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Declining volumes in Communication market segment – falling EBIT margin stabilised by cost measures
The much weaker communications market resulted in significantly lower volumes around the world, which impacted the entire industry. Compared to the very strong net sales from the previous year, the Communication segment suffered a significant slump, especially in the second and third quarters, due to declining 5G rollouts in North America and the continued depletion of high inventories throughout the supply chain. Order intake declined by 25.6 % to CHF 283.4 million (PY CHF 380.6 million), while net sales decreased by 27.4 % to CHF 280.3 million (PY CHF 385.9 million). In this environment, which was characterised by significantly lower demand, business picked up towards the end of the reporting period with the securing of new mobile communication rollouts in Asia in particular and in the data center growth initiative. Thanks to measures to reduce the cost base and adjust capacities to the lower volumes, the EBIT margin was improved in the second half of the reporting year compared to the first half and stabilised at 4.9 % for the year as a whole (PY 8.9 %).
“Following the completion of the first wave of 5G network rollout in North America and Europe in 2022, the market environment in these regions was extremely challenging in 2023, with reduced investments by communication service providers and the continued depletion of high inventories. In contrast, the Asian market developed positively for HUBER+SUHNER at the end of the year, mainly thanks to India and Australia. The shortfall in net sales forced us to implement drastic cost-cutting programmes to adapt our cost base to the changed market environment in a sustained manner. Through active cost management, we succeeded in stabilising our margin in the second half of the year. The continuing exponential growth of data traffic and the emergence of artificial intelligence applications are increasing demand for high performance, high density and low latency in data centers and communication networks. This represents a significant opportunity for us and our innovative solutions in the field of optical interconnects, WDM transport systems and optical switches.”
Jürgen Walter, COO Communication segment
Our solutions for the Communication market
Signs of recovery in globally depressed communications industry toward year end
The very high volumes of the previous two years, especially in North America, had been attributable to major investments in mobile communications infrastructure in the wake of the coronavirus pandemic. In addition, declining demand was exacerbated by high inventories in the supply chains. These two effects led to an unanticipated slump, which was even more pronounced for component suppliers such as HUBER+SUHNER.
In addition, the risks of insufficient energy supplies, especially in Europe, made it difficult for operators of energy-intensive data centers to obtain new construction permits, often resulting in project delays.
By contrast, the rapid and wide-scale emergence of artificial intelligence applications brought new demands on data center architecture, which breathed new life into this growth initiative towards the end of the year. The company has unique solutions in its portfolio to address these customer requirements.
