First quarter 2020
- Sales fell by 12% and totalled SEK 1,180m (1,339). Currency-adjusted sales fell by 14%. However, the aftermarket has proven to be resilient and saw an increase of 2% compared to same period last year.
- Adjusted operating income totalled SEK 43m (97), equivalent to an adjusted operating margin of 3.6% (7.2).
- Adjusted operating margin excluding investments in new technology was 4.4% (7.5).
- Reported operating income was SEK 30m (97).
- Earnings per share was SEK 0.04 (1.54).
- Operating cash flow totalled SEK -43m (-84). Adjusted for the effect of IFRS 16, cash flow totalled SEK -64m in the first quarter.
- Antitrust complaint was filed with the European Commission against the largest shareholder, Knorr-Bremse.
- CFO Andreas Larsson resigned, the recruitment process is ongoing.
- The distribution centre in Weyersheim was temporarily closed for two weeks due to COVID-19 and is slowly reopening since 7 April.
- Furloughs were announced affecting 250 employees in Landskrona, Sweden.
- Negotiations with the trade unions in Germany regarding relocation of production from Heidelberg were finalised. Total cost for the relocation is estimated to EUR 14m, equivalent to approximately SEK 156m, which is in line with expectations.
Events after the quarter
- The full-year forecast for 2020 was withdrawn as a consequence of the effects of COVID-19 (page 11).
- Haldex has decided to postpone the Annual General Meeting until 23 June 2020 due to the uncertain situation related to COVID-19 effects.
- In response to the negative effect of COVID-19, Haldex has decided to implement a general cost savings initiative to protect profitability going forward.
- A new long-term structural savings programme will be implemented with estimated annual savings of SEK 100m.
- Haldex has extended the partnership with one of the leading European trailer manufacturers signing a 3-year contract for the supply of brake components.
Comment from Helene Svahn, President & CEO:
The COVID-19 pandemic has swept the world, engulfing region after region. Being a global company, we were first affected in February when China closed down Wuhan and restricted travel. We had to close our factory in Suzhou, but were able to re-open after just 12 days. Thanks to the great effort put in by the team on site, the negative impact was kept to a minimum. These COVID-19 measures did, however, impact demand, which declined significantly, primarily in February. China is however recovering quickly and market volumes rose by 10% in March and from our perspective, both sales and operations are almost at full speed.
In March, the virus hit Europe, where governments took unprecedented measures to lower the rate of spread of the virus. A majority of truck OEMs closed their factories, while most trailer OEMs continued operations, albeit at a slower pace. All our sales and production facilities were affected, and we saw a significant drop in sales in March as Europe closed down. To mitigate the situation, we closed our distribution centre in Weyersheim for 14 days, partly offsetting this with direct factory deliveries. Weyersheim was reopened on 7 April and is slowly ramping up operations. We also announced a furlough in Landskrona which affected almost all employees. The rate of new COVID-19 cases is declining in Europe, and governments across the continent are considering responsible reopening of society.
The situation in our largest market, North America, is similar to Europe, where new builds fell significantly in March due to lower demand. Transport is classified as an essential business sector, and there has been continuous demand for services and spare parts in the aftermarket. Haldex aftermarket sales in the region increased by 9%, which is attributed to our high service level and agile organisation, which has been able to cater to our customers’ needs.
COVID-19 has had a significant effect on operations, and with the exception of China we expect even weaker sales in the second quarter. Although we hope for a broader recovery in the second half of the year, we have withdrawn our forecast for the full year and have decided not to announce a new forecast until we have a better picture of the timing and speed of market recovery. In response to the negative effect of COVID-19, Haldex has decided to implement a general cost savings initiative to protect profitability going forward. This programme will affect all parts of the business, including for example personnel reductions, significantly reduced travel costs and other non-FTE related overhead costs. Haldex has also decided to reduce capital expenditures with approximately SEK 100m in 2020.
That said, I would like to stress the importance of focusing on what we can do. It is essential that we keep going. When the whole world economy is fragile, opportunities open up and it is very important to stay motivated and engaged. Having been founded in 1887, Haldex has overcome many crises, and adaptation to new market conditions and change is part of our DNA. It is therefore imperative that we do not stand still and wait for others to move. My sole goal is to make sure that we emerge from this crisis as a stronger company and that we continue to pursue our work within our four focal areas:
Continued reduction of cost base
We are committed to reaching an adjusted operating margin of 10% in 2022, and I am pleased to see that our cost saving initiatives are progressing according to plan.
To lower our cost base even further we have decided on a new long-term structural savings programme adding extra annual savings of SEK 100m. These measures will reduce the cost-base and number of employees. Adding the savings from our long-term structural plans, we expect annual savings of SEK 203m.
Going forward we will continue to identify structural measures that will further solidify our position, protect our profits and our staff, partners and investors for the longer term.
Increased economies of scale in production
We successfully concluded the negotiations with the unions at the Heidelberg production facility, with an outcome in line with expectations. The reduction of our operational footprint will reduce annual costs by SEK 75m from 2021.
More effective cultivation of markets
We continue to focus on attractive markets and product niches where we have a strong position and offering. We have had interesting dialogues with several potential customers. Of which some are testing our scalable brake system for the Chinese electric bus market, but due to the COVID-19 situation most processes have slowed.
Continued investment in new technology
Our focus on new technology and product development remains high, and we managed to pass some important development milestones in concluding successful winter tests regarding our scalable brake system. The results were above expectations, but given the impact of COVID-19 the customers’ decision processes are delayed. However, the large truck OEMs are now starting up gradually and we remain positive.
To conclude, this has been a very challenging quarter for both people and enterprises. As a company we have lost sales and profits are down, but we are fortunate that our employees have not suffered serious illness and that we have been able to drive aftermarket sales to make the most of this crisis. I am very proud of all our employees and their professionalism.
President & CEO
Full interim report
Press and analyst meeting
Media and analysts are invited to a telephone conference at which the report will be presented with comments by Helene Svahn, President & CEO and Andreas Larsson, CFO. The presentation will also be webcasted live and you can participate with questions by telephone.
Date & Time: Thursday, April 23 at 11:00 am CEST
The press conference is broadcasted at:
To join the telephone conference:
SE: +46 8 50 55 83 53
UK: +44 33 33 00 90 35
US: +1 83 38 23 05 90
The webcast will also be available afterwards and you can download the Interim report and the presentation from Haldex website.
For further information, visit https://haldex.com/sv/corporate/investerare/ or contact:
Helene Svahn, President & CEO
Phone: +46 418-476000
Andreas Larsson, CFO
Phone: +46 418-476000
With more than 100 years of intensely focused innovation, Haldex holds unrivaled expertise in brake systems and air suspension systems for heavy trucks, trailers and buses. We live and breathe our business delivering robust, technically superior solutions born from deep insight into our customers’ reality. By concentrating on our core competencies and following our strengths and passions, we combine both the operating speed and flexibility required by the market. Collaborative innovation is not only the essence of our products – it is also our philosophy. Our 2,200 employees, spread on four continents, are constantly challenging the conventional and strive to ensure that the products we deliver create unique value for our customers and all end-users. We are listed on the Nasdaq Stockholm Stock Exchange and have net sales of ap proximately 5 billion SEK.
This information is information that Haldex AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on Thursday, March 23, 2020 at 7:20 CEST.
The interim report is essentially a translation of Swedish language original thereof. In the event of any discrepancies between this translation and the original Swedish document the latter shall be deemed correct.