Concentric Capital Markets Day 2023: Updated strategy to accelerate profitable growth and new financial targets

Concentric announces new financial targets and will present its updated strategy to accelerate profitable growth at the Capital Markets Day today, May 23, 2023. During the afternoon, Concentric’s CEO Martin Kunz and other members of the senior leadership team will detail the company’s priorities to capture emerging opportunities from electrification and to continue delivering strong cashflows, margins and growth from its base business.

“Our updated strategy sets out our roadmap for the next five years, during which we aim to accelerate profitable growth in our base and electrical businesses. We plan to generate strong cash-flows and invest our capital wisely to grow into new markets, have ambitions to deliver strategic acquisitions and strong returns to our shareholders. The electrification of our markets enables us to increase the value that our products can deliver to customers and help them reach their sustainability goals. It also increases the number of our products required on each vehicle and makes it possible to increase the revenue generated from each product. Based on our new financial targets approximately 30 percent of our sales are projected to come from electrical products by 2028. We will continue to invest in our profitable base business to retain our technology leadership and deliver on our customers’ demands for years to come,” says Martin Kunz, CEO.

Updated strategy to accelerate profitable growth

As part of our updated strategy, Concentric will maintain its focus on strong margins and financial discipline. The strategy is based on five pillars, underpinned by an organizational shift in culture and mindset towards growth:

• Developing our base business – continued focus on growing our base business, including seizing opportunities emerging from regulatory changes to reduce emissions, such as the Euro 7 standards, and the continued demand for our hydraulic products and fuel-efficient internal combustion engine solutions. The slower rate of off-highway electrification, combined with the higher power density requirements for agriculture and construction equipment, ensures a continued demand for our hydraulic products.
• Accelerating electrification – leveraging our high-quality e-product offering and the underlying customer demand to accelerate electrical sales growth. As part of the shift from internal combustion engines towards electric vehicles, the number of Concentric products required per vehicle, revenue per product and the value the products can deliver increases significantly. This would increase our potential share of wallet from approximately EUR 150 for an internal combustion engine truck to approximately EUR 8,000 for a battery electric truck.
• Expanding into new end markets and applications – continue building on our success within energy systems and target sales in new markets through dedicated resources. Our range of electric pumps and fans, designed for challenging reliability and lifetime requirements, meets the cooling needs of applications that generate significant heat. This makes other markets where batteries are used to store energy an attractive opportunity for Concentric.
• Investing in a platform for growth in India – our long track record, customer relationships and recent wins in India, paired with the country’s forecasted growth and planned investments, create an attractive platform for continued growth of our business in India.
• An active acquisition strategy – active pursuit of targets to support our electrification strategy, secure additional market leading technologies, provide access to new markets or further strengthen our geographical footprint.

New financial targets

Concentric’s new financial targets are valid over a business cycle and include:

• Electrical sales compound annual growth rate of 15% over a business cycle and sales growth of 3% above market indices from our base business
• Operating margin at or above 16%
• Cash conversion at or above 100% of adjusted operating income
• Return on Capital Employed at or above 20%

Concentric reiterates its ordinary dividend policy of returning 33% of net income to shareholders and introduces a new policy of not exceeding a net debt to EBITDA ratio of 2.5x.

Details of the event

Concentric’s Capital Markets Day will start at 13.00 CET on Tuesday, May 23, 2023 at Tändstickspalatset, Västra Trädgårdsgatan 15, 111 53 Stockholm. Registration begins at 12.30 CET.

Telephone conference

Participants are required to register at least 10 minutes in advance of the conference using the link provided below. Upon registering, each participant will be provided with Participant Dial In Numbers, and a unique Personal PIN.

To join the conference call, please go to:

https://register.vevent.com/register/BI2a85d534ec6a4b2b91a04929e56869c3

Access the webcast:

To join the webcast online, please go to: https://edge.media-server.com/mmc/p/rsattndt

(Please note that we will not be able to take any questions from the webcast session.)

There is no need to pre-register to participate via webcast. The webcast and presentation slides will be available on Concentric’s website as soon as practically possible after the conclusion of the event.

For additional information please contact:

Marcus Whitehouse

Telephone +44-121-445 6545

Mail marcus.whitehouse@concentricab.com      

The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 07:15 CET on 23 May 2023.

Concentric AB is an innovator in flow control and fluid power, supplying proprietary systems and components to the world’s construction equipment, truck, agricultural machinery and industrial applications end-markets. The company has a global manufacturing presence including in the USA, Germany, UK, Sweden, India and China. Concentric’s focus is to develop world class technology with innovative solutions that meet the sustainability needs of our customers. Concentric offers engine products including lubricant, coolant and fuel pumps and hydraulic products encompassing gear pumps and power packs. Concentric also offers a range of products developed for the fast-growing electric and hybrid powertrain market including, electric water and oil pumps, electric fans, thermal management systems and electro hydraulic steering. In 2022, the Group had a turnover of MSEK 4,056 and circa 1,207 employees.