Haldex Annual Statement, January - December 2018: Strong Sales Growth and Improved Earnings per Share Despite Weak End to the Year

STOCKHOLM, Feb. 14, 2019 /PRNewswire/ -- Haldex increased its net sales in all geographic regions in 2018 and has also grown faster than the market. The development in a number of product lines continued to be strong, including brake adjusters and disc brakes. Income in the fourth quarter was negatively affected by higher direct material prices and tariffs in the USA, which contributed to the operating income excluding one-off items for 2018 being lower than the previous year. Investments in R&D continued, which resulted in a concept phase being initiated in the new technology area with a customer. Cash flow from operating activities and earnings per share improved significantly compared to the previous year.

Net sales for Q4 totalled SEK 1,225(1,049) m, equivalent to an increase of 17 per cent compared to the previous year. After currency adjustments, net sales increased by 11 per cent. Net sales for FY 2018 totalled SEK 5,119(4,462) m, which, after currency adjustments, is a 12 per cent increase.

Operating income excluding one-off items totalled SEK 38(66) m for Q4 and SEK 305(292) m for FY 2018. This is the equivalent of an operating margin excluding one-off items of 3.1 (6.3) per cent for Q4 and 6.0 (6.5) per cent for FY 2018. Operating income for FY 2018 including one-off items totalled SEK 255(149) m, which corresponds to an operating margin of 5.0 (3.3) percent.

Net income after tax for Q4 totalled SEK -24(14) m, and earnings per share for Q4 totalled SEK -0.54 (0.25). The corresponding figures for FY 2018 are SEK 153(79) m for net income after tax and SEK 3.46 (1.67) for earnings per share.

Cash flow from operating activities totalled SEK 199(45) m for Q4 and SEK 274(173) m for FY 2018.

Breakthrough for Scalable Brake System. A concept phase has been initiated with a world-leading truck manufacturer.

The long-term operating margin target of 10 per cent is expected to be achieved in year 2022, excluding investments in new technology.

The Board of Directors proposes to the Annual General Meeting a dividend of SEK 1.15 (0.55) per share, which is in line with Haldex's dividend policy.

Key figures for October - December 2018

(same period previous year in brackets)

•  Net sales, SEK m   1,225 (1,049)

•  Operating income, SEK m   -12 (33)

•  Operating income, excl. one-off items, SEK m   38 (66)

•  Operating margin, %   -1.0 (3.1)

•  Operating margin, excl. one-off items, %   3.1 (6.3)

•  Return on capital employed,%1   9.8 (6.8)

•  Return on capital employed, excl. one-off items,%1    11.8 (13.3)

•  Net income, SEK m   -24 (14)

•  Earnings per share, SEK   -0.54 (0.25)

•  Cash flow, operating activities, SEK m   199 (45)

1)     Rolling twelve months

Key figures for January - December 2018

(same period previous year in brackets)

•  Net sales, SEK m   5,119 (4,462)

•  Operating income, SEK m   255 (149)

•  Operating income, excl. one-off items, SEK m   305 (292)

•  Operating margin, %   5.0 (3.3)

•  Operating margin, excl. one-off items, %   6.0 (6.5)

•  Return on capital employed,%1   9.8 (6.8)

•  Return on capital employed, excl. one-off items,%1    11.8 (13.3)

•  Net income, SEK m   153 (79)

•  Earnings per share, SEK   3.46 (1.67)

•  Cash flow, operating activities, SEK m   274 (173)

2)     Rolling twelve months

Comment from Åke Bengtsson, President and CEO: 

"Haldex is closing the books on a year where we for the first time exceeded SEK 5 billion in net sales. We increased net sales by 12 per cent and won market shares on all markets. Cash flow and earnings per share are greatly improved compared to last year. However, the final quarter of the year was weaker than planned. We had predicted a continued increase in direct material costs and new tariffs, but they increased more than expected in Q4. Costs to meet increased production volumes were also higher than we forecast. We have taken measures to relay the higher raw material prices and tariffs to customers and streamline the cost structure in order to improve the operating margin in 2019. In the autumn, we also conducted an extensive project to secure our future strategy, verify that our technological projects are headed in the right direction and begin to streamline the operations. This gives us a strong platform to stand on as we enter 2019.

Technology shift in China and North America

Two focus areas in 2018 have been the new legislation requiring automatic brake adjusters in China and the technology shift from drum brakes to disc brakes in North America. In China, net sales grew sharply due to the change in legislation. However, we saw somewhat of a slow-down for Q4. The market is still not fully compliant with the law, and we expect growth to continue but at a slightly slower rate going forward. In North America, the technology shift continues from drum brakes to disc brakes. Work has begun to build up production capacity for disc brake production in North America, and production will begin during the year.

