CONCENTRIC INTERIM REPORT JANUARY - JUNE 2023

REDDITCH, England, July 26, 2023 /PRNewswire/ -- SECOND QUARTER 2023

• Net sales: MSEK 1,098 (1,021) - reported sales were up +8% year-on-year. After adjusting for the impact of currency +8%, sales on a like for like basis, in constant currency year-on-year were flat.
• Operating income: MSEK 175 (164), generating an operating margin of 16.0% (16.1).
• Net income for the period: MSEK 120 (134); basic EPS of SEK 3.15 (3.53).
• Cash flow from operating activities: Cash flow from operating activities was MSEK 138 (76).

FIRST SIX MONTHS 2023

• Net sales: MSEK 2,225 (1,955) - reported sales were up +14% year-on-year. After adjusting for the impact of currency +9%, sales on a like for like basis, in constant currency year-on-year were up +5%.
• Operating income: Operating income was MSEK 356 (330), generating an operating margin of 16.0% (16.9).
• Net income for the period: MSEK 241 (264); basic EPS of SEK 6.33 (6.96).
• Cash flow from operating activities: Cash flow from operating activities was MSEK 227 (166).
• Group's net debt: MSEK 950 (1,081); gearing ratio of 42% (56).

President and CEO, Martin Kunz, comments on the Q2 2023 Interim Report.

Solid second quarter sales performance, great cash generation and increased book-to-bill ratio.

Financial Performance

A solid second quarter's operational performance saw net sales reported at MSEK 1,098, up +8% with the increase attributable to foreign exchange rates movements, underlying sales were flat. Operating income was MSEK 175, corresponding to an operating margin of 16.0% (16.1). The cash flow from operating activities was MSEK 138 with a profit to cash conversion ratio of 135% for the quarter and 97% for the half year. The book-to-bill ratio has improved from 92% in Q1 to 99% in Q2.

Despite the economic situation deteriorating with high inflation and rising interest rates demand for our engine products remained strong this quarter in a difficult market. Net sales were MSEK 735 up +9% with underlying sales growth of +2% and operating margins of 16.0% (14.6). The book-to-bill ratio also increased this quarter to 107% from 96% in Q1, driven by higher order intake for electric products. However, demand for our Hydraulics products weakened, particularly in Europe. Net sales were MSEK 363, up 5% with underlying sales declining 2%. Operating margins improved modestly quarter-on-quarter to 15.8% (18.8). The book-to-bill ratio remained at Q1 levels, namely 85%.

The recent business wins confirm the successful ongoing execution of our electrification growth strategy presented at our recent capital markets day and underpins our capabilities to win new applications in established as well as new end-markets, in particular energy systems.

Sales and Market Development

North America continues to be more resilient than Europe delivering underlying sales growth of +3%, however, the market was mixed with only the truck and construction sectors growing year-on-year. Sales to our European customers were down -4% with reductions in all four end-market applications, but mainly the construction and agriculture off-highway sectors. Alfdex continues to perform well as the truck market in North America and Europe remains stable and further modest improvements were seen in China.

Sales of electric products were MSEK 197, equating to 18% of group sales for the quarter. The strong book-to-bill ratio for electric products confirms the successful conversion of prototypes shipped in past quarters into production orders and the interest in our electric products remains strong, particularly high voltage fans and pumps.

Manufacturing consolidation

Yesterday we announced the closure of one of our North American facilities in Itasca, Illinois. This forms part of our operational excellence strategy recently announced at our capital markets day to optimise our manufacturing footprint, creating economies of scale and centres of excellence with state-of-the-art manufacturing facilities to improve customer experience. The consolidation of the Itasca site into our other existing US facilities will be completed by the end of 2023, achieving annual operational savings of MSEK 12.

Outlook

The global macroeconomic situation is deteriorating because of high inflation and rising interest rates meaning the outlook for the second half of this year remains uncertain. There is also the risk that as the global industry supply chain further stabilises, our customers look to reduce their inventory levels which could also impact demand.

Thanks to the strength of our book-to-bill ratio this quarter and the near-term demand from our customers, we expect net sales for the third quarter to be broadly in line with sales achieved during the second quarter of 2023, adjusted for seasonal variations.

We will monitor closely our sales order intake during the coming quarters and ensure our business remains adept and flexible to adapt to demand changes in our end-markets and 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 26 July 2023.

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SOURCE Concentric AB