CONCENTRIC INTERIM REPORT JANUARY - SEPTEMBER 2023

News provided by

Concentric AB

Nov 08, 2023, 02:24 ET

REDDITCH, England, Nov. 8, 2023 /PRNewswire/ --

THIRD QUARTER 2023

Net sales: MSEK 1,035 (1,068) - reported sales were down -3% year-on-year. After adjusting for the impact of currency +4%, sales on a like for like basis, in constant currency year-on-year were down -7%.
Operating income: MSEK 134 (175), generating an operating margin of 13.0% (16.3). After adjusting for the cost associated with the closure of Itasca of MSEK 12, the operating margin before items affecting comparability was 14.1% (15.5).
Net income for the period: MSEK 89 (126); basic EPS of SEK 2.35 (3.32).
Cash flow from operating activities: Strong cash performance for the quarter, cash flow from operating activities was MSEK 161 (163).

FIRST NINE MONTHS 2023

Net sales: MSEK 3,260 (3,023) - reported sales were up +8% year-on-year. After adjusting for the impact of currency +7%, sales on a like for like basis, in constant currency year-on-year were up +1%.
Operating income: Operating income was MSEK 490 (505), generating an operating margin of 15.0% (16.7).
Net income for the period: MSEK 330 (390); basic EPS of SEK 8.68 (10.28).
Cash flow from operating activities: Cash flow from operating activities was MSEK 388 (329), with a profit to cash conversion ratio of 114% (85).
Group's net debt: Group's net debt reduced this quarter to MSEK 799 (1,005), with an associated gearing ratio of 35% (45).

President and CEO, Martin Kunz, comments on the Q3 2023 Interim Report.

A quarter with excellent progress on our strategy execution, strong electric sales and near-term headwinds as customers reduce inventory levels.

Financial Performance

The published market indices suggest our end-markets were broadly flat this quarter, with demand for engine products slightly stronger than that for hydraulics, which were affected by weaker end-market demand in our core geographical regions. With the general economic outlook weakening and the global supply chain continuing to stabilize our customers are destocking, reducing their component inventory levels to pre-pandemic levels.

Despite these headwinds our reported net sales were MSEK 1,035 (1,068), down 3% and operating income before items affecting comparability was MSEK 146 (166), corresponding to an equivalent operating margin of 14.1% (15.5). Restructuring costs associated with the recently announced closure of our facility in Itasca, Illinois was expensed in the quarter totalling MSEK 12. Strong cash management resulted in a cash flow from operating activities of MSEK 161 (163) for the quarter and MSEK 388 (329) year-to-date representing a profit to cash conversion ratio of 114% for the first nine months of the year.

Both of our reporting divisions were affected this quarter by our customer's destocking activities, to a greater or lesser extent. Net sales of engine products were MSEK 709 (712) with underlying sales down by 5% year-on-year, whilst operating margins before items affecting comparability were 15.3% (14.2). Soft demand for hydraulic products in both Europe and North America meant net sales were MSEK 326 (356) with underlying sales down 12% and the operating margins were 11.5% (18.1). The operating margin this quarter has been impacted by lower sales volumes and a delay in adjusting our cost structure to the sharp reduction in demand from our customers.

The book-to-bill ratio for the group was 92%, with stronger demand for our e-Products continuing.

Sales and Market Development

Underlying sales in our core North American and European markets were 7% lower than the prior year, with sales to all end-markets down with the exception of the North American truck sector. However, sales of electric products were strong this quarter with net sales reported to be MSEK 221, equating to 21% of group sales and the book-to-bill ratio for e-Products remained a strong 110%. Demand for the Alfdex oil mist separator was relatively stable in North America and Europe and sales were boosted by stronger demand in China for gas truck engines.

Continuing our Strategic Journey

The successful execution of our strategy to grow both our e-Products and our base mechanical businesses is affirmed by several important business wins across reporting divisions and geographical manufacturing locations. This includes the largest individual business nomination for our Hydraulic division since the company's public listing in 2011, the first significant order for the new generation of our electro-hydraulic steering and a large electric coolant pump nomination in the Indian on-highway market.

With the announced closure of our facility in Itasca, Illinois we are realizing synergies in our manufacturing footprint resulting from the successful integration of EMP.

Outlook

The macroeconomic situation with high interest rates and high inflation has impacted the level of demand for our products in our core geographical end-markets, however, visibility of true market demand remains limited whilst our customers continue to reduce their inventory levels.

We expect net sales in the fourth quarter to be slightly lower than the net sales achieved in the third quarter. We will continue to monitor closely the sales order intake for the coming quarters and will actively manage our cost base to continue to deliver strong financial returns.

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 8 November 2023.

The following files are available for download:

https://mb.cision.com/Main/1643/3871420/2414994.pdf

Q3_ENG_231108B

SOURCE Concentric AB