AQ Group AB (publ), interim report January - March, 2021
First quarter, January - March 2021 in brief
- Organic growth and continued good cost control resulted in a sharp increase in operating profit in the quarter
- Net sales decreased by 2.6% to SEK 1,307 million (1,342)
- Operating profit (EBIT) increased by 23.7% to SEK 121 million (98)
- Profit after financial items (EBT) increased by 45.0% to SEK 126 million (87)
- Profit margin before tax (EBT %) was 9.6% (6.5)
- Cash flow from operating activities increased to SEK 160 million (141)
- Earnings per share after tax amounted to SEK 5.89 (4.11)
- Equity ratio was 56% (54)
- The Board of Directors proposes no dividend to the Annual General Meeting 2021 (previous year SEK 0.00 / share)
A word from the CEO
This is my first report. I want to thank Anders Carlsson for his time at AQ and for a very good handover. This enables us not to lose momentum and that we can continue to focus on increasing our growth. Personally, I am happy to be back at AQ. During my ten years as an employee at AQ, I learned what it means to be an entrepreneur the AQ way. There is a strong inherent force in AQ's decentralized entrepreneurship and our core values, which means that AQ will continue to be a growth company for many years to come. One of our goals is to grow through acquisitions. Therefore, it feels very good to be able to welcome Schaffner's Power Magnetics Division to the AQ family. We have followed Schaffner's development for many years and we see that through this acquisition we gain a leading position globally for the design and manufacturing of transformers and inductors in electromobility.
First quarter
Net sales are back at basically the same level as in the same period last year. We have a small organic growth of 2.4%. We are not happy with that. We need to get our organic growth increasing properly again. The focus now is on helping our customers. During the quarter, demand was good in medical technology, commercial vehicles and agricultural machines. This together with lower costs gave a strong profit in the period where the EBT margin is 9.6%. We have a problem with our unit in Mexico. Order intake from our largest customer in coach buses has decreased sharply during the year and we also need to improve work routines in the factory. We work hard to solve the problems.
During the quarter, some of our units experienced disruptions in terms of supply of incoming material. Thanks to our strong purchasing organization, we have nevertheless succeeded well in not disturbing our customers. Prices of raw materials such as copper and steel have risen sharply in the quarter, but we have managed to obtain compensation for this from most of our customers globally.
Customers
Investments in renewable energy continue to increase. We supply inductive components, sheet metal details and electrical cabinets to customers in wind and solar power segments. Renewable energy also drives the need for energy storage. Here we work with new solutions for several customers.
AQ is a leader in the development and manufacturing of transformers and inductors in electromobility for trains and heavy vehicles. The acquisition of Schaffner's Power Magnetics Division further strengthens our position in this area while we gain more customers in Germany and the USA. We know filter technology, electrification, and automation at the same time as we are a supplier of wiring systems, sheet metal and inductive components for commercial vehicles. We participate in about twenty different development projects for electric vehicles.
Acquisitions
Our M&A team works continuously to identify potential acquisitions that fit into AQ. At the beginning of the second quarter, we agreed with the Schaffner Group to take over their Power Magnetics Division. The acquired units complement AQ's business area Inductive Components in a very good way, both in terms of technology and geographical coverage. Above all, there is a technically strong sales organization in Germany and manufacturing units in the USA, Hungary and China. We are convinced that this acquisition will contribute to AQ's long-term ambition to be a global leader in the design and production of inductive components in our niches such as rail vehicles, renewable energy and control of electric motors. The acquisition contributes with approximately 10% growth in our net sales on an annual basis. The takeover is planned to take place at the beginning of the third quarter of 2021.
Covid-19
The pandemic has had some impact in AQ during the quarter. Mainly disruptions in the form of late deliveries to our factories. In some factories, we have also had minor outbreaks of Covid-19, which in some isolated cases has reduced our delivery capacity to our customers. During the quarter, we received SEK 11 million in subsidies from a handful of the countries in which we operate.
AQ is a decentralized and dynamic organization. This is most evident in tough times when we have to adapt quickly to new conditions. We are proud of our leaders and employees throughout the organization who handle this difficult situation in an excellent way.
Environment
AQ has management systems for the environment at all our manufacturing units. These include concrete goals, metrics and activities to reduce our environmental impact. One requirement is that there must be local targets for reducing CO2 emissions at each unit. However, we do not like excessive documentation and bureaucracy at AQ. We like concrete measures that really benefit the environment. Therefore, we do not have a nice brochure on glossy paper written by expensive consultants that describes how good we are. We focus our resources on implementing concrete measures. During the quarter, for example, we had the local energy company in Estonia install solar panels on our land, which then supply our factory with clean energy. It reduces both our CO2 emissions and our costs. Measures that really bite.
Cash flow and balance sheet
Our balance sheet is strong, and our cash flow is stable. It is sustainable. Even after the acquisition of Schaffner's Power Magnetics Division, we will have a low debt level. Our strong balance sheet allows us to focus on our customers and continue to invest and grow with them. It also means that we have can act when our M&A team finds attractive acquisition opportunities.
New management - new strategy?
I know AQ well. There will be no revolution. Our strategy and our core values will not change. AQ has fantastic employees who will continue working hard to make our demanding customers and partners happy. It's continuous nitty gritty work that we love at AQ. Not so glamorous, but we are proud to be a part of our customers' success. We shall continue to grow, make money and have fun. It doesn’t have to be harder than that.
James Ahrgren
CEO
_________________________________________________________________________________________________________________
For further information, please contact:
James Ahrgren, CEO, +46 76 052 58 88 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 James Ahrgren for publication at 08:00 hours CEST on April 21, 2021.
____________________________________________________________________________________________
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, 2020, in total about 5,900 employees in Sweden, Bulgaria, China, Estonia, Hungary, India, Italy, Lithuania, Mexico, Poland, Serbia, Finland, Canada, USA, Brazil and Germany.
In 2020 AQ had net sales of SEK 4.8 billion and the group has since its start in 1994 shown profit every quarter.
Tags: