Interim report January–September 2019

Third quarter of 2019:

• Consolidated sales increased by 3.9% to SEK 909.1 M (874.8).
• Operating profit rose to SEK 109.4 M (107.3), with a margin of 12.0% (12.3).
• Profit after financial items amounted to SEK 103.9 M (100.9), with a profit margin of 11.2% (11.5).
• The Group’s profit after tax amounted to SEK 73.7 M (71.2).
• Earnings per share amounted to SEK 2.95 (2.85).
• Restating in accordance with IFRS 16 had a positive impact on operating profit of SEK 0.7 M.

Nine months 2019:

• Consolidated sales increased by 9.7% to SEK 2,878.1 M (2,623.7).
• Operating profit rose to SEK 368.2 M (329.7), with a margin of 12.8% (12.6).
• Profit after financial items amounted to SEK 335.2 M (292.0), with a profit margin of 11.6% (11.1).
• The Group’s profit after tax totaled SEK 245.9 M (212.5).
• Earnings per share amounted to SEK 9.83 (8.50).
• Restating in accordance with IFRS 16 had a positive impact on operating profit of SEK 1.9 M.

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

VBG Group delivers a strong third quarter

VBG Group’s core markets remained strong in the third quarter, and Group sales increased by 4% over the preceding year, to just over SEK 900 million. At the same time, the Group reported continued stability in the operating margin for the quarter, at 12%.

The strength of VBG Group lies in its portfolio strategy and its diversified business structure: we work in carefully selected niches, which creates an equalising and dampening effect against economic fluctuations in our markets. This means we can deliver at healthy, stable levels over time as regards both sales and earnings.

Continued growth for deliveries to commercial vehicles during the quarter

Sales to the commercial vehicle market – which covers VBG Truck Equipment, Mobile Climate Control and Edscha Trailer Systems – in the third quarter totaled just under SEK 800 million, corresponding to 86% of the Group’s total sales. Compared with the preceding year, sales for commercial vehicles increased just over 5% in the quarter; we noted a downturn in Europe that was, however, compensated for with upturns in the North American market and the rest of the world. Looking at the climate control system market, Mobile Climate Control reported favourable levels of sales and stable profitability in the quarter and also reported continued growth, if not as robust as we have seen previously. The important US market remained strong, and there are no definite indications of any major changes to the economy.

The trade war currently under way between the US and China impacts the operations of Mobile Climate Control to some extent, since certain products are manufactured in China and then sold in the US. Mobile Climate Control has good possibilities for managing this, which means it does not represent any major problems for the division, nor will it lead to any crucial changes for VBG Group. In the third quarter, VBG Truck Equipment once again showed signs of strength in its operations and business model. The division achieved both growth and excellent profitability in the quarter. In the European market, which is VBG Truck Equipment’s core market, we are seeing the rate of growth slow down somewhat but the situation remains stable with healthy order books through the end of the year.

The volatility and slowdown we saw in the trailer industry in the second quarter continued into the third quarter as well. It had a noticeable impact on our smallest division, Edscha Trailer Systems, but had little impact on the Group as a whole since the division’s sales constitute less than 5% of the Group’s total sales. A decrease in the underlying need for transportation as a result of a weaker economy in combination with too much stock of new and used trailers meant that trailer manufacturers reduced their production drastically in the third quarter.

Ringfeder Power Transmission – continued stable profitability

Ringfeder Power Transmission, which has a strong position globally in its market niches, represented 14% of the Group’s sales. The division is experiencing a trend of steadily decreasing demand for capital goods, primarily in the US and Germany, where order bookings for the machine industry continued to decline. This trend was partially compensated for by upturns in Australia and Brazil. Despite a generally weaker market, Ringfeder Power Transmission reported continued stability in its profitability.

VBG Group – well placed for structural growth at the right time
Since the former Division Manager of Mobile Climate Control left the Group on September 1 for a job in the Investor sphere of companies, I have now taken on the job of Division Manager for Mobile Climate Control in addition to my role as President and CEO. The division has a well-functioning management team and its business situation is stable. This permits me to regard the immediate future with confidence, and I look forward to working on strengthening the division further.

On the whole, the Group reported a stable performance and excellent results this quarter. In pace with a more uncertain economy, it is a source of comfort that today we have a lower business and market risk in the Group as a result of the structure and breadth we have as regards the market, our products and our customers. With our renewed bank agreement, we also have flexibility in our ability to manage both our capital structure and financial risks while at the same time being prepared to carry out acquisitions at the right time, under the right conditions.

Contact
Anders Birgersson, President & CEO
Telephone: +46 521-27 77 67, +46 702-27 77 78
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 four divisions – VBG Truck Equipment, Edscha Trailer Systems, 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.

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