AQ Group AB (publ): Year-end report 2020
Fourth quarter, October-December 2020
in brief
- Strong operating profit driven by recovery in volumes and good cost control
- Net sales decreased by 3.4% to SEK 1,256 million (1,300)
- Operating profit (EBIT) increased by 93.3% to SEK 125 million (65)
- Profit after financial items (EBT) increased by 91.5% to SEK 111 million (58)
- Profit margin before tax (EBT %) was 8.8% (4.5)
- Cash flow from operating activities increased to SEK 163 million (153)
- Earnings per share after tax amounted to SEK 5.03 (2.60)
Full year 2020 in brief
- Strong resilience to Covid-19 effects and cyclical fluctuations
- Net sales decreased by 5.7% to SEK 4,819 million (5,113)
- Operating profit (EBIT) increased by 17.8% to SEK 401 million (340)
- Profit after financial items (EBT) increased by 14.8% to SEK 369 million (321)
- Profit margin before tax (EBT %) was 7.7% (6.3)
- Cash flow from operating activities increased by 21.9% to SEK 609 million (499)
- Earnings per share after tax increased by 20.0% to SEK 17.24 (14.37)
- Equity ratio was 57% (52)
- The Board of Directors proposes no dividend (previous year SEK 0.00 / share)
A word from the CEO
Fourth quarter
Net sales recovered well during the period, mainly driven by medical technology and commercial vehicles. We have a small organic growth of 0.4% compared to the fourth quarter last year. This together with lower costs gave a good profit in the period where the EBT margin is 8.8%. During the quarter, we also incurred costs for restructuring our unit in Mexico, where we have problems with declining demand for coach buses.
During the year, we have shown that we are able to adjust our costs in a downturn. AQ has a strong resilience to economic fluctuations thanks to our fast-paced and decentralized structure. We also have a good spread of risk to many different businesses and a healthy exposure to the sustainable products and solutions that our customers develop to do something about the climate threat.
Market
Investments in renewable energy continue to increase. We supply inductive components, sheet metal details and electrical cabinets to customers in wind and solar power. Renewable energy also drives the need for energy storage. Here we work with new solutions for several customers. When it comes to inductive components, we are also involved in developing the technology for our customers.
AQ has a particularly good position in electromobility. We know filter technology, electrification and automation, at the same time as we are a supplier of wire harnesses, sheet metal and inductive components for commercial vehicles. We participate in about twenty different development projects for electric vehicles. And these projects are now moving faster from development to serial deliveries.
Even more important to the climate is public transport. AQ is a significant supplier of components for trains and buses and works with interesting projects in Europe, Asia and North America. For example, we are a supplier to the large electric bus delivery in Gothenburg, Sweden. We are also a plastic supplier to a leading system for electric bicycles.
Automation and digitalization are central to controlling and using energy in a more environmentally friendly way. All automation requires electrical cabinets where you install automation components from leading suppliers. AQ has a strong global position in this supply chain. We can supply complete electrical cabinets including in-house made enclosures worldwide. Cloud-based software solutions also drive the need for electrical cabinets, and here we have developed a new business during the fourth quarter for a customer in the data center business.
Covid-19
The pandemic has affected AQ in many ways. Above all, we have lost net sales but also suffered from supply chain disruptions and additional costs. Particularly dramatic was the v-shaped up and down curve in the second quarter, where we are proud that we always managed to deliver to our customers. We have received subsidies for short-term work and compensation for lower volumes in many of the countries in which we operate. However, AQ's own cost savings are still more than twice as large than what we have received in support. The support measures have meant that we have been able to maintain our capacity and staff and thus continue to generate jobs and tax revenue in the communities in which we operate.
During the fourth quarter, the Group received SEK 25 million in support measures for Covid-19, primarily in Lithuania, Bulgaria and Canada. If we exclude this, we have an adjusted EBT margin for the quarter of 6.7% compared to 4.5% last year. The second wave of Covid-19 has meant a larger spread in the countries where we operate. So far, routines and measures have been sufficient to deal with the pandemic, but we are aware that we need to be persistent with this for a long time to come. Finally, we have benefited from increased deliveries to build up capacity for vaccine production during the year.
To ensure maximum financial freedom of action during the beginning of 2021, the Board of Directors proposes that no dividend is paid for 2020. However, the Board may return later in the year and propose a dividend. AQ's balance sheet is strong, but uncertainty about the development of the pandemic still remains.
Sustainability
In 2020, we have ensured that there are environmental management systems for all our operational 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. It is gratifying that we are making concrete improvements that both reduce the environmental impact but also reduce our energy and material costs. In addition to climate and carbon dioxide, there is also a strong focus on water and chemicals. We have also improved the work environment and reduced our incidents and accidents, which helps us to recruit staff and to be an attractive employer. The work with the environment and the work environment will never be ready, so we will continue our work with this for a long time.
Cash flow and balance sheet
When the pandemic started, there was great financial uncertainty. We have since managed to generate a strong cash flow from operating activities, which continued during the fourth quarter. It is noteworthy that our inventories decreased in the fourth quarter even though sales returned to higher levels. AQ Group has a strong balance sheet with low net debt that will help the Group to continue to grow organically and to make acquisitions.
Handover to new management
Finally, I would like to warmly welcome James Ahrgren back to AQ Group when he takes over as CEO on April 1. James and I are now working together to ensure that we do not lose pace and to make a good handover.
AQ's strategy and core values remain unchanged. We work long-term with demanding industrial customers who have high demands on quality and delivery security. We always want to do the "little extra" for our customers and help them become successful in their markets. The key to this is skilled employees who work in decentralized companies led by strong entrepreneurs. We are simple and cost-effective, which makes us competitive. Finally, we dare to go our own way and say things as they are, which helps us to address the problems and opportunities that arise in each company.
Our strategy is to grow organically and through acquisitions. In the pandemic year 2020, we have not succeeded in this, but we have laid a good foundation for continued growth in the years to come.
It has been extraordinarily fun and educational to be the CEO of AQ Group. I'm sure that James, together with the board and employees, will continue to develop AQ to become an even more successful and "reliable" supplier to demanding industrial customers around the world.
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 CET on February 18, 2021.
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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, 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.
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