Dear Shareholders

StarragTornos records year-on-year increase in sales and leap in profits on a pro forma basis

Dear Shareholders,
Following the successful merger of Starrag and Tornos to form the StarragTornos Group in December 2023, we are delighted to present to you today the first Annual Report for our new Group. We are very pleased that the shareholders of Starrag and Tornos approved the merger by an overwhelming majority at the end of November 2023 and that we will now together be shaping the future of the global metal-cutting machine tool industry as the StarragTornos Group. Since the fusion was technically an absorption merger, the annual figures of Starrag are consolidated with the results of Tornos for the month of December 2023 in the financial report from page 120 onwards (12 months of Starrag Group plus 1 month of Tornos Group). To give you a realistic picture of the overall development of the StarragTornos Group with the two divisions Starrag and Tornos, you will also find the pro forma figures for StarragTornos on an annual basis for 2023 and 2022 in the first part of this report (12 months of Starrag Group plus 12 months of Tornos Group). These show a significant increase in sales and a leap in profit.

Compared to the previous year, and based on the pro forma figures, StarragTornos increased net sales by 13.2% to CHF 564.7 million, EBIT* by an impressive 56.8% to CHF 46.4 million and net profit by 56.0% from CHF 20.8 million to CHF 32.4 million. The EBIT margin rose from 5.9% to 8.2%. Substantial growth was achieved by the Group in 2023 in the Aerospace and Transportation market segments (especially Truck & Bus) as well as in the service and spare parts business. After both Starrag and Tornos posted outstanding order backlogs at the end of 2022, the StarragTornos Group reported a consolidated order backlog* of CHF 340.8 million on a pro forma basis at the end of 2023 (previous year: CHF 395.3 million).

Starrag division
The pleasing further improvement in Starrag’s profitability is due on the one hand to the structural cost reductions implemented in 2021 and the resulting lower cost base. On the other, Starrag was able to process the high order backlog efficiently and profitably throughout the year.

In its target market Aerospace, Starrag was able to achieve the highest sales volume in 2023. It also made significant gains in the Transportation target market, especially in the Truck & Bus segment. The Energy target market, on the other hand, was characterized by significantly lower demand.

At Starrag, the Bumotec high-precision machines (191 neo and S1000c) for the production of small workpieces for watches, jewelry, medical technology, and micromechanics were in particularly high demand. Starrag also made significant gains with the ECOSPEED line, and especially with the new Starrag STC 1250HD which was developed for machining complex structural titanium parts for the Aerospace industry.

The successful merger to form the StarragTornos Group offers us the opportunity to significantly increase our market presence worldwide.

Another success story is the new Heckert H75 and H85 which are perfectly tailored to the needs of the demanding agricultural machinery market.

Tornos division
In terms of new investments on the customer side, Tornos noticed a great deal of uncertainty in some sales markets, which was reflected in various project postponements.

In 2023 Industrial was the largest target market for Tornos. This includes the Electronics market segment and the job shops, which themselves serve other Tornos target markets on a larger scale. The Industrial target market was followed by MedTech & Dental and Luxury Goods. In general, Tornos’ dependence on the automotive industry has decreased massively over the past few years. In 2023, Tornos generated only around 10% of its net sales in this sector.

The SwissNano Swiss-type automatic lathe produced in Switzerland continued to enjoy good demand in 2023, while the MultiSwiss multispindle machines were most affected by project postponements. It is pleasing to note that MultiSwiss machines are also increasingly in demand outside the automotive industry.

For the machines produced by Tornos in the Taiwan region and in China, demand was slightly lower in 2023 than in the previous year.

Service business expanded further
Starrag’s and Tornos’ service business continued to perform well in 2023, with sales in this area rising by 6.8% compared with 2022 on a pro forma basis. This business now accounts for 24.1% of total net sales at StarragTornos.

Growing sustainable
Over the past few weeks, following the successful merger of Starrag and Tornos to form the StarragTornos Group, we have integrated the existing sustainability programs of Starrag and Tornos into a joint program called Growing sustainable. This is the beginning of a holistic approach to our Group’s environmental, social, and governance initiatives, providing a fundamental framework for ongoing development and impactful activities. Together, we want to shape a sustainable future. Detailed information on this can be found in the StarragTornos Sustainability Report, which is an integral part of this Annual Report (pages 46 to 81).

Board of Directors and Executive Board
In the course of the merger between Starrag and Tornos, in addition to the elected members of the Board of Directors of Starrag Group Holding AG, the members of the Board of Directors of Tornos Holding AG were elected to the Board of Directors of StarragTornos Group AG at the Extraordinary General Meeting of Starrag Group Holding AG on November 29, 2023: François Frôté, Till Fust, and Michel Rollier. The Executive Board of the new StarragTornos Group has been composed as follows: Michael Hauser (CEO), Stéphane Pittet (CFO), Martin Buyle (Division CEO Starrag) and Jens Thing (Division CEO Tornos).

Distribution to shareholders
At the General Meeting on April 20, 2024, the Board of Directors will propose to the shareholders a dividend of CHF 2.50 per share, which corresponds to a payout ratio of 34.7%.

Outlook
In view of our good order backlog and the promising prospects offered by the merger between Starrag and Tornos, we are very well positioned for 2024. However, it is difficult to make specific forecasts due to the fact that global economic developments remain unpredictable. The ongoing war in Ukraine and the numerous political and social conflicts and unrest in other regions bring with them many uncertainties. This also includes inflationary and recessionary trends in various sales regions. However, the successful merger to form the StarragTornos Group offers us the opportunity to significantly increase our market presence worldwide and further expand attractive customer segments.

Thanks
The Board of Directors and the Executive Board would like to thank our employees at all locations for their great commitment over the past financial year. Many thanks also go to our customers and suppliers for their excellent cooperation during the past year. And in particular, we would like to thank you, our shareholders, whose generous trust and support at the end of last year made the merger of Starrag and Tornos possible in the first place.

* Non-GAAP financial measure, refer to page 125 in the 2023 Annual Report of the StarragTornos Group

Michael Hauser
President and Chief Executive Officer