Concentric Interim Report January - September 2019

SKÅNES FAGERHULT, Sweden, Nov. 6, 2019 /PRNewswire/ -- THIRD QUARTER

• Net sales: MSEK 463 (622) - sales were down -26% y-o-y. After adjusting for impact of currency (+2%), sales in constant currency were down -28%.

• Underlying sales development: Underlying Group sales for the third quarter were down y-o-y by -19% and by -7% y-o-y for the first nine months, when excluding the effect of the previously announced decision by a global OEM customer to dual source components during 2019.

• Operating income: MSEK 91 (142); generating an operating margin of 19.8% (22.9).

• Earnings after tax: MSEK 64 (108); basic EPS of SEK 1.67 (2.74).

• Cash flow from operating activities: MSEK 98 (165); cash generation affected by lower sales.

FIRST NINE MONTHS

• Net sales: MSEK MSEK 1,582 (1,828) - sales were down -13% y-o-y. After adjusting for impact of currency (+4%), sales in constant currency were down -17%.

• Operating income: MSEK 338 (388), generating an operating margin of 21.4% (21.3).

• Earnings after tax: MSEK 250 (290); basic EPS of SEK 6.49 (7.36).

• Cash flow from operating activities: MSEK 328 (418); cash generation affected by lower sales.

• Group's net debt: MSEK 207 (37); gearing ratio of 20% (4). The effect of remeasurement losses on pensions on net debt is MSEK 140 and on gearing ratio is 13%.

• Effects of new accounting principles for Leases - IFRS 16: The effects in the income statement are not material (EBIT margin 0.0%; EBITDA margin +1.1%). Cash flow from operating activities was affected by MSEK +18. Other effects at 30 September were; total assets MSEK +89; net debt MSEK +93; gearing ratio +9%.

President and CEO, David Woolley, comments on the Q3 2019 Interim Report.

Market and sales development

The Group's underlying sales were affected by the overall market slowdown in the third quarter with sales down year-on-year by -19% in the third quarter and by - 7% in the first nine months. The reported sales were down year-on-year for the third quarter and for the first nine months by - 28% and - 17% respectively in constant currency and including the effect of the previously announced decision by a global OEM customer to dual source components during 2019. Published market indices suggest production rates, blended for the Group's end-markets and regions declined by 2% in the third quarter with both the Americas and Europe & ROW reporting negative growth. Market growth has slowed in each successive quarter this year with the third quarter being the first quarter to report year-on-year market declines, suggesting that the market has now passed its peak. This market decline accentuates year-on-year comparisons, as the third quarter 2018 was the peak of the market. The market indices reported a modest increase in demand in the third quarter for medium- and heavy-duty trucks in North America whilst demand for trucks in Europe declined. The truck market remains Concentric's largest end-market and accounts for 43% of the Group's sales. Our European and Indian markets reported negative growth in three out of four end-markets this quarter, namely trucks, agricultural machinery and construction equipment. We have previously discussed how our customers are managing risk and conducting supply chain destocking programs as the market outlook becomes more uncertain. This trend intensified during the quarter and coupled with weakening market demand these factors had a significant impact on Group sales. Concentric's sales in North America, Europe and India were down year-on-year in the quarter while sales in South America and China were slightly up. Sales to all end-markets were lower in the third quarter year-on-year and the construction equipment sector was especially weak in both North America and Europe.

Concentric Business Excellence - gearing up for the global market slowdown

The strength and impact of the Concentric Business Excellence programme ("CBE") is equally important to Concentric during these challenging trading conditions. Our management teams have responded quickly to address the downturn in demand, maximising our flexible business model to reduce the cost of capacity through reductions in headcount and other manufacturing costs. The business has placed yet greater focus on productivity and inventory efficiency. Importantly, our investment in new customer programmes and the development of new electrification technologies have been safe guarded, securing the core business strength ready for the return of better market conditions. The Group has managed to maintain operating income at high levels with 19.8% (22.9%) for the third quarter and 21.4% (21.3%) the first nine months.

Electrification offers Concentric exciting new markets

We have recently announced an important new order to develop and supply coolant pumps with integral electronic motor drive and intelligent control systems to a leading global OEM for their new energy storage products. This is a landmark award and establishes Concentric as a key supplier in the previously untapped global energy storage market and further builds on the expertise developed through its advanced battery cooling for commercial vehicle applications, again utilising the liquids we are pumping to cool and control the temperature of the electronics. It also demonstrates our ongoing commitment to innovative technology to meet the demands of increasing electrification of flow control.

Acquisition opportunities

Our focus remains on both geographical and technical expansion, but we have recently escalated our efforts and have given greater attention to opportunities that will increase our penetration of the electrification of transport, construction and industrial sectors, as these offer real revenue growth in both our current and new markets and are of strategic importance.

Outlook

Looking forward, the level of orders received in the third quarter indicate that sales in the fourth quarter 2019 will be similar to sales in the third quarter, even after accounting for the fewer working days in the fourth quarter. The published market indices have been revised down and now suggest that production volumes blended for Concentric's end-markets and regions will remain flat for the full year and the market forecast for the full year has therefore been lowered from +2% to 0%. We continue to expect that demand for medium- and heavy-duty trucks could weaken still further during the coming quarter. Our continued focus on business excellence will help us respond to these challenging market conditions for both on- and off-highway sectors and the business remains vigilant and ready to adapt to further changes in customer behaviour. Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.

For further information, please contact:

David Woolley (President and CEO) or Marcus Whitehouse (CFO) at Tel: +44-121-445-6545 or E-mail: info@concentricab.com

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 agency of the contact persons set out above, at 08.00 CET on 6 November, 2019. 

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SOURCE Concentric AB