AQ Group AB (publ), interim report January - June, 2020
Second quarter, April-June 2020
- Lower net sales due to Covid-19 but continued stable profit
- Net sales decreased by 15.0% to SEK 1,116 million (1,313)
- Operating profit (EBIT) decreased by 13.6% to SEK 81 million (93)
- Profit after financial items (EBT) decreased by 11.7% to SEK 78 million (88)
- Profit margin before tax (EBT %) was 7.0% (6.7)
- Cash flow from operating activities increased to SEK 166 million (50)
- Earnings per share after tax amounted to SEK 3.80 SEK (3.81)
- Covid-19 affected the quarter by SEK 229 million lower net sales and subsidies and similar support amounted to SEK 35 million
Six months, January-June 2020
- Net sales decreased by 4.2% to SEK 2,458 million (2,566)
- Operating profit (EBIT) decreased by 5.5% to SEK 179 million (189)
- Profit after financial items (EBT) decreased by 9.0% to SEK 165 million (181)
- Profit margin before tax (EBT %) was 6.7% (7.1)
- Cash flow from operating activities increased by 42.7% to SEK 307 million (215)
- Earnings per share after tax decreased by 0.5% to SEK 7.91 (7.95)
- Equity ratio was 56% (49)
A word from the CEO
AQ Group had decreased net sales by 15% in the quarter, but managed to maintain an EBT margin of 7.0% thanks to early and powerful measures to lower our costs while a big part of the group contributed better or at the same level as last year. Profit before tax was also positively affected by a change in the reserve for an earnout.
During the quarter, we received subsidies for the units that have been strongly affected by Covid-19. This has helped us deal with the consequences of the pandemic in these units. An adjusted EBT margin excluding subsidies and change in earnout is 3.2% in the quarter.
Strong focus has been placed on strengthening our liquidity and the balance sheet. We have renegotiated our loans and repayment terms and thereby increased the portion of long-term financing. The Annual General Meeting also decided on June 25 not to pay a dividend. Our working capital has decreased during the quarter and we have postponed our investment plans. In total, these measures, in addition to our profit, have led to our net debt excluding IFRS 16 decreasing from SEK 377 million to SEK 292 million during the quarter, thereby strengthening our cash position and liquidity.
It has been a very interesting quarter with great uncertainty. The 5 units in Canada, the USA, Italy and India where we were forced to close completely resulted in a reduction in sales of SEK 42 million. Our customers for these units are mainly in the same countries and were thus also closed. We carried out the shutdown and start-up in a controlled and good way.
Our large units in Poland, Lithuania, Estonia and Sweden, which supply to the European automotive industry, were strongly affected during April and May, and the Covid-19 effect was SEK 187 million in reduced sales. We are proud of how we have handled the situation and that we have managed to deliver to our customers throughout the period despite challenges with both materials, transport and personnel. In particular, there have been many, large and uncertain changes in demand from our customers during the quarter. Being able to plan production and material management under these conditions without increasing inventory and without delivery problems is good. The temporary lay-off support and subsidies that have been provided have helped us to downsize and to restart without us being forced to lay off skilled staff that was needed when business began to move again in early June.
All our open units have managed the balance between both keeping the business going but at the same time introducing routines and measures to reduce the risk of virus spread. Our work with costs requires a special mention. During the last four quarters, we have reduced our personnel, including temporary employees and consultants by about 800 people, due to declining demand and uncertainty for the future. Major savings have also been made in travel, transport and supplies. We received SEK 35 million in subsidies and similar measures during the quarter, for which we are grateful, but our own savings amount to more than double what we have received in support.
Throughout this period, we have benefited from our decentralized and agile organization, while our international presence and size means that we have been able to quickly spread ideas and information about how we handle the pandemic.
A majority of the Group's units have been mildly affected by Covid-19 and continue their growth. We work intensively with new customers in all our wiring systems factories. We are expanding our capabilities in system products in both Bulgaria and Sweden and we are working on several development projects with customers where we will manufacture complete machines. Our business in electrical cabinets and sheet metal processing has had a good quarter where we deliver automation equipment mounted in specially adapted and cost-effective enclosures. Our units in China have delivered several major "e-houses" for material handling. Our acquisition of Trafotek contributed with a large number of deliveries of dry power transformers during the quarter. There has been a good increase in plastic parts for hand tools and electric bicycles and we also contribute through the manufacturing of products that are ultimately used to modernize Swedish and Finnish nuclear power plants.
Our guideline is to be a long-term, stable, growing and profitable group with a profit margin (EBT) of 8% and a strong financial position. With strong relationships with our world-leading customers and committed employees, we will work hard on improving our efficiency in the production units and lower our purchasing costs. This includes to humbly and quickly adapt to the new reality that exists in our markets, regardless of the scenarios that occur. With our decentralized structure and strong balance sheet, AQ Group is well positioned to handle the challenges and opportunities that the Covid-19 pandemic will continue to pose in the countries and segments where we operate.
We want to increase our turn-over both organically and through acquisitions. We continue to work with acquisitions in the same way as before and continue our efforts to take advantage of the organic growth opportunities that exist in the market.
Our employees and leaders have done a very good job during one of the most difficult quarters in AQ's history. Our demanding industrial customers have had major challenges in their markets and in their operations during this period. We feel that, with good support from our core values, we have really been a "reliable" supplier to our customers during this quarter.
For further information, please contact:
Anders Carlsson, CEO, +46 70 513 42 99 or CFO, Christina Hegg, telephone +46 70-318 92 48
AQ Group is required to make the information in this press release public in accordance with the EU Market Abuse Regulation and the Securities Markets Act. The information was released by CEO Anders Carlsson for publication at 08:00 hours CEST on July 16, 2020.
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, provides cost effective solutions in close cooperation with the customer.
The Group headquarter is in Västerås, Sweden. AQ has, on December 31, 2019, in total about 6,300 employees in Sweden, Bulgaria, China, Estonia, Hungary, India, Italy, Lithuania, Mexico, Poland, Serbia, Finland, Canada, USA, Brazil and Germany.
In 2019 AQ had net sales of SEK 5.1 billion and the group has since its start in 1994 shown profit every quarter.