AQ Group: Year-end report 2016
Full year 2016 in brief
- Net sales increased by 12% to SEK 3 289 million (2 931)
- Operating profit (EBIT) increased by 39 % to SEK 281 million (202)
- Profit after financial items (EBT) increased by 32 % to SEK 279 million (212)
- Profit margin before tax (EBT) 8.5% (7.2)
- Cash flow from operating activities increased by 77 % to SEK 290 million (166)
- Equity ratio 60 % (58)
- Earnings per share after tax increased by 38 % to SEK 13.01 (9.44)
- The Board of Directors proposes a dividend of SEK 2.75 (2.25)
Fourth quarter, October – December 2016 in brief
- Continued growth in sales and profit mainly driven by acquisitions
- Net sales increased by 13 % to SEK 905 million (803)
- Operating profit (EBIT) increased by 9 % to SEK 60 million (55)
- Profit after financial items (EBT) increased by 9 % to SEK 60 million (55)
- Profit margin before tax (EBT) 6.6 % (6.8)
- Cash flow from operating activities increased by 57% to SEK 55 million (35)
- Equity ratio 60 % (58)
- Earnings per share after tax increased by 16 % to SEK 2.79 (2.41)
A word from the CEO
Market
The fourth quarter was our 89th consecutive quarter with profit.
We have increased our turnover every year since the start October 1, 1994 i.e. for 22 years. We have shown profit during all 89 quarters. 2016 shows yet again the highest turnover and profit in the history of the group.
Both turnover and profit is better than the same quarter in 2015, but we are not satisfied.
The fourth quarter is a quarter with substantially lower margins than the first and the second quarter. As I have previously communicated, we had an unusual number of projects with good operating margin during the first half of the year. Two of our production units in Sweden have profitability problems and action programs are ongoing, but it will take time to get them to satisfactory profitability. Including the acquisition of Gerdins Industrial System AB with subsidiaries the result of the fourth quarter should have been better.
Raw material prices, especially of steel, are increasing rapidly. Therefore, it is important that we can immediately adjust prices to our customers when prices of raw material are increasing.
The organic growth for the quarter was -4.6 % compared to the fourth quarter in 2015. This was mainly caused by decreasing sales to some of our customers in Sweden. Swedish industry is generally going well, but our customers in telecom and packaging machines have had lower sales and decreasing demands of mechanical parts caused by technical development.
As always, our focus is to adapt to our customers’ requirements and real demand. It’s a strategy we will continue to follow, to be fast movers and adaptable no matter of market conditions.
The Board has decided to let the goal for EBT margin before tax to remain at 8%.
Acquisitions
Gerdins was acquired on October 3, 2016. It is our biggest acquisition so far when it comes to turnover. The subsidiaries of Gerdins have been integrated into AQ’s existing business areas. Two of Gerdins’ operations have not delivered results according to forecast. Improvements to rationalize administration and to reduce operating expenses are ongoing.
The acquisition brought a number of new exciting customers in industries such as defence, forestry and agriculture in Sweden and Germany. In the areas of marketing, purchasing and IT there are ongoing action plans. We have already seen savings within purchasing with the support of AQ’s global purchasing organisation. Gerdins has a well-functioning sales organisation, which will help us to increase organic growth overall.
Organisation
AQ Plast AB’s transfer of production to Anderstorp from Vadstena is completed. The cost of the transfer has been higher than planned. There are still disturbances in the production in Anderstorp.
On January 16, the AQ share started trading on Nasdaq Stockholm Mid Cap. A movie from the bell ringing ceremony is available on our home page www.aqg.se.
Our organisation is built on entrepreneurship and it is a foundation of our core values.
Outlook
India is a market with high growth. AQ sees a clear trend that many of our customers want to use India as an alternative to China also for deliveries to Europe. Our company in India grew strongly during 2016 and we believe in growth also for 2017. Profitability is still unsatisfactory though, but we saw a break in the trend at the end of the year. Quality and delivery precision have also improved.
Our company in Mexico is developing positively and has turned the loss in 2015 to a profit in 2016. We believe in solid growth for 2017 and the company is also delivering better value to the customers than earlier.
AQ was awarded mechanical supplier of the year in 2016 by Sony Mobile. Sony is assembling an increasing share of their mobile phones in Thailand instead of China. Our company in Thailand has thereby good opportunities for growth and profit improvements in 2017.
My feeling is, despite the negative organic growth in the fourth quarter, that we are gaining market shares in several areas and are also entering new markets. However, one shall be aware of the fact that AQ is acting in a global competition with subsequent price pressure.
With strong relations to world leading customers and engaged employees I am looking positively at the future with continued growth with stable profit level. An important part of this is our core values and our efforts to be a reliable supplier to leading industrial customers.
AQ is well positioned for new acquisitions from a financial as well as from a management view.
I would like to especially thank our customers for a good cooperation and our employees for their good work during 2016.
Claes Mellgren
CEO
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Further information can be given by AQ Group AB:
CEO, Claes Mellgren, telephone +46 70-592 83 38 or CFO, Mia Tomczak, telephone +46 70-833 00 80 or IR, Glen Nilsson, telephone +46 70-654 40 03
AQ Group is required to make the information in this press release public in accordance with the EU Market Abuse Regulation. The information was released by CEO Claes Mellgren for publication at 08:30 hours CET on February 23, 2017.
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AQ in brief
AQ is a leading supplier to demanding industrial customers and is listed on Nasdaq Stockholm’s main market.
The Group consists mainly of operating companies each of which develop their special skills and in cooperation with other companies, striving to provide cost effective solutions in close cooperation with the customer.
The Group headquarter is in Västerås, Sweden. AQ has, on December 31, 2016, in total about 5,100 employees in Sweden, Bulgaria, China, Estonia, Hungary, India, Italy, Lithuania, Mexico, Poland, Serbia and Thailand.
In 2016 AQ had net sales of SEK 3.3 billion and the group has since its start in 1994 shown profit every quarter.
AQ has the highest credit rating AAA according to Bisnode.
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