants and it is remaining selective.
Buy Now-Pay Later (BNPL) is fully integrated and brought in CHF 2024m in the first half of 19 – the business will probably continue to grow slightly, but here too the company will remain selective in order to keep risks under control.
My conclusiont: with slightly falling interest rates, the equity case is becoming increasingly attractive and the targets for 2026 are certainly achievable. The Cembra share was already in a good position last year and I expect that 2025 will also bring good price development. The Plutos Switzerland Fund is holding on to its position.
Comet (CEO Stephan Haferl) – very positive
Comet is and remains an important, mission critical supplier, holds a leading market position, is well positioned and financially stable.
The development of the Penang site, the new semi-hotbed outside of Silicon Valley, is progressing well and will be/become a strategic manufacturing location.
Plasma Control Technologies (PCT): The dynamics of the Synertia RF generator have improved even further, and Comet has achieved "many, many" design wins. In 2025 and especially 2026, the first relevant volumes will come from this product and more customers will be interested in upgrading to the latest technology that Comet offers. CEO Haferl sees NAND coming back "with a vengeance."
Comet will continue to spend 10% on R&D no matter what happens because innovation is the lifeblood of Comet's future.
X-ray systems: Comet has introduced a more modular offering and will move more towards semi-testing. The CA3 20D X-ray inspection device in the field of non-destructive testing was successfully launched in November 2024.
M&A: Comet has a very interesting roadmap organically - if there is something that makes the company stronger, it would be looked at, but not for volume. The focus is on technology expansion.
On the cycle: Comet was not the only one to predict an upturn in H224 that did not materialize. There was some upturn in H224 and the industry as a whole grew well, but with a value-oriented focus - AI.
Artificial intelligence is extremely expensive and not yet widespread. The market has focused heavily on this topic and therefore volume business in the consumer sector has not yet picked up, but that will happen this year. You can probably compare it to an albatross taking off: it runs, flaps its wings, touches the ground again, keeps running and finally takes off - and then looks elegant.
Tariffs/Duties: Comet has no restrictions on selling its products, even with the new US leadership – the CEO sees the Trump administration as economically oriented, not ideological – which, in short, is positive for all technology companies.
Comet has recently surprisingly published preliminary key figures for FY 2024. Sales growth has reached the guidance ('lower end of CHF 440 - 480 million') and even slightly exceeded the consensus. Overall, Comet grew by over 2024% in 12. The EBITDA margin was 13.8%, which is slightly below the guidance and consensus, but the reasons are higher investments, a slightly worse product mix and underutilization in Q424 - excusable in my view. The book-to-bill is at a healthy 1x. The outlook for 2025 remains positive and Comet expects a further recovery and better figures.
My conclusion: Stephan Haferl was surprisingly positive in my opinion and sees Comet as ideally positioned - which in turn did not surprise me. I do not consider a comparison with VAT to be very useful, as Comet has considerably more potential in terms of margins and market share. The Plutos-Switzerland Fund is sticking to its position.
DocMorris (CEO Walter Hess, CFO Daniel Wüest) – generally positive, frustration about the share price
So I'm not the only one: DocMorris management also can't understand the share price... because Rx comparison data has only been available for two quarters, and Teleclinic, an important growth pillar, has only been available since the beginning of last year.
99% of the market is still made up of suburban pharmacies, which continues to promise enormous growth potential.
DocMorris is relaxed about dm's entry into the market: shipping prescription drugs from the Czech Republic to Germany is not permitted. The market reaction should also have had a much greater impact on Redcare, as the German competitor is much more exposed in the OTC sector.
Teleclinic is a lot of fun: in September, the company was able to win the largest health insurance company, TK, which will now be active in December. With the AOK, the ADAC and 40 other partners, DocMorris sees itself as very well positioned and significantly stronger than Redccare.
Large pharmaceutical companies have suggested DocMorris consignment warehouses to eliminate wholesale distribution – this would be margin-positive for both parties.
According to the CFO, speculation about cash holdings of only CHF 80m appears to have little truth in it – they are significantly higher than this value.
The marketing costs, which represent a fraction of the EUR 200m spent by Redcare, are also overestimated. CFO Wüest therefore sees no reason for a capital increase, especially as DocMorris will also be selling some properties.
The question of whether Gesund.de is a major competitor was answered in the negative. It is simply a platform for pharmacies that operates a click & collect concept - it is not comparable to the DocMorris offering.
My conclusion: It seems hardly understandable to condemn DocMorris now. DocMorris has long been short seller's heaven and as long as no real hard facts can be presented about the e-prescription, the price will remain very volatile. As mentioned, however, the data is becoming increasingly statistically relevant and, in our view, DocMorris is not making any technical errors, but is increasingly preparing and expanding the market. The Plutos-Switzerland Fund is sticking to its position.
