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October 25, 2001 | Interim Report
Haldex Group January-June 2001

Haldex Group January-June 2001 Further downturn on vehicle markets affect volumes and results Summary Jan- Jan- Sept Sept MSEK 2001 2000 Change Net sales 4,756 4,680 +1.5% Operating profit before 371 489 -24% depr. (EBITDA) Operating profit (EBIT) 160 305 -53% Income before tax (EBT) 110 253 -63% The group's net sales increased by 1.5%. Currency adjusted, however, net sales decreased by 9%. Vehicle production on the main markets continued downwards also during the 3rd quarter. The group's net sales (currency adjusted) declined during the 3rd quarter by 11%. The market shares have been maintained or improved in most product areas. In the half year report, a weak result was forecasted for the 3rd quarter. The actual outcome was weaker than expected, mainly due to lower sales. Cost reductions are ongoing. From last year's peak level, the number of employees has been reduced by 7%, varying from 0-25% between different units. Recent world events have resulted in a downward adjustment of the future economic development. New forecasts delay the recovery of the North American vehicle industry to the 2nd half of 2002. The forecasts for the European vehicle industry show a further decline for next year. Considering the further weakened vehicle market, especially in North America, the previous forecast must be adjusted downwards: Thus, there is a risk that the group's invoicing and result for the 2nd half year of 2001 will be considerably lower than during the 1st half. During 2002, sales and profits are expected to improve. Key business events AWD system Volvo and Ford/USA choose Haldex AWD system. Order value about 1 BSEK each over a 5-year period. Delivery start 2001/02 and 2003/04 respectively. Brake systems Freightliner decided to introduce Haldex long stroke brake chambers as standard. Yearly order value around 50 MSEK. Haldex automatic brake adjusters were introduced as standard at yet another North American truck manufacturer. Yearly order value about 30 MSEK. In an agreement with STRANA, Haldex became official and exclusive supplier of brake systems (disc brakes and other products) to the American truck racing over the next 3 years. Haldex and Altra Technologies established a cooperation regarding development and marketing of anti-collision systems for commercial vehicles. Haldex acquired a minority ownership in Altra Technologies. cont. Haldex January-September 2001 2. In a preliminary agreement, Haldex acquired (October 2001) PAGG srl, the Italian agent for Haldex brake products. Hereby, Haldex has established its own sales organization for the Italian vehicle industry. Hydraulic systems Haldex acquired all patents and assets in the Canadian development company Micro Hydraulics Inc. The acquisition puts Haldex in the forefront of electronically controlled hydraulic systems which, in the long view, offers considerable new business opportunities at present customers. Haldex newly developed hydraulic drive system for cooling fans was chosen by a leading European forklift manufacturer. Yearly order value around 50 MSEK. Engine components Haldex received two important US orders for valve spring wire products for engines within GM and Toyota. Yearly order value around 50 MSEK. Market development During the 9 months period the vehicle business climate turned sharply downwards on the main markets in North America and Western Europe. In the 3rd quarter, the vehicle production declined further, due to continued receding sales. Inventories of new vehicles are still considered too high. Heavy vehicles - North America From mid 2000, the sales of heavy vehicles in North America have declined by some 45%, from a yearly rate of 295,000 units in the first half of 2000 to a yearly rate of 160,000 in the 3rd quarter 2001. The 3rd quarter's sales rate was some 11% lower compared to the first half of the year. In order to reduce the large inventories of new and second-hand vehicles, production has since the middle of last year been lower than sales. Thus, the production has decreased by some 60%, from a yearly rate of 315,000 units in the first half of 2000 to a yearly rate of 130,000 in the 3rd quarter 0f 2001. The 3rd quarter's production rate was some 15% lower compared to the first half of the year. Hereby the inventories of new vehicles have decreased by around 55% since mid 2000, from 62,000 units in June 2000 to 28,000 units in September 2001. Current inventory level represents slightly more than 2 months sales, a relatively normal level. Recent world events have resulted in a weaker future development than earlier expected as regards sales of heavy vehicles. In the latest forecast (J.D. Power) from October 2001, sales are expected to continue to fall for the next two quarters, and bottom out in the 