Climate Division
The Climate Division develops and produces energy-efficient systems for indoor climate for buildings of all kinds. It serves customers throughout Europe, with eight production locations, five development competence centres for research and a number of international sales offices.
The division promotes sustainable heat and cold generation, heat and energy storage, heat and cold distribution, ventilation and air filtration. The product portfolio includes ventilation units, fan coils, heat pumps, storage batteries, underfloor heating systems and radiators. The systems are suitable for new buildings in the private and commercial sectors as well as for renovation projects.
The pioneering system solutions are seamlessly compatible and pave the way for energy-efficient and energy-independent buildings, promote the use of renewable energies and reduce CO2 emissions. In this way, the Climate Division is supporting the energy transition in Europe and around the world.
Market trends
The Climate Division achieved revenues of CHF 576.6 million in the reporting year, down 10.8% on the previous year (CHF 646.2 million). When adjusted for currency and acquisition effects, revenue was down 9.8% on the figure for the previous year. The EBITDA margin decreased from 9.1% in the previous year to 7.4%. At CHF 42.8 million, absolute EBITDA with one-time effects was 27.0% below the previous year (CHF 58.6 million). Without one-time effects resulting, among others, from the relocation that had been announced for the design radiator plant, from Belgium to the Czech Republic, EBITDA reached CHF 54.7 million: 7.5% below the previous year (CHF 59.2 million). EBIT with one-time effects came to CHF 5.5 million, which corresponds to a reduction of 77.5% compared to the previous year (CHF 24.6 million). EBIT without one-time effects closed with CHF 18.7 million, 25.6% below the figure for the previous year of CHF 25.2 million.
The year 2023 was characterised by unprecedented volume decreases in large parts of the product and country portfolio. In the case of traditional heat exchange products in particular, further inventory reduction at wholesalers in the first half of the year and the slump in new construction and renovation activity had a negative impact on sales development. It was only possible to maintain the level of earnings and offset the sharp rise in wages by optimising prices in conjunction with successful cost-saving initiatives and progress in process and production efficiency. Currency effects also had a negative impact – particularly the strong Swiss franc – as the majority of revenue is generated in the eurozone.
The global supply chain complications that dominated the year 2022 gradually eased towards the end of 2022. This enabled delivery capacity to be largely restored in the first half of 2023, with many orders being delivered. The energy shortage feared due to the war in Ukraine did not materialise either – although energy costs remained high. As a result, the situation for the division remained cautiously optimistic in the first half of the year despite a sharp decrease in radiator volumes. Over the course of the year, the picture became bleaker due to further increases in construction costs, rising interest rates and ongoing uncertainty regarding government regulations and funding opportunities in the building sector. The resulting reluctance to invest also affected growth segments such as heat pumps in the second half of the year.
Business in Southern Europe was driven more by commercial construction projects and its development over the course of the year was positive. Although momentum weakened somewhat towards the end of the reporting year, this business area nevertheless proved to be robust. The division therefore benefited from its diversified positioning with solutions for both new builds and modernisation projects in residential construction as well as commercial and industrial construction.
In July 2023, the division announced its intention to relocate design radiator production from Dilsen in Belgium to the highly automated production plant in the Czech Republic. This measure aims to improve competitiveness in this product group, which is currently under fierce competitive pressure. The second half of the year was dominated by negotiations with employee representatives. These were completed in January 2024, meaning that the relocation can be implemented as planned during the year 2024.
The Portuguese company Cirelius, which was acquired in December 2022 and specialises in the sale of HVAC system solutions, was fully integrated into the division in the reporting year. This acquisition strengthens Arbonia’s market access on the Iberian Peninsula and has already resulted in initial synergies on the cost and sales side.
Products, technology, and innovation
During the reporting year, the Climate Division updated its mission statement: "We create superior indoor climate solutions for future generations". This sums up the division’s strategic direction and, at the same time, demonstrates its exceptional competence profile. The division is focusing on current megatrends and, with its product and system portfolio, is an important pioneer for the energy revolution. This strategy is also reflected in the renaming of the division to "ARBONIA climate".