Jungfraubahn Holding (CEO Urs Kessler, CFO Christoph Seiler) – on the watchlist
My first meeting with the company. There isn't much more Swissness than this: the Jungfraujoch, Top of Europe, is clearly the most visited attraction in Switzerland. The maximum visitor capacity on the Jungfraujoch is currently around 1 million visitors. Somewhat surprisingly, the peak months are not the winter months, but July/August, with around 5 visitors per day. From March 000, 1, a mandatory seat reservation must be introduced.
The Jungfrau Railway is continually investing in expansions and modernizations, and safety is its top priority.
The need to travel has increased again and the economic situation seems to be of secondary importance in the decision to travel to Jungfrau.
The core markets are South Korea, India and China. Japan has lost some of its importance, but the USA has become stronger. Around 15% of visitors are Swiss.
The change of CEO from long-standing visionary Urs Kessler to a Swiss manager focused on the Asian markets poses some uncertainty for me.
Jungfraubahn has a clear dividend guidance of 40-60% payout rate.
The main concern is a geopolitical event between China and Taiwan – it would hinder the South Korean visitors.
My conclusion: JFN has fairly high hurdles for competitors, because the Jungfrau only exists once. CEO Kessler has built up an excellent marketing network and has always invested. Prices remain high or may even have to be increased in the future - since many visitors only visit the region once in their lives, they treat themselves to it. Compared to similar attractions on a global level, JFN has a relatively low valuation and we consider an investment by the Plutos-Switzerland Fund to be quite possible.
Kuros Biosciences (CEO Chris Fair, CFO Daniel Geiger) – a highlight
My first meeting with the company. We could not invest in it until December 2023 because part of the business was biotech. After the cecassion of the Fibrin-PTH project, Kuros has become a pure medtech company with the MagnetOs product. The market capitalization is around CHF 1 billion, the coverage is still very thin with only one analyst, but should increase soon (I hear Baader Helvea and ZKB). Kuros generates 95% of its sales in the USA.
MagnetOs, which has a consistency similar to toothpaste, is used to close bone gaps and support the regeneration of bone tissue. Kuros has already received market approval for the granule product, MagnetOs Granules, in Europe and the USA. The product is currently only used in the spine area, but will most likely soon be used in the extremities (foot, hand, skull, lower jaw, upper jaw and hip) - or in dentistry for bone reconstruction.
The product is manufactured in Bilthoven, the Netherlands - if production is to be carried out on a larger scale, it will be relocated to the USA, but the intellectual property will remain in the Netherlands. In principle, MagnetOs could be produced anywhere.
Kuros will certainly not be carrying out a capital increase in the near future, everything is self-financed and the company is cash positive. FCF has reached the break-even point since Q324. Q125 will be flat to slightly negative due to the expansion of production. CEO Chris Fair and CFO Daniel Geiger do not see a higher free float (currently 75%) via secondaries - the 25% anchor shareholder will remain invested for the long term.
My conclusion:'A one-trick pony but with a really good trick. Until December 2023, Kuros was a biotech/medtech hybrid and not investable for us - but with the discontinuation of biotech activities, Kuros became a pure medtech company, a development that we frankly missed...
You may be wondering whether a stock that has gained over 2024% in 400 still has upside. In my view, Kuros still has huge potential: the 400% was simply the market reaction that Kuros has transformed itself from a capital and risk-intensive biotech company into a cash flow and profit-generating, debt-free medtech company.
The recently announced sales collaboration with Medtronic in the USA shows that the global leader in the spine sector has recognized the potential of MagnetOs.
Coverage is still very thin with only one analyst, but is likely to increase very soon (I hear Baader Helvea and ZKB) - without a doubt a trigger for an increase in the share price. We included Kuros in the illustrious circle of Plutos Switzerland portfolio companies in January.
Medmix (CFO Jenny Dean) – cautiously positive
First things first: the inventory clearance process in the dental sector appears to be complete. With market growth in the low to mid single digits, Medmix is growing faster, but capacity utilization in the US is still not as high as it was before Covid.
In light of the H124 results and another profit warning, medmix has set three urgent priorities:
- Drive innovation pipeline and focus on joint development projects with key customers
- Creating a customer-focused organization and culture to deepen long-standing strong customer relationships
- to drive operational excellence in the expanded and modernized production network
The production facility in Atlanta is largely complete, Valencia is fully operational. The 'Fit for Growth' program to improve customer focus and innovation is off to a good start.
