Fourth quarter 2019
- Sales fell by 7% and totalled SEK 1,141m (1,225). Currency-adjusted sales fell by 11%.
- Adjusted operating profit totalled SEK 44m (38), equivalent to an adjusted operating margin of 3.8% (3.1).
- Adjusted operating margin excluding investments in new technology was 4.9%.
- Reported operating profit was SEK -133m (-12).
- Earnings per share was SEK -3.36 (-0.49).
- Operating cash flow totalled SEK 239m (199). Adjusted for the effect of IFRS 16, cash flow totalled SEK 230m in the fourth quarter.
- On 8 October and 22 October two major changes to production were announced which are to lead to annual savings of SEK 75m when the transfer of production has been completed and entail non-recurring costs of SEK 172m, of which SEK 162m is charged against 2019.
- Cost saving measures have led to decreased selling and administration expenses of SEK 27m currency-adjusted compared to the same quarter 2018.
Full year 2019
- Sales rose by 1% and totalled SEK 5,151m (5,119). In currency-adjusted terms, sales fell by 5%.
- Adjusted operating profit totalled SEK 317m (305), equivalent to an adjusted operating margin of 6.1% (6.0).
- Adjusted operating margin excluding investments in new technology was 6.9%.
- Reported operating profit totalled SEK 105m (255).
- Earnings per share was SEK 0.12 (3.46).
- Operating cash flow totalled SEK 328m (274), equivalent to SEK 263m including adjustment for IFRS 16.
- The Board of Directors proposes, with the application of the company's accepted principles for dividend distribution and in the light of the Company's efficiency measures, that no dividend will be paid.
Comment from Helene Svahn, President & CEO:
An intensive fourth quarter brings to an end an eventful year notable for a strong focus on efficiency improvements, reduced selling and administrative expenses and development of our new technology. Investments in installations in new technology surpassed expectations, and approval by the Chinese authorities of our electromechanical brake system has cleared the way for several test installations. Our joint venture Haldex VIE has consequently entered a more active phase in which we anticipate that within a few years our electromechanical brake system will be installed in a large number of electric buses. We have also seen a positive trend in Europe, featuring both extended and deeper cooperation with world-leading truck manufacturers.
The year began with a consistently high level of new production for trucks and trailers during the first six months. However, production declined during the third quarter, before a sharp downturn during the fourth quarter. The year ended with an overall decrease in the number of newly built trucks of 3% and trailers of around 8%. Our most important markets, Europe and North America, were hit hardest.
The lower demand for new vehicles had a severe impact on our sales of OE products for trucks and trailers, which in currency- adjusted terms fell by around 18% and 16% respectively over the quarter. The downturn was, however, offset by our aftermarket sales for the full year of 2019 remaining at the same level as in the previous year. The increasing share of aftermarket in the product mix contributed to an improved gross margin.
Sales for the full year totalled SEK 5,151m. Adjusted operating profit (excluding non-recurring expenses) improved to SEK 317m. Adjusted operating margin excluding investments in new technology amounted to 6.9%. Backed by this positive trend, the fact that we are continuing with our plan with the following four focal areas is even more encouraging:
Reduced selling and administrative expenses, and greater cost control
It is gratifying to see the measures we have taken to improve efficiency and profitability in our basic operation bear fruit. In the fourth quarter we reduced our selling and administrative expenses by 14% or SEK 27m compared with the same quarter of 2018. Looking forward, we see further opportunities to improve profitability through continued efficiency improvements. The target is to achieve 10% in adjusted operating margin, excluding investments in new technology, by the end of 2022.
Increased economies of scale in production
Restructuring decisions leading to the closure of two production units were announced in the fourth quarter. It is estimated that this action will yield annual savings of around SEK 75m due to production being transferred to existing plants with significant economies of scale. The restructuring involves non-recurring expenses which have been estimated at SEK 172m, of which SEK 162m is charged to 2019. We incurred combined restructuring expenses of SEK 175m during the quarter to boost profitability in the basic business.
More effective cultivation of markets
We have focused on strengthening our presence in attractive markets and in product niches where we have a strong offering and position. We see potential in Asia with a large untapped market for example in disc brakes for trucks and brake systems for electrified vehicles. The switch in the industry to new technological vehicle solutions is due to increased requirements for safety and environmental improvements from the authorities in China in particular. Talks are therefore under way with several large, interesting industrial partners, with the aim of further advancing our positions in these areas. We must also ensure that our share of the spare parts market is on a par in terms of size with our installed base among existing vehicle manufacturers. During the quarter we started targeting logistics companies in Eastern Europe.
Continued investment in new technology
Haldex holds a unique position as a strong innovator and global brake specialist. In 2019 we made large investments in the development of an open and integrable brake system adapted to the electrified and self-driving heavy vehicles of the future. This means, among other things, a high-precision pneumatic brake system (Fast Acting Brake Valves), electromechanical brake systems and an open architecture for integration of the vehicle’s dynamic control system. The benefits of the new systems include lower energy requirements, higher performance, open communication of data and cost-effective system integration.
Our development strategy is based on developing our scalable systems in close cooperation with our partners. The cooperation on the electromechanical brake system through Haldex VIE is an excellent example of how we develop a safe and effective brake system, primarily for electric commercial vehicles, together with partners. We reached significant milestones during the quarter, by successfully carrying out test installation of the system in the vehicles of several customers after obtaining product approval from the Chinese authorities. During the quarter we also completed a first prototype installation together with one of the largest vehicle manufacturers in Europe, which is a necessary step towards progress in the development of customised solutions for the European market.
To sum up, we took several important steps towards a more profitable and stronger Haldex in 2019. Growth and profitability in the core business is our top priority. At the same time, we have successfully pursued the development of our new concepts. We are currently in discussion with world-leading manufacturers of heavy vehicles and trailers and developers of new logistic solutions. These discussions have strengthened our belief that Haldex has a unique opportunity to position itself in a consolidated market as an independent supplier of open systems that enable our partners to meet their challenges. The key to continued success is to continue to be innovative, inquisitive and decisive. Last but not least, I would like to extend my sincere thanks to all the employees who contributed during the year to making Haldex stronger and more capable of fulfilling its long-term potential.
President & CEO
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, February 13, 2019 at 11:00 am CEST
The press conference is broadcasted at:
To join the telephone conference:
SE: +46 8 505 583 69
UK: +44 33 33 00 92 71
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/en/corporate/investors/ 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 3,200 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, February 13, 2019 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.