Breakthrough for Scalable Brake System

In 2018 we worked on presenting and engaging customers in the new technological area for connected, electrified and self-driving vehicles that we call Scalable Break System. We are therefore very proud that we are now able to start a project with a world-leading truck manufacturer. We will together enter a concept phase that is expected to lead to a development contract at the end of the year. This collaboration is strategically very important for Haldex since it verifies our technology, presents us with a partner to further develop the technology and also provides a valuable reference for us for future sales to other customers.

Long-term operation margin objective of 10 per cent

In parallel to the investments being made in leading technology, Haldex conducted an analysis of the business to verify that the long-term operating margin target of 10 per cent was feasible. A stable and profitable core business with high quality is crucial for our ability to invest in new technology. Operations will be streamlined and optimized with the objective to reach a 10 per cent operating margin in 2022, excluding investments in new technology.

During the fall of 2018, Haldex and the Roland Berger consultant firm, which has extensive competence within the automotive industry, together conducted a strategy project to analyse and verify the market size, market trends and competitiveness of Haldex's future development projects. Work has begun to refine the existing product portfolio. With a few thousand product variations in the portfolio, small-scale products need to be phased out and non-profitable products divested or closed down. In January, as part of this work, an agreement was signed to divest the rotary connector for construction machinery.

The supply chain for the brake adjusters, which is Haldex's single largest product, continues to be optimised. An increasing number of components are bought from or manufactured in India to lower the manufacturing cost. A new supply chain for spare parts will be established within the aftermarket. The supplemental brands Haldex launched in 2016 (Midland and Grau) have strong potential for profitable growth. A separate purchasing organisation will ensure the right level of quality at the best price.

In addition, we will focus on cost control and outsourcing of non-core activities. We also have a new organisation as of 1 January, where we merged Sourcing and Operations into a single Supply chain function. This leads to greater focus on the entire production chain, from purchasing to delivery, and is part of the efforts to work more effectively with direct material and associated higher raw material prices and new tariffs.

I am convinced that the streamlining measures we introduced and will continue to roll out will enable Haldex to reach a 10 per cent operating margin, excluding investments in new technology. We will not be satisfied until we have reached our profitability target, and we will optimise our cost base and identify areas for continued growth.

Outlook for 2019

The market in North America is expected to continue to grow in 2019. However, the North American market can fluctuate rapidly, and it is difficult to assess whether the growth will last the entire year. Europe is judged to be stable with order intake in line with 2018. China has a weaker market in 2019. Haldex can partly withstand a downturn given that automatic brake adjusters are currently required by law on heavy vehicles. India is expected to have a weak year with lower production levels, and Brazil is expected to experience cautiously optimistic market growth, although from low levels.

For 2019, we make the assessment that sales will increase in North America, which will be offset by unchanged or lower sales in other regions. As a whole, sales in 2019 are expected to be in line with 2018. Haldex makes the assessment that the operating margin in 2019, including increased investments in new technology, will be in line with or higher than the operating margin excluding one-off items in 2018."

Full interim report

The full interim report is available at http://corporate.haldex.com/en/investors/financialreports or at http://news.cision.com/haldex

Press and analyst meeting

Media and analysts are invited to a telephone conference at which the report will be presented with comments by Åke Bengtsson, President and CEO and Andreas Larsson, CFO. The presentation will also be webcasted live and you can participate with questions by telephone.

Date & Time: Thursday, February 14, 2019 at 11.00 CEST

The press conference is broadcasted at:

https://tv.streamfabriken.com/haldex-q4-2018

To join the telephone conference:

SE: +46-08-566-42-706

UK: +44-33-33-00-92-64

US: +1-64-67-22-49-03

The webcast will also be available afterwards and you can download the Interim report and the presentation from Haldex website: http://corporate.haldex.com/en/investors  

For further information visit http://corporate.haldex.com or contact:

Åke Bengtsson, President & CEO, +46-418-476000

Andreas Larsson, CFO, +46-418-476000

Catharina Paulcén, SVP Corporate Communications, catharina.paulcen@haldex.com or +46 418-476157

Haldex AB (publ) is required to publish the above information under the EU Market Abuse Regulation and the Swedish Financial Instruments Trading Act. The information was submitted for publication by the Haldex media contact stated in the release on February 14, 2019 at 7.20 CET.

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.

This information was brought to you by Cision http://news.cision.com

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SOURCE Haldex