At the end of the year, a settlement was signed with the company that copied medmix products, which should lead to new orders from its customers.
Drug delivery: medmix is still winning several projects that are now in the development phase.
Surgery wants to grow by 2025 and Atlanta is currently being geared towards that.
Industry is still mixed: Electronics (30% of sales) remains volatile, but is relatively well positioned if there were a tariff war. It simply needs more volume, but continues to grow above the market. Customers are still waiting to see what impact the new Trump administration will have.
With the problems in Poland, the development of Atlanta and Valencia and the insourcing of production, customer orientation may have been lost somewhat - management will now focus more on this.
Beauty: The Chinese acquisition is going quite well, the market is still difficult and competitive, but medmix has won the first contract for brushes with L'Oréal. Lots of repeat business - but the focus remains on healthcare.
My conclusion: 2025 seems to be a transition year. The market is not currently changing dramatically - 4-6% growth could be too high, probably rather flat. 200-300 bps margin improvement is possible, but will be eaten up by the "Fit for Growth" restructuring program. After the expansion in Atlanta in 2025, the capex, currently 8-9%, will be lower. The volume in drug delivery is unlikely to increase before the end of 2026 - but this should be a big step and could coincide with the recovery of the industry. The Plutos Switzerland Fund is sticking to its position.
R&S Group (CEO Markus Laesser, CFO Matthias Weibel) – positive
The integration of Kyte Powertech is progressing faster than expected - by mid-June 2025, 80/90% of the integration will be completed. It is intended to be a minimal, careful 'soft' integration and Kyte is to remain 'stand-alone'. In the first 100 days, compliance, finance, management team, IT/cyber, initial sales orientation and key customers have already been integrated. Now the combination of sales, engineering and HR is next. Specific teams/project groups support and flank the integration.
FY24 is already consolidated with Kyte: around CHF 280m revenue with a 20% EBIT margin is expected – all within guidance, of course.
The market is simply not price-sensitive - security and reliability are much more important for buyers. No buyer will buy a transformer from the Philippines to save a few thousand francs (Asia is no longer cheaper than Poland). Therefore, business will remain local - with a few exceptions.
The demand for electricity will continue to increase, and at the same time the old transformers, some of which date back to the post-WW2 build-up, will have to be replaced. Not because they no longer work, but because they are no longer efficient enough. Transformers are like sockets - more are needed all the time because demand has increased.
The customers are energy companies, data centers via the building owner, but also stadiums (e.g. Qatar World Cup) or airports (e.g. The Circle).
An Achilles heel is the availability of copper, not necessarily the price level, because this can be passed on to the customer.
My conclusion: Four years ago, R&S Group had a negative margin. In the meantime, under the new management, the company has developed a margin level of 20%. R&S did its homework, managed its inventories better, set up advance payments, and much more. I also think it is important to mention that many investors who did not yet know R&S wanted to see the management. CEO Markus Laesser and CFO Matthias Weibel do a great job of explaining the strategy and the road map.
The share was recently under pressure only because a share placement was poorly digested after a board member had already sold shares on a large scale at the end of the year.
And the shares seem to have fallen into weak hands: the placement at CHF 19.30 was followed by prices as low as CHF 18.35. For me, this was a perfect opportunity to increase the position.
I know both sellers and know that this is just a case of profit-taking and not a company-specific problem. I remain convinced that the R&S Group, especially with last year's acquisition, will continue to give us a lot of pleasure, i.e. performance.
I can no longer imagine the Plutos-Switzerland Fund without the R&S Group position.
Rieter (IR Tim Schläpfer) – little new
The markets continue to be under pressure from the economic slowdown, high inflation rates and weak consumer sentiment. Rieter does not yet see a broad recovery in the key markets, but it could happen quickly - but at the moment the planning is conservative.
Structurally, automation is becoming increasingly important because there is a shortage of workers in many places, but customers still need the finances in advance to set it up.
Since 2023 was super-weak, 2024 saw good growth from this low base, which should continue in 2025. The Q324 order backlog of CHF 650 million is historically rather normal.
Cash flow was not so good in 2024 due to severance payments and missing prepayments.
At the beginning of 2023, Turkey, an important market for Rieter, was hit by an earthquake. Rieter operations are up and running again, but customers cannot find staff as many are busy in construction and reconstruction. Rieter will certainly thin out its agents as sales deductions are severely reducing margins.
Rieter does not see acquisitions as a driver for growth and improved profitability - it is more likely to buy in the components sector, where there are many competitors. In addition, M&A is generally considered for man-made fibres, nonwoven. One example last year was Prosino in Italy, which was recently bought and produces ringers and ring travellers.
