Belimo Pursues Its Growth Path in a Demanding Environment

Belimo achieved strong results and continued to deliver on its growth strategy despite complex economic conditions.

Thanks to its highly engaged employees and strong values, Belimo returned a remarkable performance in a year characterized by inflation trends, rising interest rates, and slowing business momentum in the construction industry. Overall, demand remained at a solid level during the reporting period, although business lost some impetus in mid-2023 before picking up again moderately towards the end of the year.

Despite the development of the markets and foreign exchange effects, sales grew, driven mainly by price increases. A specific highlight was the consistently strong contribution of control valve products across all regions. Overall, net sales grew 7.2% in local currencies and 1.4% to CHF 858.8 million in Swiss francs.

The Americas market region reported impressive results with a sales growth of 7.7% in local currencies. This follows an extraordinary previous year in which Belimo was able to gain significant market share due to delivery issues in the industry. This led to a substantial baseline effect, particularly in the second half year of 2022. EMEA achieved solid sales growth of 6.4% in local currencies. This performance was still impacted both directly and indirectly by the war in Ukraine, which had prompted Belimo to exit the Russian market in the first quarter of 2022. The Asia Pacific market region registered an increase in sales of 8.2% in local currencies. Belimo India, along with other regional subsidiaries, performed exceptionally well, compensating for the challenging circumstances in China.

Net Sales by Market Regions

The business line Control Valves could gain significant market share, posting growth of 12.0% in local currencies. This confirms Belimo’s successful efforts as innovation leader in this application field. Additionally, Sensors and Meters gained further traction, registering an increase of 31.0% in local currencies. Damper Actuators, on the other hand, grew only slightly by 1.1% in local currencies. Destocking by original equipment manufacturer (OEM) customers and the slowed-down business momentum in the new construction industry adversely affected sales.

Net Sales by Business Lines

Earnings before interest and taxes (EBIT) came to CHF 152.5 million in 2023 (2022: CHF 152.4 million). With an EBIT margin of 17.8% (2022: 18.0%), profitability was very robust. This was despite the demanding economic environment, inflation trends, and foreign exchange developments that were unfavorable for Belimo given that its main cost base is in Swiss francs. Material costs normalized after having increased in 2022, owing to supply disruptions, higher energy costs, and inflation.

As far as further expenditure is concerned, Belimo is committed to maintaining its strategic stability and thus mastering the global economic challenges without impairing its medium-term potential. Consequently, the Company increased its research and development expenses to CHF 76.0 million or 8.9% of net sales. In an effort to ensure the successful implementation of its key initiatives, Belimo welcomed almost 100 additional new talents to benefit from the five megatrends of energy efficiency, climate change, urbanization, safety in buildings, and digitization.

The Group achieved net income of CHF 136.8 million (2022: CHF 122.7 million). Earnings per share rose to CHF 11.14 (2022: CHF 9.99). Both figures were positively impacted by a one-time tax effect of CHF 17.1 million in 2023 absorbing a negative financial result of CHF 10.1 million driven by strong adverse foreign currency movements during 2023.

Operating cash flow increased to CHF 157.0 million (2022: CHF 112.9 million), positively affected by a decline in net working capital in the reporting period. In the previous year, net working capital was increased to maintain superior lead times in an environment of global supply chain shortages. Free cash flow amounted to CHF 135.9 million (2022: CHF 91.2 million), including a divestment of term deposits of CHF 25.0 million (2022: net divestment of CHF 35.0 million).

EMEA

The EMEA market region registered net sales of CHF 375.9 million in 2023. This corresponds to an increase of 6.4% in local currencies (2.2% in Swiss francs) compared to the previous year, mainly driven by the successful implementation of price increases. As the year progressed, the consequences of interest rate hikes and the war in Ukraine increasingly restricted avenues of growth within the European construction industry.

On the other hand, on the product side, Belimo’s pressure-independent valves performed particularly well, seeing a rise in demand stemming among other things from an increasing focus on energy savings and substantial progress in the OEM business with data centers throughout the EMEA region. Belimo grew significantly in Italy and France, where it was able to exploit its excellent standing in Electronic Pressure-Independent Valves (EPIVs).

Owing to uncertainty concerning German energy regulations and subsidies for the replacement of fossil-fueled boilers, the market saw a considerable downturn in demand for biomass furnaces and heat pumps. This impacted the development of Belimo’s sales in Germany, as well as in Austria and Poland, where the company does a considerable volume of business with biomass furnace manufacturers.

At the same time, construction activity in Saudi Arabia is picking up owing to Saudi Vision 2030, which is additionally boosting Belimo’s business in the Middle East.

Americas

The Americas market region reported CHF 373.8 million in sales in 2023, corresponding to an increase of 7.7% in local currencies (1.5% in Swiss francs). This includes a price increase implemented in 2023, which contrasts with two bigger price increases enforced in 2022. The rise in the Federal Funds effective interest rate, which was unprecedented in the past two decades, had a negative impact on GDP and thus also on the financing of new construction projects. The heating, ventilation, and air conditioning (HVAC) market remained resilient despite less robust general economic growth.

