Haldex Interim Report, January - June 2019: Stable Quarter on a Weak Market
STOCKHOLM, July 18, 2019 /PRNewswire/ -- The market conditions continued to weaken during Q2. Net sales increased slightly in the quarter, while the currency-adjusted net sales decreased. Sales in North America continue to be high, which did not have a full impact on profitability due to high raw material prices and tariffs. Demand in Europe has slowed, primarily in the Trailer customer category, which also affected the sales of disc brakes. The operating margin, excluding new technology, is in line with Q1. Operating income was primarily affected by lower sales volumes, but also by high costs for direct material and tariffs. Cash flow from operating activities improved compared to the previous year.
Net sales for Q2 totalled SEK 1,389 (1,372) m, equivalent to an increase of 1 per cent compared to the previous year. After currency adjustments, net sales decreased by 4 per cent. The currency-adjusted net sales for the first six months of the year decreased by 2 per cent.
Operating income excluding one-off items amounted to SEK 91 (102) m for Q2. The operating margin excluding one-off items totalled SEK 6.5 (7.4) m for Q2 and SEK 6.9 (7.2) m for the first six months of the year. The operating margin including one-off items amounted to 5.3 per cent for Q2.
The operating margin excluding investments in new technology (Scalable Brake System) amounted to 7.4 per cent for Q2 and 7.5 per cent for the first six months of the year. The target is to achieve an operating margin of 10 per cent for the core business, i.e excluding new technology, by 2022.
Income after tax totalled SEK 49 (61) m for Q2 and SEK 117 (119) m for the first six months of the year. Earnings per share totalled SEK 1.11 (1.39) for Q2 and SEK 2.65 (2.69) for the first six months of the year.
Cash flow from operating activities totalled SEK 97 (65) m for Q2 and SEK 13 (1) m for the first six months of the year.
Helene Svahn will assume the role as President and CEO after Åke Bengtsson. The change goes into effect immediately, but she will become full-time on 12 August. In the interim, Deputy CEO Staffan Olsson will be responsible for the day-to-day operations.
Key figures for April - June 2019
(same period previous year in brackets)
- Net sales, SEK m 1,389 (1,372)
- Operating income, SEK m 73 (102)
- Operating income, excl. one-off items, SEK m 91 (102)
- Operating margin, % 5.3 (7.4)
- Operating margin, excl. one-off items, % 6.5 (7.4)
- Operating margin, excl. investments in new technology, % 7.4 (-)
- Return on capital employed,% 1 8.2 (11.7)
- Return on capital employed, excl. one-off items,%1 10.6 (14.0)
- Net income, SEK m 49 (61)
- Earnings per share, SEK 1.11 (1.39)
- Cash flow, operating activities, SEK m 97 (65)
1) Rolling twelve months
Key figures for January - June 2019
(same period previous year in brackets)
- Net sales, SEK m 2,728 (2,624)
- Operating income, SEK m 170 (188)
- Operating income, excl. one-off items, SEK m 188 (188)
- Operating margin, % 6.2 (7.2)
- Operating margin, excl. one-off items, % 6.9 (7.2)
- Operating margin, excl. investments in new technology, % 7.5 (-)
- Return on capital employed,% 1 8.2 (11.7)
- Return on capital employed, excl. one-off items,%1 10.6 (14.0)
- Net income, SEK m 117 (119)
- Earnings per share, SEK 2.65 (2.69)
- Cash flow, operating activities, SEK m 13 (1)
2) Rolling twelve months
Comment from Staffan Olsson, Deputy CEO:
"In Q2 the North American market continued to show strong growth, even if there are increasingly evident signs of a slow-down. The long winter had a negative impact on the aftermarket in Q1, but we recovered in Q2 what we had lost. North America is the geographic market where we have the highest profitability, but due to high raw material prices and tariffs, the high level of net sales has not had a full impact on profitability in the region.
Europe showed signs of a slow-down at the beginning of the year, and the downturn in Trailer was evident in Q2. Because the Trailer customer group is our strongest group in Europe, the declining demand had an impact and also affected disc brake sales.
China had stable sales in the first six months of the year, but at significantly lower levels than last year. In 2018, a law was introduced requiring automatic brake adjusters on newly manufactured heavy vehicles, which resulted in a sharp increase in sales in China in 2018. Comparative figures are thus high, and our operations in China will not reach last year's volumes this year. The market is still not fully compliant with the law, but it still benefits us since we are one of the leading manufacturers of automatic adjusters on a market that otherwise is characterised by heavy price pressure and lower production volumes for new vehicles. However, we make the assessment that in the long run the safety requirements will result in an increase in demand for Haldex's products.
