HALDEX INTERIM REPORT JANUARY-MARCH 2021

Sharp increase in profitability in the first quarter

FIRST QUARTER 2021

• Sales fell by 8 percent to SEK 1,080m (1,180). The organic growth increased by 1 percent.
• Gross margin improved by 4.6 percentage points to 31.1 percent (26.5).
• Adjusted operating profit increased to SEK 115m (43), equivalent to an adjusted operating margin of 10.6 percent (3.6).
• Adjusted operating margin, excluding investments in new technology, was 11.5 percent (4.4).
• Reported operating income totaled SEK 142m (30). Non-recurring effects of net SEK +27m, including a profit of SEK 43m on the sale of the property in Kansas City in the United States, had an impact on profit.
• Changes in exchange rates had a negative impact on operating income of SEK -17m (+13).
• Profit after tax was SEK 95m (3). Tax totaled SEK -32m (-1).
• Earnings per share were SEK 1.94 (0.04).
• Cash flow from operating activities totaled SEK -30m (-43).
• The savings programs developed according to plan and reduced expenses by SEK 88m, whereof the structural savings amounted to SEK 57m.
• The Board of Directors has appointed Jean-Luc Desire as the new CEO. The new CEO will take up his duties by July 1, 2021, at the latest.
• The supply chain is strained due to increased raw material costs and component shortages.

EVENTS AFTER THE QUARTER

• The Board of Directors has decided to update the financial targets and dividend policy.
• A joint venture has been formed with FAST Group to produce and sell Air Disc Brakes and aftermarket service with initial focus on the Chinese market.

Comment from Helene Svahn, President & CEO:

The first quarter continued to be affected by the ongoing COVID-19 pandemic However, continuing recovery was recorded in most of our segments and markets. Haldex reported stable sales, and our cost savings programs have delivered according to plan, contributing to a sharp increase in the operating margin in line with our long-term target. Haldex significantly strengthens its presence in China by a strategic partnership in April with market leading FAST Group regarding Air Disc Brakes.

CONTINUED RECOVERY IN THE FIRST QUARTER

Net sales are back to pre-pandemic levels and totaled SEK 1,080m (1,180) in the first quarter, equivalent to an organic growth of 1 percent compared to the same period previous year. The 13 percent depreciation of the US dollar had a negative impact, as North America accounts for about 40 percent of Haldex’s sales.

The trend across our regions was mixed. Net sales for Region America amounted to SEK 538m (652) corresponding to a negative organic growth of 4 percent. The region showed a pleasing recovery from the previous quarter. Sales to the truck segment remained challenging but improved toward the end of the quarter. Region Europe noted a strong recovery in all segments and net sales amounted to SEK 430m (417) corresponding to an organic growth of 8 percent compared to same period previous year. Net sales in Region Asia amounted to SEK 112m (111), also corresponding to a growth of 8 percent.

Net sales to the truck segment amounted to SEK 185m (224) in the quarter corresponding to an organic negative growth of 5 percent compared to the same period previous year. This is primarily because we lost a major customer in North America in early 2020 and because of continued strained supply chains. On the other hand, our increased focus on the trailer segment paid off and sales amounted to SEK 348m (352), an organic growth of 6 percent compared to last year. Aftermarket sales amounted to SEK 547m (604), an organic increase by 1 percent.

Sales in the Foundation Brake product line amounted to SEK 588m (662) corresponding to a negative organic growth of 2 percent, and sales in the Air Controls product line was SEK 492m (518), an organic growth of 5 percent.

SHARP RISE IN PROFITABILITY

Adjusted operating profit totaled SEK 115m (43), and the equivalent margin increased to 10.6 percent (3.6). This is the highest margin since 2011 and is in line with our long-term target of 10 percent. The increase is due to an improved gross margin and a significantly lower share of operating expenses due to our extensive savings programs. Operating expenses decreased by SEK 88m during the quarter, of which the structural savings accounted for SEK 57m. Cash flow also improved compared to the same period in the previous year, mainly due to the strong result. 

UPDATED FINANCIAL TARGETS

The Board of Directors of Haldex has decided to update the financial targets and dividend policy. Over the past year, the management and the Board have been working on a strategic review of the business and a more powerful action program aimed at boosting profitability. These efforts have resulted in both cost savings programs and product development that is more focused on electrification. Work on the strategic review is continuing, and we intend to provide an update during the second half of 2021 instead of in the second quarter that was previously communicated, due to the change of CEO. The updated financial targets are presented on page 11.