Belimo was able to retain most of the market shares it had gained in the region during 2022, a year marked by the severe supply chain disruption experienced by competitors. This success was made possible by a high level of operational excellence and resulting fast lead times along with a sales force that provides outstanding customer value based on extensive HVAC application know-how. Additionally, specific product categories like pressure-independent control valves grew considerably, whereas business with damper actuators remained flat compared with the previous year.

The regulatory framework in the United States (i.e., the Inflation Reduction Act and local initiatives) also favored market engagement. Belimo’s RetroFIT+ initiative has allowed the Group to support major projects earlier in the cycle than traditional sales channels, contributing to the advancement of the existing building market, which accounts for half of Belimo’s sales in the Americas.

Asia Pacific

The Asia Pacific market region reported CHF 109.1 million in sales in 2023, corresponding to an increase of 8.2% in local currencies (-1.5% in Swiss francs). The HVAC market experienced a slowdown in China owing to liquidity issues and further economic challenges. India’s HVAC business saw significant growth, driven by promising sectors such as data centers, infrastructure, and the pharmaceutical and hospitality sectors, coupled with a heightened emphasis on energy efficiency, indoor air quality, and eco-friendly certified buildings. The Southeast Asian market likewise grew, mainly fueled by new construction ventures, with growing interest in renovation and upgrades.

The Company managed to expand its market share considerably in India across all segments, especially in pressure-independent valves, sensors, and smart actuators with an integrated variable air volume and room controller (ZoneEase VAV). The performance of pressure-independent valves was largely driven by OEM business in the data center vertical. Belimo also recorded double-digit growth in Southeast Asia.

Belimo’s CESIM House in Mumbai has received the prestigious ASHRAE Technology Award for Industrial Facilities in the region and a nomination for the global award. This accolade has proven to be an excellent way to educate the market.

Outlook

In 2024, the Group anticipates solid demand for its field devices in both new construction and the renovation of existing structures. Sales growth, measured in local currencies, is projected to be at the lower end of its guided growth corridor. Additionally, the EBIT margin is likely to be influenced by foreign exchange fluctuations and sustained high levels of research and development, along with ongoing investments in future advancements.

In the EMEA market region, Belimo believes that the economic downturn experienced in 2023 will persist and affect non-residential construction throughout 2024, with a rebound starting in 2025. Despite this, the HVAC market is expected to be in a better position, supported by demand for renovations and the implementation of the EU Energy Performance of Buildings Directive (EPBD) in Germany through the Building Energy Act. This new legislation is expected to enhance renovation efforts, an area where Belimo has already made significant inroads with its RetroFIT+ initiative. The company is well-placed to capitalize on the anticipated surge in the renovation sector, which is expected to result in an accumulation of retrofit projects.

In the Americas market region, the Group is anticipating moderate sales growth due to predictions of rather stable economic conditions and less opportunity to increase prices owing to lower prevailing inflation rates. Positive market share gains are expected, mainly driven by continued above-average market growth in control valves, sensors and meters, and opportunities arising from the RetroFIT+ initiative.

In the Asia Pacific market region, the Indian business is thriving and has promising prospects for 2024, partly thanks to the New Delhi airport project. Segments such as data centers, pharmaceuticals, hospitality, and infrastructure are expected to experience significant growth. In Southeast Asia, the Group predicts robust growth in the HVAC market in line with expectations of higher GDP growth. As for China, Belimo remains prudent regarding its growth targets. Nevertheless, the economic outlook for 2024 seems relatively stable, although projections of GDP growth have been marginally reduced.

The non-residential building market faces challenging investment decisions amid global economic uncertainty, signs of recession, and higher interest rates. Nevertheless, even if these higher rates slow new construction activity, refurbishment projects are expected to pick up, albeit with some delay. This potential shift presents Belimo with additional growth opportunities.

As the market leader in energy-efficient HVAC field devices, Belimo is strongly positioned to leverage these changes in the market. The ongoing urbanization and climate change trends are fueling demand for improved indoor air quality and energy efficiency in building automation, offering prospects for growth outpacing general GDP trends. The Group remains committed to its long-term growth strategy, continuing to invest in strategic initiatives and expanding its capacity, mainly in the logistics area, leading to an elevated capital expenditure level in the coming years. Furthermore, the Company will continuously invest in training programs for its over 2`300 talents who live the Belimo values every day.

Financial Key Performance Indicators

Income Statement

Cash Flow

Balance Sheet

Balance Sheet as at December 31, 2023

Total assets remained stable compared to previous year at CHF 662.0 million (2022: 672.0 million). Cash and cash equivalents grew from CHF 86.8 million to CHF 110.8 million, mainly due to the short-term investment in term deposits in previous year of CHF 25.0 million. Net working capital dropped by CHF 18.2 million year-on-year to CHF 241.9 million (2022: CHF 260.1 million). 

The equity ratio remained at a very solid 80.1% (2022: 77.6%). Based on average equity, the return on equity (ROE) came to 26.0% (2022: 23.8%).

The Board of Directors is proposing a dividend of CHF 8.50 per share at the 2024 Annual General Meeting on March 25, 2024.