Interim report January - September 2022

Increased sales in the third quarter.
 

Third quarter 2022

• Consolidated sales increased by 28.7% to SEK 1,091.6 M (848.3).
• Adjusted for exchange rate changes and acquired volume between the years, organic growth was 14.1%.
• Mobile Climate Control incurred costs of SEK 12.6 M in conjunction with relocating the US production facility.
• Operating profit (EBITA) amounted to SEK 111.7 M (117.6).
• The operating margin (EBITA) was 10.2% (13.9).
• Profit after financial items amounted to SEK 101.4 M (107.4).
• Earnings per share amounted to SEK 2.51 (3.29).

Nine months 2022

• Consolidated sales increased by 26.7% to SEK 3,388.5 M (2,675.2).
• Adjusted for exchange rate changes between the years, actual organic volume growth was 14.0%.
• Net profit from the sale of Mobile Climate Control’s property (SEK 18.8 M) and costs pertaining to the relocation (SEK 24.4 M) had a negative impact on operating profit (EBITA) of SEK 5.6 M.
• Operating profit (EBITA) increased to SEK 422.8 M (404.7).
• The operating margin (EBITA) was 12.5% (15.1).
• Profit after financial items increased to SEK 382.2 M (369.8).
• Earnings per share amounted to SEK 11.10 (11.16).

Comment from VBG Group´s President & CEO, Anders Birgersson

In the third quarter of 2022, VBG Group’s quarterly sales increased to SEK 1,091 M with EBITA of SEK 112 M. The high sales was attributable to high levels of demand for the Group’s products in combination with favorable currency effects and price increases for our sales.

The global instability that marked the beginning of 2022 continued during the third quarter. The Group’s supply chains were still affected by disruptions, unpredictability and a shortage of shipping capacity. The Group’s EBITA margin of 10.2% (13.9) remained under pressure as a result and was also impacted by increased inflation and continued price increases in the market.

Our divisions

Demand for the Group’s products was strong across all divisions during the third quarter. Inflation continued to rise more than expected, which means that we will continue to see a lag in our price increases. Raw materials prices stabilized during the third quarter, but increased energy costs – primarily in Europe – in combination with high inflation globally means that the margins in all divisions were pushed downward.

Mobile Climate Control’s bus operations reported a reduced operating margin, due in part to incoming price increases but also to costs for relocating the operations to Pennsylvania that the consolidation entailed. The relocation has now been completed, and at the end of the third quarter the bus operations had begun to catch up to the delays in delivery that the operations had been wrestling with since the pandemic. Our off-road business once again had a strong quarter, with robust profitability.

Sales for Ringfeder Power Transmission remained strong during the quarter, even though earnings for the division were weighed down by decreased sales in the US combined with an unfavorable product mix.

After a long period of restrictions, Truck & Trailer Equipment could once again hold physical meetings with customers and took part in both the Elmia Truck Show in Sweden and IAA in Germany. Our customers were presented with new solutions that promote increased safety and sustainability. Increasing overhead and disruptions in the supply chain, both of which impacted production, had an adverse effect on the operating margin.

New sustainability targets

In addition to our long-term goals – growth and profitability – the Group now also has a third: sustainability.

The Board meeting in September adopted the Group’s new sustainability targets for the period from 2023 to 2030. These targets are designed to support the UN Sustainable Development Goals and guide the Group toward long-term sustainable development.

VBG Group will reduce greenhouse gases by 50% (Scope 1 and 2) between 2023 and 2030 (reference year 2022). Working toward increased circularity and better use of resources is something we want to make clear. By 2030, we will reduce our hazardous waste by 50%, and the total amount of waste by 25%. Apart from this, we are raising our ambitions concerning diversity and inclusiveness, as well as keeping our already ambitious goals concerning ethics and safety.

The new goals are an increase in the Group’s overall ambitions. In the third quarter, we implemented additional training initiatives in order to boost our employees’ competence in sustainability. These included initiating a partnership with University West to further expand our understanding of sustainability in industrial production – a prime example of how Swedish academia and industry can collaborate to achieve change.

Acquisitions

The Group furthered its efforts around acquisitions in the third quarter. In addition to re-working the acquisition process, the Group acquired the assets and liabilities of Tüschen und Zimmermann’s industrial brake business. The purchase price totaled EUR 1.3 M, and the business will be incorporated into the Ringfeder Power Transmission division.

Tüschen und Zimmermann manufactures unique braking systems that promote safer working conditions in the mining industry.

For VBG Group, this acquisition is a small one financially but an important one strategically. With this acquisition, the division gains access to products that are an excellent complement to its current product range, strengthens its customer offering, and offers synergy effects in production and sales.

The acquisition is well suited to our goal of growing as an industrial group, and the products are fully in line with our ambition of creating a safer society.

The future

In summing up the third quarter, I can state that inflation has been higher than we expected. All our divisions are working hard at implementing price increases and offsetting reduced gross margins and rising fixed costs.

One positive aspect of the future is that, at the end of the quarter, we saw a decrease in delays on deliveries and we could reduce the inefficiency we have experienced in our supply chains ever since the pandemic.

We are seeing a continued strong demand for our products. New orders increased by 34% in the first nine months of 2022 compared with the year-earlier period.

After the end of the reporting period, I announced that I was stepping down as President and CEO and going into retirement. I am incredibly proud of VBG Group’s performance during my 22 years with the Group. We now have a stable platform for continued sustainable and profitable growth. After the end of the year, I will be pleased to hand over control to my successor, Anders Erkén.

Contact
Anders Birgersson, President & CEO
Telephone: +46 521-27 77 67
E-mail: anders.birgersson@vbggroup.com

VBG Group AB (publ), domiciled in Vänersborg, is the Parent company of an international engineering Group with wholly owned companies in Europe, North America, Brazil, South Africa Australia, India and China. The Group’s operations are divided into three divisions – Truck & Trailer Equipment, Mobile Climate Control and Ringfeder Power Transmission – with products that are marketed under strong, well-known brands. VBG Group AB’s Series B share was introduced on the stock exchange in 1987 and is listed today on the Nasdaq Stockholm Mid Cap list.