Deutsch

89% Deutsch
High-performance    connectors    

DEUTSCH CUSTOM MAKES CLOSE TO 80% OF ITS CONNECTORS

Why did we invest in Deutsch?

Deutsch designs and manufactures innovative connector solutions in close tandem with its clients’ R&D departments. Its products are highly innovative and perform exceptionally well while standing up to very harsh operating environments. All its products meet the most stringent quality standards. Deutsch is among the world leaders on its markets and benefits from high barriers to entry, such as the long clientaccreditation procedures, the long lifecycle of platforms, notably in aerospace and industrial equipment, as well as the high level of skills and experience it has gained in research and development. Deutsch has also developed numerous original solutions, such as aluminum cabling systems for the Airbus A380.The Group’s growth is based on developing markets, such as aerospace, and targeted acquisitions.

What were the highlights of 2010?

Deutsch recorded sales of $559.7 million in 2010, up 25.3% on 2009 (up 27.2% in organic terms) on 2009. The pick-up in growth over the second quarter continued in the rest of the year.
This sales growth was driven largely by very robust business at LADD, the exclusive distributor of the group’s products in the United States (up 43.1%) and a twofold increase in the Industrial division (up 92.1% in organic terms), representing 53% of the group’s sales. Both are benefiting from extremely high demand on all end markets for high-performance connectors.
This demand was especially strong in HGVs and construction engines. Overall, growth nonetheless slowed at the end of the year, as end clients completed their inventory rebuilding.
The stabilization of the Aerospace division (44% of sales) is the result of growth on the US market, which partially offsets the relative weakness observed in certain end markets such as civil and military aerospace or rail. The Offshore division, which accounts for 3% of the group’s sales, achieved lower sales than in 2009, as new orders continued to be postponed. The entire offshore drilling industry remains impacted by the Deepwater Horizon catastrophe off the coast of Louisiana in April 2010. Deutsch’s business recovery also had positive repercussions on employment and the company’s workforce returned to pre-crisis levels. Nearly 400 employees joined the group in the past 18 months. As expected, Deutsch’s adjusted operating margin also returned to its pre-crisis level and stood at 20.1% of sales. The efforts made by the group to increase operational efficiency during the downturn translated into a sharp rise in profitability and boosted adjusted operating income from $51.4 million to $112.6 million.

What is the outlook for development?

After experiencing the worst downturn in its history, Deutsch was able to quickly redeploy its production facilities to meet new demand, especially from India and China. The Group expanded its production units in Bangalore and Shanghai, where over 7% of the Group’s employees are now based. As the economy continues to recover, Deutsch anticipates a further 5% to 10% growth of sales, continued robust performance in the industrial division and strengthened recovery in civil aerospace. In light of the above, the company expects a stable or increased operating margin and a further reduction in debt. In the longer term, Deutsch plans to reach $1 billion in sales, by 2015.