CONCENTRIC INTERIM REPORT JANUARY – MARCH 2019

FIRST QUARTER

•  Net sales: MSEK 566 (603) – sales were down –6% y-o-y. After adjusting for impact of currency (+6%), sales in constant currency were down –12%.
•  Operating income: MSEK 126 (120), generating an operating margin of 22.2% (19.9).
•  Earnings after tax: MSEK 94 (89); basic EPS of SEK 2.43 (2.26). 
•  Cash flow from operating activities: MSEK 102 (111); cash generation affected by lower sales. 
•  Group’s net debt: MSEK 27 (92); gearing ratio of 2% (9). 
•  Effects of new accounting principles for Leases – IFRS 16: The effects in the income statement are not material (EBIT margin +0.1%; EBITDA margin +1.1%). Cash flow from operating activities was affected with MSEK +6. Other effects per 31 March were; total assets MSEK +99; net debt MSEK +102; gearing ratio +8%.

President and CEO, David Woolley, comments on Q1 2019 Interim Report.

Sales development

Published market indices suggest production rates, blended to the Group’s end-markets and regions were up by 5% year-on-year in the first quarter. Whilst our customers’ end markets grew, they have managed risk and reduced stocks during the first quarter, which means their tier 1 suppliers sales have not grown to the same extent. Group sales for the first quarter were down year-on-year by 12% in constant currency reflecting the decision by a customer, a global OEM, to dual source components during 2019 and is broadly in line with previous guidance. Excluding sales to the global OEM from both periods, group sales were constant for the first quarter year-on-year. The continued sustained demand in the first quarter is evident both in our core regions of North America and Europe, as well in all four sectors we serve, notably truck, and equipment for construction and agriculture. The largest end sector for Concentric continued to be trucks, representing 42% of the Group’s sales, concentrated primarily in North America and Europe. Market demand for medium- and heavy-duty trucks in North America grew by 5% year-on-year in the first quarter, whilst European demand continued with low single digit growth. India reported strong market growth in the first quarter but was probably the market most affected by pressure to reduce stocks. Sales to the Agricultural Machinery end sector remained strong predominantly in the Americas and India. However, the Construction Equipment end sector proved more challenging, particularly in North America and Europe as our customers adjusted stock levels to a more uncertain outlook.

Concentric Business Excellence

The key objectives of the Concentric Business Excellence programme (“CBE”) are to achieve absolute satisfaction of our customers and employees. The CBE programme has enabled the teams to efficiently reduce our cost of capacity and output to meet current demand, optimising our operational cost base. The CBE-programme has managed to defend the Group’s operating income levels, reporting an operating margin for the first quarter of 22.2% (19.9).

Concentric wins important contracts for next generation steering systems

Concentric AB has won five Electro-Hydraulic Steering (“EHS”) systems contracts worth an estimated total of SEK 94 million over the next five years. The contracts relate to EHS systems to be used in electric trucks as well as hybrid and electric buses. Even though these platforms currently constitute a small niche, local city regulation and customer requirements will drive increased demand for electric commercial vehicles going forward. These nominations are therefore strategically important and we believe that the electric segment presents exciting long-term opportunities for Concentric.

Acquisition Opportunities

We continue to explore acquisition opportunities that will offer either geographical expansion, product expansion or technologies that will enhance our current engine and hydraulic product lines to provide us with an even greater presence alongside our global customers.

Outlook

The underlying sales order book remains strong and the level of orders received in the first quarter indicate that sales in the second quarter 2019 will be broadly in line with sales in the first quarter. Market indices predict that production volumes blended to Concentric’s end-markets and regions will be up 4% year-on-year for 2019, which is lower than the 7% growth rate in 2018. Our expectation remains that demand for medium- and heavy-duty trucks, particularly in North America could weaken towards the end of 2019 and the business is vigilant to the change in customer behaviour such as destocking and is ready to adapt to any market changes. Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.

For further information, please contact:
David Woolley (President and CEO) or Marcus Whitehouse (CFO) at

Tel: +44 121 445 6545 or E-mail: info@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 agency of the contact persons set out above, at 08.00 CET on 7 May, 2019.