Subsidy programs for the textile market are still few and far between. There is a program in India, but Rieter has not noticed anything about it so far, nor about the stimulus packages in China. India is better than Europe when it comes to new machines, but not as strong. South America also has good momentum alongside China. When business comes in, it can quickly lead to a lot of orders.
My conclusion:The FY24 key figures that have now been published missed expectations in terms of both sales and order intake. Last year, the company recorded a significant drop in sales of 40%. As expected, however, order intake also rose significantly by 34% due to the weak base. The exact profit figures will not be published until March 13, 2025, together with the guidance based on sales/EBIT. An operating margin in the upper half of the guidance is expected.
We are monitoring the major textile sellers (Boss, Nike etc.) to get an X-Read for Rieter, but after the Plutos-Switzerland Fund performed well with Rieter last year, we will not be building a position at the moment.
Schweiter Technologies (CEO Roman Sonderegger, CFO Urs Scheidegger) – positive
Schweiter does not expect any significant impact of the new Trump administration on the US business or in other regions, as production and sales are local.
The market launch of ALUCOBOND A1 is important, a ventilated building shell that can be used to design 3D shapes. A1 refers to fire resistance. A2 is currently available, and with A1 the fire rating is even higher. Only two suppliers have A1 in their range globally: Mitsubishi and Schweiter. Market shares vary regionally, but globally Schweiter is the market leader with around 25%.
Efficiency and innovation are the focus of the 'Accelerate' program, which was largely completed in 2024. For example, the 'Footprint optimization': the plant in Mainz and a site in Brazil were closed, the tasks distributed across different plants. The costs of CHF 20 million were already charged in 2024, and Switzerland now expects annual cost savings of CHF 10 million.
Organic growth is the priority, but opportunities would be recognized.
Innovation is progressing: digitalization, for example with a virtual world of different applications and as inspiration for the customer or a chat bot for customer service as support.
Process automation leads to faster batch changes for the different batches. Solution and technology innovation helps with differentiation, and the 5-dot sustainability label leads to higher margins. The customer portfolio is very broad in all four areas. Architecture sees the best growth in America in particular.
Schweiter is the only provider of the entire value chain in balsa production. 15 hectares in Ecuador and Papua New Guinea are cultivated by 1500 FTEs.
The goal is to reach double-digit EBITDA margins again as quickly as possible; in H124 it was 8.7%. In a bad year, the EBIT margin should not be below 7%, in a good year 9% is possible. ROIC should reach 9-11%, WACC is at 7.5, so 5.3% in 2023 was too low and -1.5% in 2022 anyway.
The shareholder-friendly dividend policy envisaged a payout rate of over 2023% for 75 (EPS CHF19.80, dividend CHF 15) – the dividend should remain in this ratio in the future.
My conclusion: The Plutos-Switzerland Fund will expand the still small position in the future. The conversation with CEO Roman Sonderegger and CFO Urs Scheidegger was very open and showed me the future potential, while at the same time the valuation is low.
SFS Group (CFO Volker Dostmann) – positive
The US tariff issue leaves the CFO pretty cold. SFS hardly exports, except in the ramp-up phase of a product. With seven production sites in the USA and 20 in Europe, SFS is well positioned and the raw materials are sourced locally. Overall, CFO Dostmann believes that many decisions are being postponed due to the global political situation - but that could change soon and then many market participants will have to decide which path to take.
The new large logistics hub (LogisticCity in Nuremberg) will soon reach a reasonable capacity. SFS is growing into the building cost-efficiently. One partner has closed its warehouse and integrated it into the LogisticCity. Two more partners will join this year.
SFS is exposed to the automotive industry with around 20% of its turnover, which also contributes a significant part to its profits. From discussions with customers for 2025, Dostmann sees a long overdue capacity adjustment in the German automotive industry, because that is what is ailing the industry. A legacy is being carried that can probably no longer be fully utilized. The employees could be deployed where skilled workers are desperately needed.
Fortunately, SFS has not expanded its capacity, but its customers, Tier 1 suppliers, are feeling the crisis directly. M&A is unlikely to be seen here. Engineered components growth (1-2%) comes from the ramp-ups of new products, mostly braking systems.
Of course, the 2025 guidance was confirmed. Construction will not show any organic growth, but the inventories now seem to have been reduced. Here, SFS will probably also want to grow inorganically and buy distributors (already three in 2024).
Distribution & Logistics is in a difficult situation because automation has not taken place at the machine builders' plants for the time being due to the financial situation.
CFO Dostmann sees a certain revival in Electronics, which is closest to the consumer business (good HDD business).
