Haldex Interim Report, April - June 2020
Sharply reduced sales, signs of recovery in aftermarket
Second quarter 2020
- Sales fell by 37% and totalled SEK 875m (1,389). Currency-adjusted sales fell by 37%. The decline is mainly explained by covid-19 and its effect on production of trucks and trailers. The aftermarket was also affected, but as road transport returned in June and we are already seeing some recovery.
- Adjusted operating income totalled SEK -3m (91), equivalent to an adjusted operating margin of -0.3% (6.5). Costs decreased by SEK 49 million, of which long term structural savings programs contributed SEK 5 million during the second quarter. The savings programs totalling approximately SEK 200 million in annual savings will have full effect during the first half of 2021.
- Adjusted operating margin excluding investments in new technology was 0.8% (7.4).
- Reported operating income was SEK -151m (73). Non-recurring items of SEK 148m were charged to the quarter's earnings, of which SEK 101m are related to write downs. For the quarter non-recurring items had a cashflow effect of SEK 8m.
- Earnings per share was SEK -2.95 (1.11).
- Operating cash flow totalled SEK -96m (97).
- A directed new share issue provided the company with SEK 157m before transaction expenses.
- The Annual General Meeting appointed four new Board members; Stefan Charette was elected as the new Chairman.
Comment from Helene Svahn, President & CEO:
The effects of the covid-19 pandemic are severely denting market demand. New production of heavy trucks and trailers fell sharply in the second quarter, while the aftermarket showed some resilience. New production in our two largest markets, North America and Europe, were more or less closed during the quarter which led to a very weak quarter where total net sales fell by -37%, In terms of OEM sales of trucks decreased by 58% and trailers decreased by 39%. We were hoping the aftermarket to show more resilience, but the uncertainty of markets made customers postpone planned maintenance and service measures. The aftermarket fell by 23% in the quarter, but volumes recovered somewhat at the end of the quarter and sales were better in June.
Reduced demand led us to take powerful and necessary restructuring and savings measures in all regions. Among other things, we introduced a general savings programme that reduced cost by approximately SEK 37m. The savings mainly consist of reduced travel and consultancy costs, the introduction of short-time working from 1 April 2020 and withheld bonuses. In addition, we received SEK 10 million in government subsidies during the quarter.
Despite the savings made, the weak sales led to a negative adjusted operating income of SEK -3m. During the quarter, we decided to write down assets by SEK 101 million. The main part of the write-down relates to investment in an IT platform. After an impairment test, we also decided to write down the remaining intangible assets regarding ModulT. The writedown is mainly attributable to covid-19 effects, expectation of lower volumes and that we have noticed customers being more careful when it comes to choosing new suppliers and new technology. We continue our dialogue with a Chinese partner and consider our future potential on the Asian market to be attractive.
Plan for long-term value creation
Work on developing Haldex’s long-term strategy is in progress alongside management of the covid-19 situation. The principle underpinning the strategic effort is that we should safeguard our technological edge and on that basis defend and develop our position as a leading global niche player in the market for brake systems in heavy vehicles. In purely practical terms, this means that the business must be specialised and concentrated, and in particular more streamlined. Our structural savings programmes have taken us part of the way, and our efforts to achieve savings are continuing with a focus on simplifying the value chain and reducing direct material costs. We must also increase our focus on profitability in sales activities and commit to products and services with a higher margin. We see great potential to develop our offering to the aftermarket where we have a strong position and high profitability. The target of an adjusted operating margin excluding investments in new technology of 10% remains in place, but is dependent on when the market will recover from the effects of covid-19.
Altogether we have initiated strong measures expected to yield annual savings of around SEK 200m. The structural work to streamline and reduce our production footprint is proceeding according to plan. The closure of the production facilities in Heidelberg and Blue Springs as well as the Friction Centers in US are expected to be completed during the fourth quarter. During the quarter, we also implemented a staff reduction program, which currently includes 65 employees globally.
Sales, customers and partnerships
During the quarter, we landed two larger customer contracts. Sales efforts and technological development go hand in hand, and we are focusing on attractive markets and product niches such as EBS gen4 and Scalable Brake System. Our position as a global niche player with open system solutions and future partnerships is attracting new and existing customers and we are engaged in several interesting dialogues with potential customers in Europe, the United States and China.
Several customers are testing our Scalable Brake System, and the system is running in test buses in China for the Chinese electric bus market. The tests are continuing but negotiations are still on hold due to uncertainty of covid-19 and market recovery. We follow the development of our customers' strategic priorities and have noted increased focus on the development of electric vehicles.
New share issue and financing in place
To bolster the company’s financial position, a directed new share issue was made, providing SEK 157m in equity, which in turn made it possible to extend existing loans to April 2022.
New Chairman and CFO take over
The Annual General Meeting appointed a new Chairman and three new Board members. The new Board members provided valuable industrial and sector-specific expertise, and I look forward to their contributions to Haldex’s continued development.
In conclusion, I would like to thank all the employees who, despite these exceptional times, have shown great loyalty and commitment. I would also like to extend a welcome to Haldex to our new CFO, Lottie Saks.
President & CEO
Press and analyst conference
Journalists and analysts are invited to a teleconference at which the report will be presented with comments by Helene Svahn, President and CEO, and Lottie Saks, CFO. The teleconference will also be webcast, and you can take part and ask questions by phone.
Date & Time: Thursday, July 16 at 11:00 am CEST
The press conference is broadcasted at:
To join the telephone conference:
SE: +46 8 50 55 83 65
UK: +44 33 33 00 92 61
US: +1 83 38 23 05 90
The webcast will also be available afterwards and you can download the Interim report and the presentation from Haldex website.
For further information, visit https://www.haldex.com/en/corporate/investors or contact:
Helene Svahn, President & CEO
Phone: +46 418-476000
Lottie Saks, CFO
Phone: +46 418-476000
With more than 100 years of intensely focused innovation, Haldex holds unrivaled expertise in brake systems and air suspension systems for heavy trucks, trailers and buses. We live and breathe our business delivering robust, technically superior solutions born from deep insight into our customers’ reality. By concentrating on our core competencies and following our strengths and passions, we combine both the operating speed and flexibility required by the market. Collaborative innovation is not only the essence of our products – it is also our philosophy. Our 2,200 employees, spread on four continents, are constantly challenging the conventional and strive to ensure that the products we deliver create unique value for our customers and all end-users. We are listed on the Nasdaq Stockholm Stock Exchange and have net sales of ap proximately 5 billion SEK.
This information is information that Haldex AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on Thursday, July 16, 2020 at 7:20 CEST.
The interim report is essentially a translation of Swedish language original thereof. In the event of any discrepancies between this translation and the original Swedish document the latter shall be deemed correct.