Haldex Interim Report, January - March 2019: Improved Operating Margin in Weakened Market
STOCKHOLM, April 25, 2019 /PRNewswire/ -- Market conditions weakened slightly in the first quarter. Currency-adjusted net sales decreased marginally but increased in absolute terms. The positive performance of disc brake sales continued while brake adjuster sales decreased due to a slowdown in Chinese demand. Operating income improved due to increased Aftermarket sales, stabilized raw material prices and improved cost controls, and also because Haldex's joint venture in China is now recognized as a part of operating activities. Cash flow from operating activities was down while earnings per share were up year-on-year.
Net sales for Q1 totaled SEK 1,339 (1,252) m, equivalent to an increase of 7 percent compared with the previous year. After currency adjustments, net sales decreased by 1%.
Operating income amounted to SEK 97 (86) m in Q1. This corresponds to an operating margin of 7.2 (6.9) percent. No one-off items were recognized in Q1 2019 or in the corresponding period of the previous year.
The operating margin excluding investments in new technology (Scalable Brake System) was 7.5%. The target is to achieve a 10% operating margin for core business by 2022.
Net income after tax totaled SEK 68 (58) m and earnings per share totaled SEK 1.54 (1.30).
Cash flow from operating activities in Q1 totaled SEK -84 (-64) m.
The Annual General Meeting of Haldex will be held on May 9 at 2:00 p.m. in Landskrona. The Board of Directors proposes to the Annual General Meeting that a dividend of SEK 1.15 (0.55) per share be distributed with May 16, 2019 as the distribution date.
Key figures for January - March 2019
(same period previous year in brackets)
- Net sales, SEK m 1,339 (1,252)
- Operating income, SEK m 97(86)
- Operating income, excl. one-off items, SEK m 97 (86)
- Operating margin, % 7.2 (6.9)
- Operating margin, excl. one-off items, % 7.2 (6.9)
- Operating margin, excl. investments in new technology, % 7.5 (-)
- Return on capital employed,% 1 9.7 (9.0)
- Return on capital employed, excl. one-off items,%1 11.5 (13.5)
- Net income, SEK m 68 (58)
- Earnings per share, SEK 1.54 (1.30)
- Cash flow, operating activities, SEK m -84 (-64)
1) Rolling twelve months
Comment from Åke Bengtsson, President and CEO:
"The year started off with mixed signals from our geographic regions. North America remains a strong market with healthy demand from vehicle manufacturers. We've had a rough winter that caused losses in production and shipping days, which impacted Aftermarket in the US negatively. Nevertheless, net sales are up for the region as a whole. Europe's sales have been stable in Q1, although the forecast for new production of trailers, which is a key customer group for us, is negative.
China is responsible for the major decline of the quarter. Legislation was enacted last year requiring automatic brake adjusters in newly produced heavy vehicles. As a result, our net sales in China almost doubled in Q1. The comparative figures are thus high, but China is currently a rough market with declining volumes and heavy price pressure. The legislation is not followed and the penetration of trailers is as low as 30 percent. However, we estimate that the safety requirements will lead to an increase in demand for Haldex products in the long term.
Shift to disc brakes in North America
Interest in disc brakes is growing among fleets, which is a precondition for vehicle manufacturers to bring up their disc brake sales volumes. Another trailer manufacturer chose Haldex disc brakes as the standard brake for their vehicles during the quarter. Working via fleets takes time, but we know from past experience that it is an effective way of building long-term demand. Haldex is known for its good relationships with fleets, which is one of the reasons brake adjusters were such a big success in North America. Haldex still commands a position as the absolute market leader for this product. We are continuing to build up the supply chain in North America for local disk brake production with the first round of production scheduled for the beginning of next year. Haldex's new disc brake for trucks is currently being tested and it is estimated that production will begin later this year.
Improved operating margin and continued streamlining
The increased costs of raw materials and tarriffs in the US have a delay before they can be passed on to customers. The scheduled price adjustments in Q1 to compensate for increased raw material prices and tarriffs have been implemented and are one of the reasons for the improvement to our operating margin.
As a result of the increased international focus on tarriffs, supply chains may need to be modified and we are evaluating what we will manufacture ourselves and what strategic partners will offer. The supply chain in each region is currently being reviewed to further optimize manufacturing and logistics.
In the Aftermarket, we are continuing our efforts to increase net income and broaden our product range. An analysis of the entire product range is underway to refine 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. During the quarter, an agreement was signed to divest the rotary connector for construction machinery as a part of these efforts.
I am convinced that the streamlining measures we introduced and will continue to roll out will enable Haldex to reach a 10 percent operating margin, excluding investments in new technology. The operating margin for Q1 excluding new technology was 7.5%. We will not be satisfied until we have reached our profitability target, and we will optimize our cost base and identify areas for continuing growth.
New technology for electric and self-driving vehicles
The new technology developed by Haldex is brought together under the "Scalable Brake System" name. As of this quarterly report, we are reporting this as its own product line, to better show the development and simplify the follow-up. In February, I got to visit our winter tests in Arjeplog. For the third winter in a row, we tested FABV, which is one of the first Scalable Brake System products. The feeling of riding in a self-driving vehicle on snow and ice, that braked with Haldex technology, was amazing. Our offering, which will challenge the two major industry players, has a promising future.
One of the other Scalable Brake System products is the electromechanical brake. We are continuing to conduct tests on vehicles on test tracks and are making good progress. However, we see that customers are not really ready to begin placing orders in the end of 2020 as we previously estimated. Instead, sometime during 2021 is more likely.
Outlook for 2019
The market in North America is expected to continue to grow in 2019. However, the North American market can fluctuate rapidly, and it is difficult to estimate whether the growth will last the entire year. Europe is judged to slighly decrease compared with 2018. China has a weaker market in 2019. Haldex can partly withstand a downturn given that automatic 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 Åke Bengtsson, President and CEO and Andreas Larsson, CFO. The presentation will also be webcasted live and you can participate with questions by telephone.
Date & Time: Thursday, April 25, 2019 at 11.00 CEST
The press conference is broadcasted at:
https://tv.streamfabriken.com/haldex-q1-2019
To join the telephone conference:
SE: +46-8-505-583-56
UK: +44-3333-009-271
US: +1-833-526-83-80
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
For further information visit http://corporate.haldex.com or contact:
Åke Bengtsson, President & CEO, +46-418-476000
Andreas Larsson, CFO, +46-418-476000
Catharina Paulcén, SVP Corporate Communications, [email protected] or +46-418-476157
Haldex AB (publ) is required to publish the above information under the EU Market Abuse Regulation. The information was submitted for publication by the Haldex media contact stated in the release on April 25, 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.
This information was brought to you by Cision http://news.cision.com
The following files are available for download:
Full interim report as pdf |
|
https://mb.cision.com/Public/1432/2796132/b0de05d28f32f015.pdf |
Appendix Q1 2019 |
SOURCE Haldex
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