India is becoming increasingly relevant geographically and development is good (around CHF 50 million in sales). CFO Dostmann has never seen India develop so positively; the Modi government is putting subsidies in the right places. Finding highly qualified employees does not seem to be a problem, even if the fluctuation is somewhat high, probably because the average age is low. 'India will be fun in the future.'
The new ERP system was introduced in 6 countries on January 2025, 19, and everything was completed on the same day on January 8, 2025. The costs were lower than expected and the project was on schedule. This will also help the SFS management.
My conclusion: SFS has now announced its FY24 key figures, with sales coming in slightly below expectations and the EBIT margin of 11.6% in 2024 also disappointing. In a difficult environment, I find the result to be very respectable.
SFS is one of the best that the Swiss stock market has to offer and will benefit enormously from the current crisis. The Plutos Switzerland Fund is holding on to its position.
SKAN (CEO Thomas Huber) – steady upwards
Like most of the other people I spoke to, Thomas Huber sees the Trump administration as business-oriented, not ideology-oriented. Health Secretary Kennedy wants to lower drug prices, but Americans will not become healthier as a result. 10% of the SKAN pipeline is GLP-1-related. They are taking the business with them, without specifically focusing on it. It could also be an area in which Kennedy could be most active.
Pre-Approved Services is on schedule: Swissmedic should approve the line in November, after which batches can be filled immediately. The former PU head of Novartis, who was a SKAN customer for 20 years, is now at SKAN to test and operate the line. He has been on the management board for four years and will promote and manage the Pre-Approved Services division, as he and his team have very good contacts. The first customer for the new service will then be chosen from these contacts.
The order backlog is better than ever, could also be a Novo/Catalent influence. The peak in inquiries was in April/May 2024 and since it usually takes 12-18 months between inquiry and order, more orders could come before the end of H125. The book/bill ratio is on a healthy basis at over 1.
Aseptic Technologies – where SKAN holds 90% of the company – was able to report that a customer has received approval for another product. There are now eight in total, and the number is rising, as 17 more APIs are in the pipeline, which is also constantly growing.
SKAN has also already published its key figures for 2024 and has increased both sales and earnings. A sales increase of 12,5% from CHF 320 million to around CHF 360 million, an order intake of 20%+ over the previous year (CHF 360 million vs. 295 million) and an operating profit of +12% (CHF 56 million vs. CHF 50 million) are impressive. The detailed annual results will be published on March 25th.
My conclusion: The feedback could be summed up as business as usual. SKAN has longer order cycles and good visibility. CEO Thomas Huber is not easily disturbed - this includes giving the pre-approved project the time it needs. Whether it is the end of 2025 or the beginning of 2026 is not important to him - what is important is the high quality, because he does not compromise on quality. The results are exactly as I expected - a constant improvement, step by step, without big headlines and therefore perhaps still under the radar for many. The Plutos-Switzerland Fund is sticking to its strategic position at SKAN.
Tecan (CEO Dr. Achim von Leoprechting, CFO Tanja Micki) – we remain on the sidelines
Last year's profit warning caught many off guard. What were the triggers?
Around a third of the decline came from China. In 2023, around CHF 70 million (40 million Life Science, 30m Partnering Projects) of orders came from China, with a further 70 million going indirectly from Tecan to China, via partners and distributors from the US or Europe. Many customers were waiting for the stimulus packages. In its current guidance, Tecan does not expect a rapid rebound in China.
Another third came from biopharma: IRA, Biosafety Act, AI are setting new course for the US pharmaceutical giants and some are waiting to make decisions. The interest rate level is not important because the bottom line of the big companies is very good. The project pipeline in pharmaceuticals is still very strong - the decisions were simply continually postponed.
The third part came from the large research institutes, which had little automation in 2024 and also waited for political reasons.
The relocation of production to Penang (Malaysia) can contribute to better performance in 2025 and beyond. It is Tecan's largest and most modern site. Tecan is already considering an expansion. It also meets sustainability requirements very well - Google keyword: 'Factory in the Forest'
My conclusion: Overall, many of the problems that led to the profit warning are temporary or not in Tecan's hands - strategically, the company appears to be well positioned and will deliver, perhaps even better than before, when decisions are made again. However, since there will be no growth in China in the near future, we are refraining from investing. However, Tecan is definitely a company that meets our quality parameters.
Now it is starting again, the reporting season on the annual results – 2024 was extremely challenging for many companies, but it made many even stronger and more agile.
In the next few weeks, I will meet the top management of most of our portfolio companies, try to assess their review of 2024, their outlook for 2025 and beyond and convert them into numbers for my models – and share my impressions with you again in the next Sola Capital blog
Best regards,
Stephan