Although the Climate Division is concentrating on growth products, it is also anchoring its successful position with proven products in established business units. This includes innovations and further developments in the radiator business unit; for example, so that solutions that are tailored to renovation projects can be offered for operation with renewable energies. Modern radiators that can be operated perfectly even at low flow temperatures play a key role in renovation projects, particularly when combined with a heat pump. The division presented products from this area to an audience of interested trade specialists at ISH Frankfurt (D).
In the reporting year, the division was the first radiator manufacturer to receive the Environmental Product Declaration (EPD) for all steel radiators. Awarded by the IBU Institut für Bauen und Umwelt e.V., an association of building product manufacturers, this label makes the environmental impact of the products transparent and comparable across the entire process chain. By using products verified through EPDs, specialist partners can demonstrate the environmental credentials that are increasingly required in tenders and the awarding of subsidies. This secures their competitive advantage, while enabling them to implement more sustainable building designs.
The division is paying particular attention to growth markets in the area of indoor climate. Expansion investments were made at the Opočno (CZ) production plant in 2023 in relation to heat pumps – a product which is of strategic importance for the future. To ensure an even greater degree of sustainability, heat pumps using environmentally friendly refrigerants were introduced in 2023. Furthermore, cascaded heat pump systems were launched on the market for enhanced heating performance in multi-family homes or larger properties. These systems ensure greater planning flexibility and reliability. The new models operate very efficiently and quietly at low outside temperatures. Alongside the sophisticated heating technology, there is also the option of environmentally friendly cooling in summer.
At the division’s production plant for fan coils and ventilation systems in Corbetta (IT), investments to expand capacity were made in storage and logistics technology, production processes and the machine park in 2023 in order to keep pace with the strategic growth in the ventilation market segment. The Climate Division also expanded its product portfolio for residential ventilation and successfully readied a new compact unit for market launch in the reporting year. Due to its small dimensions and practical connection options, it can also be easily installed in cabinets to save space.
In 2023, the Climate Division also further expanded its business with cleanrooms – i.e. the development of architecture and ventilation systems for industries which require stringent control of air parameters. The division is particularly proud of its partnership with a European battery-cell manufacturer, for whom the construction of the cleanroom is proceeding according to plan. It has also acquired further projects with the same customer. In view of the large number of investments in battery systems currently under discussion throughout Europe, the Climate Division expects a very positive outlook for this segment.
The division’s battery storage portfolio was expanded in 2023 to include a cascade and emergency power function. A variant with a capacity of 10 kWh was developed and will be launched on the market in 2024. The new storage system is therefore also suitable for owner-occupied homes with larger solar systems and higher consumption rates. The product does not require rare earths and is both highly durable and resistant to fire. This innovative battery storage product was also launched in Switzerland in 2023.
For growth products such as heat pumps, heat transfer products, centralised and decentralised ventilation systems and storage technology, the division expanded its in-house capacities in its R&D centres by investing in several test benches.
The Climate Division is focusing on digitisation to facilitate a modern form of customer communication and supports service processes with online applications, for example. Relaunching the key brand websites will provide the technical basis for further developing this platform. Further digitisation of internal processes is also ongoing to help the division gain in efficiency and achieve synergy effects.
Outlook
The Climate Division is perfectly positioned with its strategic direction and its product and system portfolio. However, major forecasting institutes do not expect the development of the construction industry to recover significantly in the coming year. Depending on the country, the difficult situation is expected to continue. The division is therefore prepared to start the year by facing considerable challenges. Despite this, demand remains high for new living spaces and energy-efficient indoor climate solutions, particularly in the context of modernisation projects. Furthermore, the first half of 2024 will see the relocation of design radiator production from Dilsen (BE) to the highly automated production plant in the Czech Republic. The planned cost savings will start showing effects from the middle of the year. The division is therefore holding firm to its profitability and growth targets in the medium term. It will continue to benefit from its diversified composition in 2024 and will expand its market position by continuing to implement its strategy.
