CONCENTRIC INTERIM REPORT JANUARY – SEPTEMBER 2018

THIRD QUARTER

•  Net sales: MSEK 622 (515) – up 12% y-o-y, after adjusting for currency (+9%) 
•  Operating income: MSEK 142 (96), generating an operating margin of 22.9% (18.7). 
•  Earnings after tax: MSEK 108 (72); basic EPS of SEK 2.74 (1.79). 
•  Strong cash flow generated from operating activities: MSEK 132 (73) driven by management of working capital. 
•  Group’s net debt: MSEK 37 (317); gearing ratio of 4% (41). 

FIRST NINE MONTHS

• Net sales: MSEK 1,828 (1,601) – up 13% y-o-y, after adjusting for currency (+1%).
• Operating income: MSEK 388 (296), generating an operating margin of 21.3% (18.5).
• Earnings after tax: MSEK 290 (221); basic EPS of SEK 7.36 (5.48).
• Strong cash flow generated from operating activities: MSEK 418 (228) driven by management of working capital.

OUTLOOK 2018

The underlying business is performing well and we reiterate our prior guidance, that the EBIT-margin before one-off profits during the fourth quarter, is expected to be 22% for the full year 2018.

President and CEO, David Woolley, comments on Q3 2018 interim report.

Sales development
Group sales for the third quarter were up year-on-year by 12% in constant currency and 13% for the first nine months, ahead of the published market indices. The increased activity levels in the first nine months reflects strong demand across our core regions of North America and Europe. With regard to the emerging markets where Concentric is present, India and South America also experienced strong year-on-year growth whilst China saw continued strong growth in industrial applications and negative growth in the agricultural machinery and truck markets. The largest year-on-year improvements for the third quarter were achieved in the medium and heavy duty truck markets, and we also saw steady growth in the construction equipment and agricultural machinery sectors.

Addressing increased demand through Concentric Business Excellence

The culture within Concentric to achieve continuous improvement is firmly embedded. The key drivers are to achieve absolute satisfaction among our customers and employees. The Concentric Business Excellence programme (“CBE”) has enabled the teams to efficiently increase our capacity and output across the globe to meet the growing demand.

The CBE-programme has continued to improve the group’s profitability and the reported operating margin for the third quarter and first nine months increased to 22.9% (18.7) and 21.3% (18.5) respectively. The year-on-year operating income drop through was a healthy 41% for the first nine months.

Acquisition Opportunities

We are actively investigating potential acquisitions that will offer either geographical expansion, product expansion into the growing electrification market or enabling technologies that will enhance our current engine and hydraulic product lines to provide us with an even greater presence alongside our global customers.

Technology

Concentric exhibited its extensive range of pumps at this year's IAA exhibition in Hanover and new product developments on show from Concentric included:

•  Electric auxiliary oil and water cooling pumps for use on hybrid and electric vehicles
•  Electric main engine cooling pumps
•  Electronically controllable variable displacement gear pump for medium and heavy-duty engines
•  Two speed planetary coolant pump, building on the successful heavy-duty 2-speed cooling pump

These exciting new products reinforce the company’s reputation for reducing fuel consumption, increasing system efficiency and reducing noise.

Outlook

The overall market has grown y-o-y in the first nine months by 8% and current published market indices, blended to Concentric’s mix of end market applications and geography, suggest the full year growth rate will weaken slightly during the remainder of 2018. The reason for this is mainly due to the medium- and heavy duty truck markets in North America and Europe. There is also a general weaker outlook for the Indian market.

As previously communicated, we will see one-off profits during the fourth quarter of 2018 due to end of contract pricing on specific engine platforms associated with a global OEM's ambition to have dual supply contracts for all its sourced products. The underlying business is performing well and we reiterate our prior guidance, that the EBIT-margin before these one-offs is expected to be 22% for the full year 2018.

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 30 October, 2018.