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Chandan Dubey
Chandan Dubey
Articles (150) 

Autoneum Holding: a recovery taking place under wraps

October 29, 2011 | About:

1 Company


Price=60 CHF/share

Net result=1.5 m CHF (HY2011)

EPS=-0.69 CHF/share


Sales=880 m CHF (HY 2011, Jan-June 2011)

Brief History

1984 Acquisition of Unikeller AG, Switzerland (noise control and thermal insulation systems for the automotive industry)

1994 Acquisition of Firth Furnishings, UK (car carpets)

1995 Unikeller Division renamed Rieter Automotive Systems and Acquisition of Globe Industries, USA (components for motor vehicles)

1996 Acquisition of Fimit, Italy (components for motor vehicles)

1997 Acquisition of Ello, Brazil (components for motor vehicles) and JV with Magee, USA (car carpets) (100% taken over in 2005)

2000 Rieter Automotive wins the PACE award for the innovation “Rieter Ultra Light” (RUL)

2003 JV with Nittoku for the production of automotive components in China and Increase stake in Saifa-Keller (Spain)

2006 Acquisition of Rieter Automotive India (formerly called UnikellerIndia) and Increase stake in Saifa-Keller to 100%

2008 Start of production of innovation “Rieter Ultra Silent”RUS) - PACE award finalist and Opening of new development and acoustic center in China (Shanghai)


From the companies’ website

Autoneum is one of the global technology leaders in acoustic and thermal management solutions for motor vehicles. Autoneum is a leading partner for the major light vehicle and heavy truck manufacturers around the world. Autoneum provides innovative and cost effective solutions for noise reduction and thermal management to increase vehicle comfort and value.

Since the split of the Rieter Group by separation of the Automotive Systems and Textile Systems division Rieter Holding’s former automotive business is now called Autoneum. Autoneum Holding AG is a legally independent company listed on the SIX Swiss Exchange.

Autoneum will continue to be a reliable partner for the worldwide automotive industry and all the other stakeholders of the company. With some 8’500 employees at 48 locations in over 20 countries Autoneum delivers industry-leading innovations for acoustic and thermal management.

The company operates on a global scale and has its headquarters in Winterthur, in the greater Zurich area of Switzerland.


Autoneum designs innovative sound package products for the vehicle: engine bay, passenger compartment, trunk, body and exterior. These are aimed at

  • reducing fuel consumption and polluting emissions by designing innovative engine encapsulations while treating noise at its source, the engine.
  • combined heat protection and sound management solutions for the engine and the exhaust line
  • thermal comfort in truck cabins and passenger cars

They also provide specialized measurement systems for automative acoustics since 40 years. These specialist systems have become industry standards and are used throughout the world.

Towards this aim Autoneum supplies many products and packages. Some of them are as follows

  • Engine bay - For the source of all thermal an acoustic issues in the car, the engine, Autoneum supplies engine covers, hoodliners, outer dash/tunnel insulators, water box shields, plenum chamber and battery trays. They are also developing engine/body mounted encapsulations aimed at lowering fuel consumption, reducing emission and improving acoustics.
  • Interior Trim - Provides attractive surface material while improving passengers’ acoustic comfort. They offer parcel shelves and other interior trim parts like door panels.
  • Interior Floor - Autoneum has expertise in carpet surfaces and integrated floor systems. They offer carpets, insulators, spacers and crash pads, similarly for Trunk.
  • Underbody - They offer under engine shields, floor pans, heat shields etc.
  • Body treatment - Offer dampers/stiffeners, sealants and other acoustic parts.
  • Truck - Cabin acoustics are essential to driver comfort during long journeys. Autoneum offers a whole range of products like engine compartments, interior trim and modules and interior flooring for trucks.
  • Several of Autoneum’s technologies are patent protected.

Market Position

ProductsPosition in EuropePosition in N. AmericaPosition in S. America
Tufted Carpets#2#2x
Inner Dashes#1#1#1
Heat Shields#1#3#1
Underbody Shields#1#1x
Engine bay#3#2#1


As we see from the picture, Autoneums customers are quite diverse. Autoneum is not majorly dependent on sales from one company. It has manufacturing 48 state-of-the-art manufacturing facilities located far and wide (see picture). It also has 7 development centers worldwide, with one central R&D facility in Switzerland.


Furthermore, none of the customers amount to a sales percentage of more than 13%. The sales according to the customers is as follows


Global footprint

The company has operations in North America, South America, Europe and Asia. It is trying to increase its footprint in China and India (the emerging market with biggest sales growth). Let us look at Autoneum's operations around the world.



Autoneum is concentrating on the emerging markets like China and India. Autoneum continued to expand production capacities in Asia. In the first half-year 2011, another plant was opened in

Shenyang, China, to supply local and foreign manufacturers with heat shields and acoustic insulation components. Autoneum has now in the Chinese growth market five production plants and a development center, and in India two plants.

Autoneum also installed production facilities in Bor, Czech Republic. Production will start in the fall of 2011. And in Sevelen, Switzerland, a production plant for lightweight underfloor systems employing the new RUS fiber technology is under construction for inauguration in September 2011.

According to the IHS Global Insight March 2011, the light vehicle production is going to increase at the rate of 6% during 2011-2013.



The management of Rieter (now a part of Autoneums’ management) had put in a restructuring program in 2008. They have achieved all the targets they had set in.

