AQ Group AB (publ), interim report January - March, 2020

First quarter, January-March 2020
in brief

  • Stable earnings and lower net debt than at the end of last year
  • Net sales increased by 7.1 % to SEK 1 342 million (1 253)
  • Operating profit (EBIT) increased by 2.3 % to SEK 98 million (96)
  • Profit after financial items (EBT) decreased by 6.5 % to SEK 87 million (93)
  • Profit margin before tax (EBT %) was 6.5 % (7.4)
  • Cash flow from operating activities decreased to SEK 141 million (165)
  • Earnings per share after tax SEK 4.11 SEK (4.14)
  • Equity ratio 54 % (54)
  • Covid-19 affected the quarter with SEK 25 million lower net sales and SEK 5 million lower operating profit
  • Difficult to assess the impact of Covid-19 during the year
  • The Board of Directors has decided to withdraw the previous dividend proposal and instead propose to the Annual General Meeting that no dividend will be paid
  • The new date for the Annual General Meeting is June 25

A Word from the CEO

First quarter
Our EBT margin for the quarter is 6.5%, which is 0.9 percentage points lower than last year. The result is affected by the fact that factories in China, USA and Canada have been closed due to Covid-19 and that we have had costs for ending a non-profitable customer project during the quarter.

We have worked well with our productivity and reduced personnel costs for our own and hired personnel by 5% compared to the first quarter of 2019. This combined with slightly better volumes compared to the fourth quarter has had a good effect on earnings and counteracted the volume decline we have seen with many customers. Several customers in the medical technology, food industry, environmental technology and infrastructure are still growing, which helps us to keep up the profit.

The Corona crisis affected the first quarter with SEK 25 million lower net sales and SEK 5 million lower operating profit. The units that were affected in Europe in March continued to manufacture the month out, so the impact has so far been limited.

There have been major currency movements during the quarter, where mainly EUR and USD strengthened against many of the currencies in which we operate, such as PLN, MXN and SEK. The valuation of accounts receivable and accounts payable had a positive impact on operating profit, while our internal group-wide loans had a negative impact on net financial items.

Cash flow from operating activities was good during the quarter and our net debt excluding IFRS 16 has decreased from SEK 452 million to SEK 377 million during the quarter. Working capital was affected by the low level of activity at the turn of the year and the subsequent increase in production in January and February as accounts receivables and inventories increased.

Covid-19 pandemic
AQ Group is affected by the Covid-19 pandemic mainly in three ways.

Firstly, we have operations in countries and states that completely shut down their economy. In China, this led to a shutdown lasting 3-5 weeks and it is gratifying that these three units are up and running again after extensive measures to be able to conduct the business as risk-free as possible. At present, 5 manufacturing units in Italy, India, USA and Canada are completely closed.

The other major impact is from the European automotive industry. This was forced to stop when Western Europe completely shut down its companies. AQ has 9 units in Sweden, Estonia, Lithuania and Poland, which are affected by the automotive customers standing still. Here we work with short-time work allowance, vacations, and cost savings to handle the situation as well as possible. We also work intensively with supply chain management to reduce the inflow of material to us, but also to be ready to start again. Worth noting is that most of these units are still running as we also have other customers.

The third effect is on our other 28 manufacturing units in the Nordic countries, Eastern Europe, China and Mexico. There the business continues but under new conditions. We spend a lot of time organizing our business in a way that reduces the risk of virus spread. Here we learned early from our Chinese colleagues who immediately, in February, started manufacturing with the help of these measures. We also have higher absence due to employees being at home taking care of children in the countries where the schools are closed. The deliveries from most of our suppliers are still working. There have been some concerns with transport, but this has improved gradually.

AQ Group has benefited from its decentralized and agile structure in this crisis. The situation is different in each country and in each unit and our local management has done a very good job of quickly following local directives, reducing the risk of virus spread, managing high sickness absence, chasing materials and continuing to deliver to our customers. It is a strength to be in many countries and we spend a lot of time on internal and external communication in order to learn from each other.

Outlook
There is still a great deal of uncertainty in how this will affect us. The greatest uncertainty is for how long different countries completely shut down their economy and if more countries choose to take this measure. The other major uncertainty lies in when the European automotive industry succeeds in its restart. We will have weaker earnings in the second quarter, but today it is impossible to say how much.

We continuously work with different scenarios in each company and try to be prepared for whatever may happen and then take action quickly. This applies both in the near future during the immediate crisis but also in the medium term as we need to be prepared for whatever happens to the demand from our customers. We also work hard to reduce costs and review all decided and planned investments. Everything that can wait has been moved forward. We are very humbled by this uncertain situation, but we have a good starting point with our strong balance sheet.

Our goal remains to be a long-term, stable, growing and profitable group with a profit margin (EBT) of 8% and a strong financial position.

We want to increase our turn-over both organically and through acquisitions. The acquisition activity in the near future is affected by the great uncertainty, but there will be good growth opportunities both now and after the immediate crisis, both organically and through future acquisitions.

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.

Our employees and leaders are doing a good job during these difficult circumstances and they are now increasing their efforts to continue to deliver to our customers and seize the opportunities available in the market.

A continued important part of this is our core values ​​and our efforts to be a long-term and "Reliable" supplier to leading industrial customers.

 

Anders Carlsson

CEO

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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 April 22, 2020.

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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, 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.

www.aqg.se

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About Us

AQ is a leading supplier to demanding industrial customers and is listed on Nasdaq Stockholm’s main market. 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.