Serial production of disc brakes for trucks
One of Haldex's strategic areas for disc brakes is to expand the use of disc brakes from Trailer customers to Truck customers. Haldex has run a project together with one of the world's largest truck manufacturers to create a truck version of the ModulT disc brake for one of the customer's special vehicles. This product has now started serial production, which is the first time the truck version of ModulT is being serially produced. The order volume is low, but it has a higher symbolic value.
In North America, interest continues to increase for the disc brake. The preparations for local disc brake production are continuing prior to the start of production later this year.
Continued streamlining and cost control
A price adjustment was made in Q1 that in part compensated for increased costs for raw material and tariffs. The cost for direct materials continues to be a challenge, and it is this expense item that has increased the most over the past year. More price adjustments to customers may be needed, and alternative supply strategies are evaluated continuously.
Work continues on the aftermarket to grow net sales and widen the product range. A number of products were introduced in Q2 under our Midland and Grau brands. We are currently analysing our entire product range to streamline the existing product portfolio. With a few thousand product variations in the portfolio, small-scale products need to be phased out and non-profitable products divested or closed down.
Haldex also has the goal of lowering fixed costs. The vehicle industry is cyclical, and lower demand is expected after several years of high production volumes. Haldex's objective is to reach an operating margin of ten per cent even when the market is experiencing weaker years. We have initited activites to lower the cost base and continue to streamline the operations. For example, in Q2 we decreased the number of Friction Centers (facilities to apply a new coating to brake pads) in the USA in an effort to increase profitability.
New technology for electric and self-driving vehicles
Haldex's newly developed technology is gathered under the name Scalable Brake System, which, starting this year, is reported as a separate product line in the interim reports. One of the products that is part of Scalable Brake System is the electromechanical brake. The tests on vehicles on a test track continue, and they are progressing well. In August and September, customers will be invited for the first time to demonstrations.
For the product Fast Acting Brake Valve (FABV), the concept phase is successfully progressing with one of the world's largest truck manufacturers.
Outlook for 2019
The market in North America is expected to continue to grow in 2019, even if the second half of the year is expected to be weaker than the first half of the year. The market in Europe is expected to decrease slightly compared to 2018. China has a weaker market in 2019. Haldex can partly withstand a downturn given that automatic brake adjusters are currently required by law on heavy vehicles. India is expected to have a weak year with lower production levels, and Brazil is expected to experience carefully optimistic market growth, although from low levels.
Our outlook for 2019 has not changed. We make the assessment that sales will increase in North America, which will be offset by unchanged or lower sales in other regions. As a whole, sales in 2019 are expected to be in line with 2018. Haldex makes the assessment that the operating margin in 2019, including increased investments in new technology, will be in line with or higher than the operating margin excluding one-off items in 2018."
Full interim report
The full interim report is available at http://corporate.haldex.com/en/investors/financialreports or at http://news.cision.com/haldex
Press and analyst meeting
Media and analysts are invited to a telephone conference at which the report will be presented with comments by Staffan Olsson, Deputy CEO and Andreas Larsson, CFO. The presentation will also be webcasted live and you can participate with questions by telephone.
Date & Time: Thursday, July 18, 2019 at 11.00 CEST
The press conference is broadcasted at: https://tv.streamfabriken.com/haldex-q2-2019
To join the telephone conference:
SE: +46-8-505-583-56
UK: +44-3333-009-264
US: +1-833-526-83-81
The webcast will also be available afterwards and you can download the Interim report and the presentation from Haldex website: http://corporate.haldex.com/en/investors
Haldex AB (publ) is required to publish the above information under the EU Market Abuse Regulation and the Swedish Financial Instruments Trading Act. The information was submitted for publication by the Haldex media contact stated in the release on July 18, 2019 at 7.20 CET.
The interim report is essentially a translation of Swedish language original thereof. In the event of any discrepancies between this translation and the original Swedish document the latter shall be deemed correct.
For further information visit http://corporate.haldex.com or contact:
Helene Svahn
Appointed President & CEO
+46-418-476000
Staffan Olsson
Deputy CEO
+46-418-476000
Andreas Larsson
CFO
+46-418-476000
Catharina Paulcén
SVP Corporate Communications
[email protected]
+46-418-476157
This information was brought to you by Cision http://news.cision.com
The following files are available for download:
Full interim report, as pdf |
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https://mb.cision.com/Public/1432/2865367/aa91e3606c3d9459.pdf |
Appendix |
SOURCE Haldex
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