1st quarter 2002 at a yearly rate of 150,000 units, a decrease of some 6% compared to this year's 3rd quarter. The forecast also indicates an expectation of further decreased inventory levels of new vehicles. Thus, the production of heavy vehicles is estimated to decline somewhat further in the 4th quarter, to give room for a certain production increase only in the 1st quarter of 2002 (previous forecast predicted a production low in the 3rd quarter of 2001). cont. Haldex January-September 2001 3. For the total year 2002, the recovery of vehicle production is therefore adjusted downwards, from 20% in previous forecast to 4% in the latest forecast. Heavy vehicles - Western Europe From the peak year 2000, sales and production of heavy vehicles in Western Europe have so far declined some 6% and 8% respectively. The 4th quarter is expected to be around 15% lower than last year and for the total year, the production of heavy vehicles in Western Europe is likely to be more than 10% lower than last year. The forecasts for next year point to a further decrease of some 10%. Light vehicles - North America During the later part of last year, the inventories of new vehicles were built up to too high levels. Receding sales in the current year forced a heavy decline of production in order to reduce inventories. During the 9 months period, car sales dropped by 6% compared to the same period last year. In the same period, production of light vehicles decreased by 13%. This has reduced the inventories of new cars from 83 days sales to 58 days. The forecasted sales and production for next year indicate same levels as in current year. Light vehicles - Western Europe During the 9 months period, sales dropped 0.5% while production rose by 2%, owing to exports. For the total year, the market is expected to decline, and sales and production to decrease by 1.5% and 1% respectively. The forecasts for the next year point to a decline of 1-2%. Industrial vehicles - North America The North American market for industrial vehicles began to drop already last year. In current year, the market for construction vehicles has decreased by 10%. The last months' data indicate that the turndown might have bottomed out. The market for forklifts declined sharply during the 9 months period, a development that started during the later part of last year. The volumes in this segment has in the current year declined by some 25%. Also here, the last months' market data indicate that the downturn might have bottomed out. A third segment, which is important for Haldex hydraulics business, is mobile work platforms (aerial lifts). This segment has in the 2nd and 3rd quarter of this year shown a sharp decline of more than 35%. Five of eight manufacturers have nearly gone out of business. Industrial vehicles - Western Europe From the peak year 2000, the market for industrial vehicles in Europe has declined by some 8%. The forecasts indicate a further decrease by 8% next year. cont. Haldex January-September 2001 4. The European market for forklift trucks has continued to grow, especially in the electric warehouse truck segment. In current year, the increase has been some 10%. A third segment, which is of importance for Haldex hydraulics business, is distribution vehicles equipped with tailgate lifts. New production of such vehicles has in current year decreased substantially - in the magnitude of 10% - due to rental companies' build-up of large fleets, which now show lower utilization due to reduced transport activities. Sales Development As stated in the section above regarding market development, the business conditions were dramatically worsened during the period compared to the same period last year. In a sharply decreased vehicle market, market shares were, however, maintained or increased in most product areas. The orders stated in the section "key business events" represent, at full yearly effect (which is a few years off), an increased yearly business volume - everything else equal - of more than 600 MSEK, or 10%. The significant depreciation of the Swedish Krona against US dollar and Euro makes the development in nominal terms sometimes misguiding. Both sales and costs developments are "overstated" expressed in SEK. As regards sales, even a sign change takes place: nominal sales increase somewhat, but the currency adjusted sales show a considerable decline in volume. The group's order intake amounted to 4,690 MSEK (4,758), a decrease of 1,5%. Currency adjusted, the order intake decreased by 12%, hereof 18% in North America and 4% in Europe and rest of the world. The group's net sales amounted to 4,756 MSEK (4,680), an increase by 1.5%. Currency adjusted, net sales decreased by 9%. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/25/20011025BIT01190/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/25/20011025BIT01190/bit0001.pdf The full report