PRODUCT AND OFFERING

The development of our proposition focusing on the trailer segment and aftermarket continues. As well as growing our position as an Air Disc Brake supplier of specific applications addressing both trucks and bus OEMs. Investments are focused on niches where Haldex has clear competitive advantages and where our flexibility, close customer relationships and open architecture in innovative brake solutions make a difference. To strengthen our presence in the more profitable aftermarket, we may make acquisitions in this segment.

Our key focus on electrification and our EMB product is proving successful, and there was increasing interest from key OEMs in both Europe and the United States during the quarter. The progress of EMB, which is also being evaluated by two European-based global truck manufacturers and several bus manufacturers in China, shows that we have an attractive and well-positioned product offering.

SALES, CUSTOMERS AND PARTNERSHIPS

Overall, I am satisfied with the trend in the first quarter. The recovery continued, operating income improved significantly, and we achieved our highest operating margin since 2011. It was also pleasing to see that our focus on the trailer market led to strong sales in Europe. We are purposefully working toward entering into further partnerships that can contribute to increased volumes and improved profitability.

I am delighted to be able to report that we have reached an important milestone in taking a stronger position regarding Air Disc Brakes in China. In mid-April we announced the agreement to form a joint venture company with FAST Group, the market leader in China in, for example, transmissions and gearboxes for heavy vehicles. The objective of the new JV is to launch a complete range of Haldex ModulT Air Disc Brakes for trucks and buses, using Haldex's innovation, IP and technology to leverage FAST Group's strong market position in China. The agreement was formed after a period of close dialogue and collaboration, including extensive testing and multiple market feasibility studies. The parties have excellent strategic and industrial fit and joint strong ambitions. With market leading FAST Group, we will address an attractive emerging market with large potential expected to grow significantly in the coming years due to regulatory requirements driving increased vehicle safety.

HANDOVER TO JEAN-LUC DESIRE

At the beginning of July, I will be handing over the role of CEO to Jean-Luc Desire. The Haldex I joined as a Board member and later became CEO of in 2019 was a company with major challenges ahead. The entire industry was also put under tremendous pressure by the global pandemic. I have focused on reducing Haldex's cost base, streamlining the organization, in parallel with driving the development of new products to secure Haldex's position in the future. We are now beginning to see solid results from these efforts, which I am happy and proud of. It is with warm regards that I hand over the reins to my successor Jean-Luc.

OUTLOOK

Although the first quarter noted a continued recovery and increased optimism, considerable uncertainties remain. Like the rest of the market, we are struggling with strained supply chains and rising commodity prices, mainly for iron and steel, which will put pressure on margins going forward. We are actively working to mitigate the impact of the rising commodity prices, which includes negotiating with our suppliers. We also have a continued focus on cost optimization and flexibility and are therefore confident that Haldex will have a good development in 2021.

Helene Svahn

President and CEO

For further information, visit https://haldex.com/sv/corporate/investerare/ or contact:

Helene Svahn, President & CEO. Telephone: +46 (0) 418-47 60 00
Lottie Saks, CFO and IR. Telephone: +46 (0)418-47 60 00

This information is such that Haldex AB (publ) is obliged to publish under the EU Market Abuse Regulation. The information was submitted for publication through contacts on Thursday, April 22, 2021 at 07:20 am. 

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 and time: Thursday, April 22, 11:00 am

Link to event for telephone number and link to webcast: https://financialhearings.com/event/13299

The webcast will remain available afterwards, and both the interim report and the presentation can be downloaded from the Haldex website: http://www.haldex.com/sv/corporate/investerare/finansiella-rapporter/

Haldex AB, Corporate Identity No. 556010-1155, info@haldex.com, www.haldex.com

Over 100 years of powerful innovation gives Haldex unsurpassed expertise when it comes to braking systems and air suspension systems for heavy trucks, trailers and buses. We live and breathe our business with the goal to deliver robust and technically superior solutions which is founded in a deep insight in our customer’s reality. Through focusing on our core competences and the passion we all share, we achieve the agility and flexibility that the market demands. Innovative collaborations aren’t only the core of our products, but our philosophy. Our 2000 employees, spread out across four continents, challenge the conventional on a daily basis in order to secure that the products we deliver create a unique value to our customers and the end users. We are listed on Nasdaq Stockholm and have a turnover of approx. 4 billion SEK.