Interim report January-March 2020

In the interim report for January to March, VBG Group reports a stable quarter despite growing concern globally.

• Consolidated sales decreased by 3.2% to SEK 957.5 M (989.6).

• Operating profit declined to SEK 116.0 M (135.5).

• Operating margin decreased to 12.1% (13.7).

• Profit after financial items declined to SEK 113.5 M (121.7).

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

VBG Group reports a stable first quarter as regards sales. The operating margin was stable for all divisions except Mobile Climate Control, where we are seeing continued pressure on the operating margin. We note that the growth rate has slowed in relation to 2019.
The COVID-19 outbreak, which started in China, meant that we were compelled to shut down our operations there temporarily during the first quarter, but since that part of our operations is relatively small the early outbreak did not impact earnings in general for the first quarter. Operations in China are now up and running again.
In late March, the coronavirus pandemic struck Europe and large parts of the world in earnest. Many countries and industries took drastic measures, which led to disruptions in their value chains and to many industries coming to a standstill. The end of the first quarter for VBG Group was dominated by monitoring and planning for the second quarter in order to adapt operations to the new conditions. I feel we have done an solid job on preparing our operations and on being proactive in this uncertain situation. We have various measures in place in different countries, including temporary furloughs in Sweden, and we are currently monitoring the market and our customers’ developments on a daily basis.

Truck & Trailer Equipment

In summing up the first quarter, we can state that market performance for Truck & Trailer Equipment was positive. The trailer business has reached slightly higher levels again, and the division reported strong sales of trailer hitches in such markets as Australia and New Zealand. The first quarter of the year, however, was lower than the first quarter of our record-breaking 2019. During the quarter, the Board of Directors decided to reorganize and form a new division: Truck & Trailer Equipment, a merger of Edscha Trailer Systems and VBG Truck Equipment. This is a logical step, considering the deal we made in 2019 with BPW drawbars. Through the acquisition of BPW, I see the division coming together since it works with truck-related products. By combining Edscha Trailer Systems and VBG Truck Equipment, I envision a better balance in the Group with three divisions equally balanced in size.
Moreover, I envision even greater benefit for Edscha Trailer Systems through shared resources in sales, marketing, R&D and know-how in sourcing and production.
 For the Group as a whole, this is a good step. Body builders had strong order bookings in the first quarter, but we believe this will rapidly come to a halt during the second quarter.
At the end of the first quarter, European truck manufacturers took drastic measures as a consequence of the coronavirus pandemic, shutting down operations when they noticed that parts of the value chain weren’t working. This stop resulted in serious consequences for Truck & Trailer Equipment, of course, and we have accordingly introduced temporary furloughs as of the first week in April and reviewed the entire value chain. There is a great deal of uncertainty around market developments ahead of the second quarter.

Mobile Climate Control

During the first quarter, sales (as expressed in Swedish kronor) for Mobile Climate Control were high, nearly on par with the previous year. The Swedish krona weakened against the US dollar, which resulted in a favorable dollar effect. The operating margins for Mobile Climate Control remained somewhat lower than desired, however, but on a positive note raw materials prices are decreasing, and aluminum and copper prices are falling, which has a positive impact on profitability.
 We noted that Mobile Climate Control’s sales in Europe began to slow down in the past quarter. We also saw that the effects of the coronavirus came to North America slightly later. The division’s operations in the USA have been granted an exemption as a critical operation by the authorities, and thus continued operations unimpeded from January to March despite the coronavirus pandemic.
Going forward, however, it is a question of making the entire value chain work and of our customers continuing to buy our products. At the end of March, we saw sections of the industry begin to shut down, adapting their production to the new conditions. So the effects of the coronavirus pandemic will also be tangible for Mobile Climate Control during the second quarter. We promptly implemented temporary measures, such as a two- week shutdown of the plant in Toronto around the Easter holiday, to adapt our production to lower demand.

Ringfeder Power Transmission

Ringfeder Power Transmission reported better order bookings in the first quarter of 2020 than in the year-earlier period, and also reported stable sales during the quarter, with strong sales in the US, Brazil and Australia. The industrial segment in which Ringfeder Power Transmission operates is not related to vehicles. The division has a broad customer base in many different industries, and accordingly, we did not see the same impact of the coronavirus as we did in our vehicular divisions. We believe, however, that Ringfeder Power Transmission will also be impacted by the coronavirus pandemic to a greater extent in the second quarter, and we have contingency plans for temporary furloughs and other measures if changes occur.
 

The future

In summary, I can state that the first quarter of the year remained stable. The trends for the coming quarter are extremely difficult to foresee. It depends entirely on the continued development of the pandemic, and on the measures taken by governments and the authorities around the world. Under the prevailing circumstances, we are working proactively, continually adapting and adjusting our operations. We are also reviewing what support we can obtain from government authorities in various countries. On a more positive note, we have a number of strong years behind us. We have a strong financial position, healthy liquidity, and thus solid conditions for managing major changes in the business cycle and in demand. In light of the uncertainty resulting from the coronavirus pandemic, the Board of Directors feels that— for reasons of prudence—they are justified in proposing that the 2020 Annual General Meeting resolve not to pay any dividend for the 2019 fiscal year.

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.

 This information is of the type that VBG Group AB is obligated to disclose in accordance with the EU Market Abuse regulation. The information was submitted for publication, through the agency of the contact person set out above, at 3:30 pm on April 28 2020 (in Swedish).