Concentric Interim Report January - December 2019

SKÅNES FAGERHULT, Sweden, Feb. 4, 2020 /PRNewswire/ --

Fourth Quarter           

• Net sales: MSEK 430 (582) - sales were down -26% y-o-y. After adjusting for impact of currency (+3%), sales in constant currency were down -29%.           
• Underlying sales development: Underlying Group sales for the fourth quarter were down y-o-y by -24% and by -11% y-o-y for the full year, when excluding the effect of the previously announced decision by a global OEM customer to dual source components.           
• Operating income: MSEK 134 (140); generating an operating margin of 31.1% (24.1), benefitting from releasing a warranty provision, adjusted operating margin was 23.0%.           
• Earnings after tax: MSEK 71 (115); basic EPS of SEK 1.87 (2.95).           
• Cash flow from operating activities: MSEK 58 (136); cash generation affected by lower sales.           
• Dividend: Based on the Group's earnings and strong financial position, the Board of Directors intend to propose a total dividend of SEK 4.50 (4.25) per share and to renew the current mandate for share buybacks.

Full Year           

• Net sales: MSEK 2,012 (2,410) - sales were down -17% y-o-y. After adjusting for impact of currency (+3%), sales in constant currency were down -20%.           
• Operating income: MSEK 472 (529), generating an operating margin of 23.5% (21.9).           
• Earnings after tax: MSEK 321 (405); basic EPS of SEK 8.37 (10.30).           
• Cash flow from operating activities: MSEK 386 (554); cash generation affected by lower sales.           
• Group's net debt: MSEK 54 (12); gearing ratio of 5% (1).           
• Effects of new accounting principles for Leases - IFRS 16: The effects in the income statement are not material (EBIT margin 0.0%; EBITDA margin +1.3%). Cash flow from operating activities was affected by MSEK +27. Other effects at 31 December were; total assets MSEK +80; net debt MSEK +85; gearing ratio +8%.

President and CEO, David Woolley, comments on the Q4 2019 Interim Report.

Market and sales development

The Group's underlying sales continued to be affected by the overall market slowdown in the fourth quarter with sales down -24% year-on-year and -11% for the full year. The reported sales were down year-on-year for the fourth quarter and for the full year by -29% and -20% respectively in constant currency and including the effect of the previously announced decision by a global OEM customer to dual source components during 2019.

The quarterly published market indices suggest production rates, blended for the Group's end-markets and regions declined by -2% with both the Americas and Europe & RoW reporting negative growth for the second successive quarter. Full year published market indices indicate production rates have remained flat year-on-year, but this year was a tale of two halves, modest market growth in the first half offset by the market contracting during the latter half of the year. With a weak market and the outlook remaining uncertain, our customers have maintained their supply chain destocking programs.

The market indices trend for medium- and heavy-duty trucks continued with a modest increase in demand in the fourth quarter in North America whilst demand for trucks in Europe declined. The truck market remains the largest end-market and accounts for 43% of the Group's sales.

Concentric's sales in North America, Europe, India and South America were down year-on-year in the quarter whilst sales in China were up significantly. Sales to all end-market applications were lower in the fourth quarter year-on-year with the off-highway and industrial applications sectors particularly affected in our core regions of North America and Europe. Economic conditions remain challenging in India as the banking crisis suppresses demand generally across all end market applications.

Concentric Business Excellence - managing during a global market slowdown

Our management teams have worked efficiently through the Concentric Business Excellence programme throughout the year to reduce the cost of capacity for the reduction in demand from our customers, ensuring the full year operating margin was maintained at record levels year-on-year at 23.5% (22.1) and 31.1% (24.8) for the fourth quarter.

Operating income this quarter did benefit from releasing a warranty provision associated with a customer quality claim, which was resolved amicably at no cost to Concentric. The underlying operating margin for the fourth quarter was 23.0% and 21.7% for the full year.

Strategic update on electrification

A growing market for e-products on both on- and off-highway vehicles will present new opportunities for Concentric. Concentric's e-products will also be relevant in new markets such as energy storage solutions where e-water pumps are necessary to ensure temperature control of batteries. These opportunities are additive to Concentric's existing products for internal combustion engines and we expect sales of e-products could amount to as much as 20% of Group sales by 2025.

Even though volumes currently remain at relatively low levels, we believe that e-products will grow in importance for Concentric over the coming years. By leveraging our existing relationships and moving quickly in order to have a competitive and reliable offering on early low-emission platforms, Concentric is well positioned to capture future opportunities in this growing market.

Outlook

The overall published market indices blended to Concentric's mix of end market applications and locations suggest the overall market will continue to contract during 2020, most notably the medium- and heavy-duty truck markets in North America and Europe. The emerging markets offer growth potential particularly in the off-highway sectors, agricultural machinery and construction equipment, but our core markets of North America & Europe will continue to offer challenging trading conditions.

Our customers' supply chain destocking programs have operated for three consecutive quarters and we anticipate our customers will revert to a normalised order pattern during the first half of the coming year. The level of orders received in the fourth quarter indicate that sales in the first quarter 2020 will be slightly higher than sales in the fourth quarter, even after adjusting for more working days in the first 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: [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 agency of the contact persons set out above, at 13.00 CET on 4 February, 2020. 

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SOURCE Concentric AB