Annual Report 2012 - Investor Relations

Letter to Shareholders9Urs ZieglerDelegate of the Board of DirectorsFelix ThöniMemberindustry. Sales were particularly encouraging in the foodpackaging sector, where they increased by 10%.Despite the increase in sales of core products, the marginswere unsatisfactory in these two areas of business.It was not possible in 2012 to offset the rise in energycosts (gas), which have risen in Italy by up to 50%, andthe increase in chemical prices, which have gone up byaround 10%, through higher sale prices.Digital Imaging consolidates servicesThe Cham-based business area of Digital Imaging whichis still small but is showing strong margins continued tobe successful, especially in the case of Transjet papersfor textile sublimation printing. Sales in this product segmentincreased once again by over 20%. In the textile industry,digital printing technology is increasingly also beingused in large volumes (cf. page 24). In this customersector, the demand for consulting services is also growing.For this purpose, the Group operates a Departmentfor Application Technology in Cham, which was systematicallyenlarged during the first six months of the year.BARnamic on the cusp of market introductionThe smooth introduction of BARnamic is of crucial importancein order to confirm the success of the developmentactivities of the Cham Paper Group. Thanks tothese innovative barrier papers, which are produced inSwitzerland, the Cham Paper Group should be in possessionof a unique selling point in the future. During the secondhalf of the year, the Group won an innovation prizeawarded by the Swiss Canton of Zug for BARnamic. Atthe same time, however, the company had to deal witha few setbacks during test runs with selected key costumers,which led to delays. In the first quarter of 2013,the first sales were achieved. Naturally, it will take a fewyears before this innovative product solution will be demandedin large volumes. The Development Team is currentlyworking under considerable pressure to developthe BARnamic product family further.Solid balance sheet and a lower net working capitalThe net working capital has fallen during the reportingyear by CHF 6 million to CHF 68 million. At the sametime, the Group generated a positive free cash flow ofCHF 8.1 million (previous year: CHF –4.2 million). Fixedofftake contracts are in place with the relevant customersfor the (increased) warehouses in the Industrial Releasearea. With the closure of the second paper machine inCham and the outflow of goods from the warehouses,the net working capital will continue to decrease in 2013.The net debt fell further during the reporting period, toCHF 18.0 million (previous year: CHF 25.9 million). Furthermore,better terms and conditions were achieved forsome of the credit agreements. By the end of the year,the Group had a cash position of CHF 49.0 million. Theequity ratio as at 31 December 2012 was a healthy 41%(previous year: 39.3%).Orderly staff cutsIn February, representatives for Management and Labourin Cham adopted a comprehensive redundancy package,which defines the framework conditions for socially acceptablestaff cuts of 212 jobs in total by 2014. The supportmeasures offered, such as the job centre set up bythe company and various training opportunities, were appreciatedand put to good use. By the end of the year,the Group’s staff was downsized to 544.5 employees