CONCENTRIC INTERIM REPORT JANUARY - MARCH 2022

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May 04, 2022, 02:25 ET

SKÅNES FAGERHULT, Sweden, May 4, 2022 /PRNewswire/ --

FIRST QUARTER 2022

Net sales: MSEK 934 (432) - reported sales were up +116% year-on year. After adjusting for the impact of currency (+18%) and EMP (+74%), sales on a like for like basis, in constant currency year-on-year were up +24%.
Operating income: Operating income was MSEK 166 (95) generating an Operating margin of 17.8% (21.9). The quarter includes a full three months of trading for EMP, diluting Operating margin.
Net income for the period: MSEK 130 (72); basic EPS of SEK 3.43 (1.90) and diluted EPS of SEK 3.41 (1.89).
Cash flow from operating activities: Cash flow from operating activities was MSEK 89 (73).
Group's net debt: MSEK 1,016 (-90); gearing ratio of 59% (-7). Net remeasurement gain on pension liabilities of MSEK 105 and the operating cash generated in the quarter MSEK 89 contributed to the overall quarter-on-quarter reduction to net debt of MSEK 176.
Arrival of new CEO: New CEO Martin Kunz joined the business on 1 March 2022.

President and CEO, Martin Kunz, comments on the Q1 2022 Interim Report.

Strong financial performance as our end markets remain strong but the global supply chain continues to struggle to rebalance to the level of demand.

Market and sales development

Our markets continue to remain strong during the first quarter of 2022, whether by end market application or geography, particularly North America. The published market indices suggest the blended market was up +17% year-on-year, with Hydraulics performing a little stronger driven by the off-highway sectors. Sales of heavy-duty trucks in China were down year-on-year by -6% as the region was affected by economic headwinds and a resurgence of Covid-19.

Group sales in constant currency and excluding Engineered Machine Products (EMP) were up +24% year-on-year for the first quarter and reported sales were MSEK 934, up 116%. Most of the major world currencies strengthened against the Swedish Krona during the quarter which resulted in a positive currency impact, increasing sales +18%. Our reported sales this quarter were consistent with our expectation that sales for the first quarter would be broadly similar to sales in the fourth quarter, with the addition of a full quarters trading for EMP.

Sales remain constrained by the global supply chain and Russia's devastating invasion of Ukraine has only hindered the expected recovery of the global supply chain situation. Whilst Concentric has minimal sales into these specific territories and purchases nothing from either region, the war is causing supply issues which continue to increase our customer order backlog. Our production teams remain focused on meeting the true nearterm demand from our customers but we now expect the the supply chain disruption to continue for the remainder of 2022.

Operating margins and cash

The business was able to maintain strong operating margins despite further inflationary pressures across most of our purchased components and the cost of energy. This quarter also includes a full trading quarter for EMP, which does have a dilutive effect on group operating margins. We are pleased to report record operating income of MSEK 166 and a strong operating margin for the first quarter of 17.8% (21.9).

Cash and cash equivalents increased modestly in the quarter to MSEK 448 (578) following the reported trading performance and the first loan repayment associated with the EMP acquisition. This level of cash and cash equivalents is more than sufficient to meet our short- and medium-term operational needs.

Electrification - new applications and sectors

Electrification of our markets offers Concentric organic sales growth opportunities and our strategy is to offer e-Products to our customers who seek supplier innovation to help develop zero emission vehicles and machines for the future. Both of our recent press releases demonstrate our technology can be used in new and adjacent sectors, such as mining, or in new high voltage on-highway fuel cell applications.

Reporting structures

Following the acquisition of EMP and an internal organisation and reporting review the Board has decided the business will report by technology segments, namely Engines & Hydraulics, rather than geographical regions, which is consistent with both how the business will be managed and reported internally in the future. The Engine division will include all Concentric, Licos and EMP branded engine products, including royalties and net income from our joint venture, Alfdex. The Hydraulics division will include Concentric and Allied branded hydraulic products. This change is effective from 1 January 2022 and comparative quarterly financial information for 2021 has been restated in an Appendix on pages 22-23.

Outlook

The availability of raw materials and components remains the critical sales constraint and will influence our trading performance during 2022 as will the ongoing inflationary pressures, from the metal indices, energy, freight and other supplier economic price increases. We will continue to pass on these cost increases down the value chain to maintain our strong trading margins.

The war in Ukraine is having an effect on the macro-economic indicators, but it remains too early to predict how this will impact our customers and end markets. Recently published market indices show year-on-year growth forecasts for 2022 have halved to +3%. With our recent acquisition, strong order backlog and focus on electrification opportunities we remain confident that we will outperform the market indices this coming year.

The orders received, and expected to be fulfilled during the second quarter are broadly similar to the reported sales for the first quarter of 2022 and we now expect the majority of the sales order backlog, predominantly relating to our North American businesses, will be supplied to our customers over the remainder of 2022.

Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.

For further information, please contact:
Martin Kunz (President and CEO) or Marcus Whitehouse (CFO) at
Tel: +44 121 445 6545 or E-mail: [email protected]

The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on 4 May 2022.

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Concentric_Q1_ENG

SOURCE Concentric AB