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2016-10-20

AQ Group: AQ Group AB (publ), Third quarter, 2016

Third quarter, July - September 2016
In brief

· Continued growth in sales and results, mainly driven by
acquisitions

· Net sales increased by 10 % to SEK 723 million (655)
· Operating profit (EBIT) increased by 36 % to SEK 53 million (39)
· Profit after financial items (EBT) increased by 20 % to SEK 53
million (44)

· Cash flow from operating activities increased by 20 % to SEK 67
million (56)

· Equity ratio 64 % (62)
· Earnings per share after tax increased by 32 % to SEK 2.58 (1.95)
Nine months, January - September 2016 In brief

· Net sales increased by 12 % to SEK 2 385 million (2 129)
· Operating profit (EBIT) increased by 51 % to SEK 222 million (147)
· Profit after financial items (EBT) increased by 40 % to SEK 220
million (157)

· Cash flow from operating activities increased by 81 % to SEK 235
million (130)

· Equity ratio 64 % (62)
· Earnings per share after tax increased by 45 % to SEK 10.22 (7.03)
Group overview, key figures

(See attached pdf-file)

A word from the CEO

Market

The third quarter was our 88th consecutive quarter with profit!

For AQ, which lives on production, the vacation period in July/August
always shows a weaker result with lower margin. The outcome this
quarter is better than the corresponding quarter in 2015, but we are
not completely satisfied. It is a quarter with significantly lower
margin than the first and second quarter. I have previously
communicated that we have had an unusual number of projects with good
operating margin during the first half of the year. In parallel we
have been negatively affected by a few customers who are challenged
by lower sales.

As always, our focus is to adapt to our customers' requirements and
real demand. It's a strategy we will continue to follow, to be fast
movers and adaptable no matter of market conditions.

Our improvement in results compared to the third quarter 2015 can
mainly be attributed to the acquisition of Anton Kft in Hungary, and
AQ Enclosure Systems AB and AQ Wiring Systems in Mexico having turned
last year's losses to profit.

Quality and delivery precision continues on a stable and high level,
but with two exceptions.

Acquisitions

Gerdins Industrial System AB was acquired on October 3. It is our
biggest acquisition so far when it comes to turnover. AQ and Gerdins
have similar values and are managed by people who like production and
technology. Integration has already started and continues according
to plan. The parent company Gerdins Industrial System (Gerdins) will
not have any operations and the subsidiaries of Gerdins are already
being integrated to AQ's existing business areas.

The acquisition brings a number of new exciting customers in
industries such as defence, forestry and agriculture in Sweden and
Germany. In the areas of marketing, purchasing and IT there are
ongoing actions. We will see savings within purchasing with the
support of AQ's global purchasing organisation. Gerdins has a
well-functioning sales organisation, which will help us to increase
organic growth overall.

AQ is well positioned for new acquisitions, after the acquisition of
Gerdins, both from a financial and management view.

Organisation

Our organisation is built on entrepreneurship and entrepreneurship is
a foundation of our core values.

During the last years it has become harder to find personnel in
several countries in Eastern Europe where we have factories. Going
forward we will increase our efforts to find solutions in automation.
We have also started to use labour from Ukraine in some of our
factories. AQ Plast AB's transfer of production to Anderstorp from
Vadstena is completed. The cost of the transfer has been higher than
planned, mainly due to disturbances in the start-up in Anderstorp.

The work to switch stock exchange from AktieTorget to Nasdaq Stockholm
main market continues and

is planned to be completed during 2016. We have during 2016
implemented a number of formal improvements of our internal process.
The Board has during the third quarter set up an audit committee and
a remuneration committee.

Investments

The investment in a ED paint shop in AQ Electric Bulgaria continues.

ED Electro Discharge is a surface treatment, which in many cases is a
requirement in the automotive industry. The plan is to be able to
offer automotive customers in Central and Eastern Europe sheet metal
processing including surface treatment during 2017. The biggest
investments in machinery during the quarter is additional
metal-cutting machines in AQ Anton Kft. in Hungary and a fibre laser
machine in AQ Holmbergs in China.

