CONCENTRIC INTERIM REPORT JANUARY – MARCH 2020

FIRST QUARTER

• Net sales: MSEK MSEK 456 (566) – sales were down –20% y-o-y. After adjusting for impact of currency (+2%), sales in constant currency were down –22%.
• Operating income: MSEK 87 (126), generating an operating margin of 19.1% (22.2).
• Earnings after tax: MSEK 60 (94); basic EPS of SEK 1.60 (2.43).
• Cash flow from operating activities: MSEK 81 (102); cash generation affected by lower sales.
• Group’s net debt: MSEK 27 (27); gearing ratio of 2% (2).

President and CEO, David Woolley, comments on the Q1 2020 Interim Report.

Market and sales development
The quarterly published market indices suggest production rates, blended for the Group’s end-markets and regions declined by –24% with both the Americas and Europe & RoW reporting negative growth for the third successive quarter. The Group’s sales continued to be affected by the overall market slowdown with sales down –20% year-on-year. The sales were down year-on-year for the first quarter by –22% in constant currency and remained slightly ahead of the published indices.

The pandemic, Covid-19, which is impacting the global economy did affect our China operation during the first quarter, which closed for a period following Chinese New Year. During March many of our European & Asian OEM customers have been forced to cease production as national governments imposed restrictions to limit the spread of the virus. Sales in the first quarter were largely unaffected by this rapidly changing environment.

The same market indices indicate every geographic region and every end market application was weaker year-on-year during the first quarter, most notably medium- and heavy-duty trucks declined 38% in North America and 34% in Europe. However the truck market remains the largest end-market and accounts for 41% of the Group’s sales.

Concentric’s sales in North America, Europe, India and China were down year-on-year in the quarter whilst sales in South America showed a modest increase. Sales to all end-market applications were lower in the first quarter year-on-year with the truck & off-highway sectors, agricultural machinery & construction equipment particularly affected in our core regions of North America and Europe.

Concentric Business Excellence – managing during a global pandemic

Concentric Business Excellence has been the key in our ability to adapt operations to lower demand and thereby defend our margins. All parts of the business participate in this programme, driving continuous improvement in customer service levels, employee motivation and operational excellence. The successful implementation of this model has enabled our management teams to work efficiently to reduce the cost of capacity for the reduction in demand from our customers, ensuring the operating margin was maintained at good levels during the first quarter at 19.1% (22.2).

Annual General Meeting – dividend withdrawn

At the Annual General Meeting the Board of Directors of Concentric AB withdrew the previously communicated dividend proposal of SEK 4.50 instead proposing that no dividend is distributed to the shareholders for the 2019 financial year, which was duly approved by shareholders. Due to the current market situation caused by Covid-19, the Board of Directors prioritised maintaining financial flexibility, and provided the market conditions and visibility improves adequately over the year Concentric is planning to reassess the possibility of distributing a dividend later in 2020.

Outlook

The global pandemic will have a greater impact on our business during the second quarter than the first, as OEM customers’ manufacturing facilities remain closed during the early part of the quarter. There is also a great degree of uncertainty on how quickly market will recover post the Covid-19 pandemic.

The overall published market indices blended to Concentric’s mix of end market applications and locations suggest the overall market will contract sharply during the second quarter of 2020, most notably the medium- and heavy-duty truck markets in North America and Europe. The off-highway sectors, agricultural machinery and construction equipment, will be impacted by the pandemic, but not to the extent expected in the truck sector because of the nature of their product.

The level of orders received in the first quarter indicate that sales in the second quarter 2020 will be significantly lower than sales in the first quarter, but providing further guidance is extremely difficult with the current uncertainty in the market place.

These are extraordinary times and our management teams are resilient, remain agile and are responding to challenging market conditions, reducing the cost of capacity by furloughing our facilities in various geographic regions and focussing on cash management. The financial position of Concentric is strong, both regarding capital structure and liquidity and Concentric remains committed to meeting our customers’ requirements.
 

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 6 May, 2020.