Dear Shareholders

The Tornos Group carried the momentum of the previous year into 2022 and confirmed its good results. It increased net sales by a further 5.8%, posted a record order backlog at the end of the year, and again achieved a pleasing EBIT margin. Tornos made significant gains, particularly in Europe as well as in North and South America. This was achieved in what was still a very challenging environment with frequent disruptions in the global supply chain for raw materials and supplier products. In some cases, this resulted in significant cost increases. The restrictions imposed by the local authorities to combat the coronavirus pandemic were felt most keenly in Asia, above all in China.

The Group was able to stabilize order intake at a high level. In the 2022 financial year, it did not quite reach the previous year’s level, but still clearly exceeded net sales (book-to-bill ratio: 1.07). At CHF 68.4 million, the order backlog at the end of 2022 is once again significantly above the already very high prior-year figure (end of 2021: CHF 59.3 million).

Overall, our Group generated order intake of CHF 194.1 million (previous year: CHF 204.6 million, -5.1%) and net sales of CHF 181.4 million (previous year: CHF 171.5 million, +5.8%) in fiscal year 2022.

EBIT* decreased from CHF 20.6 million to CHF 16.4 million, which is attributable to special effects. Excluding the write-back of value adjustment provisions in the amount of CHF 4.8 million, EBIT* for the financial year 2022 would come to CHF 11.6 million (2021: CHF 10.1 million, excluding the write-back of value adjustment provisions in the amount of CHF 9.8 million and excluding the book gain from a property sale of CHF 0.7 million). As a result of the changed market conditions and the usability of its inventory, the Tornos Group has introduced a refined method for value adjustment provisions that takes even better account of the specific circumstances at Tornos. You can find further details on page 43 (note 2.9 Inventories) and page 50 (note 4.1 Inventory obsolescence) of this Annual Report.

CHF 1,000	2022	2021
EBIT* (margin)	16.4 (9.1%)	20.6 (12.0%)
EBIT adjusted* (margin)	11.6 (6.4%)	10.1 (5.9%)

The EBIT margin for the Tornos Group for the 2022 financial year is 9.1%–excluding the effect of the write-back of provisions, it amounts to 6.4% (previous year: 5.9%, excluding the write-back of provisions and the book gain from a property sale). The EBIT margin excluding special effects was significantly better in the second half of the year than in the first.

Various increases in the cost of materials had a negative impact on the margin, but Tornos was able to more than compensate for this thanks to price increases and a more favorable product mix with a larger share of higher-priced high-end machines.

Further increase in orders for medical and dental technology
In the 2022 financial year, the Tornos Group remained very successful in its largest sales market, medical and dental technology. Here, it increased its order intake from CHF 40.1 million to CHF 41.0 million (+2.2%). Tornos made significant gains in the watchmaking industry, with orders received rising from CHF 13.9 million to CHF 21.4 million (+53.5%). At CHF 6.3 million, Tornos also won many more orders from the aerospace industry in 2022 (2021: CHF 1.0 million). At CHF 18.4 million, orders from the automotive industry weighed significantly less in the balance than in previous years.

Significant rise in sales at SwissNano
The SwissNano Swiss-type automatic lathe, produced in Switzerland, again had considerably more customers in all sales markets in 2022 than in the previous year. Demand for machines produced by Tornos in the Taiwan region also rose sharply. Due to the local coronavirus restrictions, which were again significantly tightened, production of Tornos machines in China was at times severely limited during the year under review.

Service and spare parts business expanded further
Tornos’ service and spare parts business continued to perform well, with sales in this area rising by 7.3% compared with 2021. The DECO 10 Plus offer, whereby Tornos customers could have their older DECO 10 machines upgraded to the latest technology, made a major contribution to this pleasing development. Tornos also buys older systems back and – after fully reconditioning them – puts them back on the market in the spirit of a circular economy.

Infrastructure projects
The Tornos Group completed or pressed ahead with a number of infrastructure projects in 2022, including in São Paolo (Brazil), where Tornos opened a 300 square-meter Customer Center, and in Kąty Wrocławskie (Poland), where the Group brought a new production plant into operation. Here, it primarily overhauls and modernizes older DECO 10 systems. There are currently around 40 qualified employees working for Tornos in Poland. Some of them are active worldwide in order to ensure an efficient, high-quality global customer service.

In the Taiwan region, the shell for a new production hall was completed. The plant is expected to be ready for operation by the end of 2023 and create optimum conditions for the continued successful production of medium- and lower- priced Tornos machines in the Taiwan region.

Turning sustainable
Responsibility towards the environment and people is given high priority at the Tornos Group. In this perspective, Tornos founded the initiative “Turning sustainable” regrouping all of the Group’s activities linked to sustainability and environment, social, and governance (ESG) and supporting the ongoing global paradigm change. The program is based on the United Nations Sustainable Development Goals (SDGs) and takes into consideration the legal frame introduced in Switzerland. Next year, for the 2023 reporting period, Tornos will publish its first non-financial statements (see also pages 24 to 27).

Distribution to shareholders
At the General Meeting on April 5, 2023, the Board of Directors will propose to the shareholders a tax-exempt distribution of CHF 0.30 per share, to be paid out from capital contribution reserves.

Outlook
In view of our record order backlog, we are very well positioned for 2023. However, it is still difficult to make concrete forecasts due to global economic developments, which are still impossible to estimate. The ongoing war in Ukraine and the coronavirus pandemic in China, which has not yet ended, uncertainty regarding the availability of raw materials and supplier parts, and burgeoning fears of inflation and recession bring with them many uncertainties. However, for Tornos, some of these developments also present opportunities. The trend towards industrial relocation in the US and Europe created by the disruptions in global supply chains is generating new demand for our products. With our portfolio, which is excellently aligned to customer needs, our steadily expanding services and our flexible structure, we remain well equipped for a wide variety of scenarios.

François Frôté
Chairman of the Board of Directors

Michael Hauser
President and Chief Executive Officer