  • Move portion of manufacturing capacity from Western to Eastern Europe
  • Optimize manufacturing in North America
  • Reduction of overhead costs, selective disposals on non-core activities.
  • Reduce the break-even point to CHF2b.

The management has successfully achieved all these results. The net positive result in HY2011 is a testament to this given the 12.1 CHF/share loss in 2010.


We will talk more about the management in the risk section. Although the way the company is being managed is a good place to judge the management.


Business GroupEuropeNorth AmericaAsiaRest
Net Sales89754977150
%yoy growth13%36%48%17%
% margin2%10%12%9%
Manufacturing facilities241077

2 Risks

Balance sheet

At the time of formation in Dec 2010, Rieter waived loans of CHF55m, increasing the equity of Autoneum. The following was the debt situation of Autoneum at the time of formation in Dec 2010.

Owed toRieterBanksLeasing obligations
Less than 1 year136.161.90.8
1-5 years8515.42.3
more than 5 years000.1

If we look at the HY2011 balance sheet, we get the following data on the short term.

ItemsJune 2011
Current liabilities464.5
Trade+other receivable309.0+54.2

This puts the current ratio at 1.17 and the quick ratio (excluding inventory) at a comfortable 0.9.

The equity ratio (including subordinated shareholders’ loan) per June 30, 2011 is more than 30%. After the split from the Rieter Group, the financing previously secured by Rieter was replaced by external financing in the form of long-term bank loans (around 136m). They have reduced the gross debt in the first six months of 2011 by 81.1 Million CHF to 220.9 million CHF. Net debt of 165.4 million CHF per balance sheet date is slightly higher than per year-end 2010.

Significantly lower gross debt in the first half-year 2011 than in the prior year period resulted in reduced interest charges, with a correspondingly positive effect on the financial result. At –11.2 million CHF it has been more than halved compared with prior year.

Transactions realized on May 12 and 13, 2011:

i) Proceeds from subordinated shareholder loans of two related parties in a total amount of CHF 25 million and with a final maturity date on December 31, 2014.

ii) Proceeds from a credit agreement with a syndicate of lender banks for a long-term loan to the amount of CHF 235 million with a final maturity date on December 31, 2014, of which CHF 165 million have been demanded. The term loan will bear interest based on the London Interbank Offered Rate (LIBOR) plus an applicable margin, which depend on the proportion of credit amount demanded and EBITDA. At the same time, a credit guarantee facility in a total amount equal to CHF 50 milion and with a final maturity date on June 30, 2013, has been demanded to the amount of CHF 15 million.

iii) Repayments to Rieter of terminated cash-pool arrangements of CHF 122.2 million.

iv) Repayments to Rieter Holding AG of all not yet fully terminated financial liabilities of CHF 71 million, involving all non-Autoneum Holding AG subsidiaries.

Since May 13, 2011, Autoneum Group is subject to imposed minimum financial requirements – financial covenants – regarding its external debt financing, interest, financial performance and equity, pursuant to the long-term credit agreement with a syndicate of lender banks. Thus, all financial covenants must be tested and reported to the syndicate of lender banks on a quarterly basis. As of June 30, 2011 all financial covenants had been complied with.

In the near future, the balance sheet looks quite good. The debt after the end of this year is quite manageable (only CHF100m, see table).


In the near term, the company will be able to pay its debts and obligations. But a global recession may hurt the company a lot. The equity ratio is 30% and this makes the company leveraged by a ratio of almost 3.3. This is quite big.

The management is paying debt and a large part of the shares are still held by the parent Rieter Holding. As this is the first year of the independent company it is not possible to find out the ownership.

3 Valuation

How do we value a company which is in a loss and is not making a money?

Ken Fisher suggests the Price-Sales ratio. The reasoning is as follows.

When a company is down, the way we can say that it still has business is its sales. How much the company does "business". If the company has strong sales, and a good management, it can recover from almost any amount of debt. Let us look at the margins of other companies in the same business as Autoneum.

CompanyNet margin
Johnsons Control (NYSE:JCI)4% (10y average 3%)
Autoliv (ALV)8% (10y average 4%)
TRW Automative (TRW)6% (10y average 1.5%)
Lear Corp (LEA)4% (10y average 2%)
Visteon Corp (VC)13% (10y average -3%)

Most of these companies are not really in the same business. But they make auto-parts and part of their business competes with Autoneum.

Let us look at the sales of Autoneum. Autoneum had sales of CHF1.7b in 2010. It had CHF2b sales in 2008 and 1.4b in sales in 2009. The current cap of Autoneum is CHF282m.

If Autoneum manages a net margin of even 2%, it can earn 34m, which is CHF6.2/share, with the same sales. This is a P/E ratio of less than 10.

I will be keeping an eye on Autoneum and invest if the share price goes below CHF55/share.

Disclosure: A lot of the figures and some forward looking statement have been taken from the first half year report of Autoneum and the sales pitch given in Aug'2011.

About the author:

Chandan Dubey
I invest because I want to be free by the time I reach 40 years of age i.e., 2025. My investment style is to find a small number of bets with large margins of safety. I pay a lot of attention to management and their incentive. Ideally, I like to buy owner operator businesses. I am fortunate to have a strong inclination towards studying. I aid my financial understanding by extensive reading in psychology, economic, social sciences etc.

Rating: 4.6/5 (11 votes)


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