Investing.com -- Shares of Georg Fischer jumped over 13% on Wednesday following the company’s statement of a refocus, targeting its higher-growth water-related business segments while divesting its machine tool unit.
This decision marks a shift in Georg Fischer’s long-term strategy, aligning the Swiss industrial company more closely with water infrastructure and sustainable growth, especially in markets with increasing water scarcity concerns.
The Zurich-based company stated its intention to sell Georg Fischer’s Machining Solutions, its machine tool division, to United Grinding Group, with an estimated transaction value of CHF 630-650 million.
Analysts at Stifel highlighted that this valuation aligns well with peer benchmarks, indicating that the deal is both financially sound and strategically advantageous.
The planned divestment is expected in the first half of 2025 and will help Georg Fischer reduce exposure to the more cyclical, lower-margin segments of its portfolio.
This move also aligns with the company’s broader goal of focusing on water-focused growth areas, a strategy emphasized by its recent acquisition of Uponor, a leader in water delivery systems.
In tandem with the divestment, Georg Fischer said that it is evaluating options for Georg Fischer’s Casting Solutions, its casting division with substantial automotive market exposure.
This part of the business has traditionally been more vulnerable to market swings and lower industry multiples, making it a potential candidate for restructuring or sale.
Analysts noted that reducing Georg Fischer’s automotive exposure is likely to bolster its market positioning, with stronger emphasis on water infrastructure and sustainability, areas of growing investor interest.
In a challenging market environment, Georg Fischer now expects flat organic sales growth, a shift from its earlier target of slight growth, and adjusted EBIT margins around 9%.
Stifel analysts said that while this updated outlook may dampen near-term expectations, the trimmed guidance was largely anticipated by the market and has done little to overshadow the positive sentiment surrounding Georg Fischer’s refocus on water-related segments.
Georg Fischer’s realignment is expected to boost its long-term stability and appeal. The group’s Piping Systems and Building Flow Solutions divisions, which together account for 64% of total sales and 80% of earnings, are becoming the company’s core revenue engines.
Positioned as structural growth drivers, these divisions provide Georg Fischer with promising growth potential and reduced volatility relative to its automotive and machining units.
In a market where water infrastructure and efficiency are high priorities, Georg Fischer’s refocusing is set to realign the company with these priorities.
Analysts are viewing Georg Fischer’s trajectory favorably, noting that its strengthening ESG profile, decreasing reliance on the automotive sector, and more sustainable cash generation, especially following the Uponor acquisition, all position Georg Fischer for further revaluation potential relative to other Swiss industrials.