Outlook

In the short term some of our customers in telecom and railway are
challenged by decreasing sales.

Our companies in Eastern Europe have good growth and profits overall.
We have intensified our work with more regional customers to the
Swedish plants and thereby get a higher growth. In the area of sales,
we will benefit from the capacity and competence in Gerdins.

We have currently a big challenge in a couple of our Swedish plants to
ensure quality and efficiency when volumes are starting to increase.
This applies to a large quantity of tool based sheet metal and
plastics components for a commercial truck customer.

Our company in Mexico is developing positively and has turned the loss
in 2015 to a profit in 2016. We believe in growth for 2017 and the
company is also delivering better value to the customers than
earlier.

Our company in India is growing and has an all-time-high in sales, but
is not delivering customer value at an acceptable level and is not
yet profitable. An action plan has been launched.

The company in Thailand has, to our joy, after less than a year after
it was started shown profit the last two months.

Our operations in China sees a lower activity with some our customers
within the telecom and mining

industries but it is still delivering results in parity with 2015.

My feeling is that we are gaining market shares in several areas and
are also entering new markets. However, one shall be aware of the
fact that AQ lives in a world with global competition with subsequent
price pressure. During the fourth quarter the Board will review AQ's
financial goals.

With strong relations to world leading customers and engaged employees
I am looking positively at the

future with continued growth with stable result level. An important
part of this is our core values and

our efforts to be a reliable supplier to demanding industrial
customers

Claes Mellgren

CEO

Group's financial position and results

Third quarter

Net sales for the third quarter was SEK 723 million (655), an increase
of SEK 68 million compared

to the same period in the previous year. The largest part of the
increase in turnover is due to the

acquisition of Anton Kft. in Hungary last year. In addition, sales in
Poland, Mexico and Italy have increased compared to the same period
last year.

The total growth in the quarter was 10.5 %, of which organic growth
2.1 %, growth through acquisitions

9.4 % and a currency effect -1.0 %. The currency effect of -1 %
corresponds to about SEK 7 million

and is mainly with the currencies CNY, MXN and PLN.

Operating margin (EBIT) in the third quarter was SEK 53 million (39),
an increase of SEK 14 million.

The increase can mainly be explained by the acquisition of Anton Kft.
in Hungary and AQ Enclosure Systems AB and AQ Wiring Systems in
Mexico having turned last year's losses to profit.

Goodwill and other intangible assets have increased during the third
quarter with SEK 5 million compared to June 30, 2016, an increase due
to currency effects. If goodwill in the third quarter of 2016 is
compared with the third quarter in 2015, it has increased by SEK 52.8
million. The increase is due to the acquisitions of Anton Kft. in
Hungary and of Magnetica in Italy and Serbia and some currency
effects.

Investments in material assets in the quarter in the group was SEK 25
million (16). Investments were

made in metal-cutting machines in AQ Anton Kft. in Hungary and in a
fibre-laser machine in AQ Holmbergs in China.

Interest bearing debts of the group are SEK 151 million (127) and cash
and cash equivalents amount

to SEK 119 million (166), which means that the group has a net debt of
SEK 32 million. In the same

period last year, the group had net cash of SEK 39 million. The change
is due to a loan in conjunction

with the acquisition of Anton Kft. in the fourth quarter of 2015.

Cash flow from operating activities was SEK 67 million (56). The
positive cash flow from operating

activities has been used for investments in fixed assets and to reduce
interest bearing debts.

Equity at the end of the period was SEK 1 367 million (1 156) for the
group.

First nine months

Net sales for the first nine months was SEK 2 385 million (2 129), an
increase of SEK 256 million compared to the same period previous
year. The largest part of the increase in turnover is due to the
acquisition of Anton Kft. in Hungary last year. The sales in Sweden
and Poland have also increased.

In the first nine months the total growth was 12.0 %, of which organic
growth 4.1 %, growth through

acquisitions 9.4 % and a currency effect of -1.5 %. The currency
effect of -1.5 % corresponds to about

SEK 31 million and is mainly with the currencies CNY, PLN and MXN, but
also INR.

Operating margin (EBIT) in the period was SEK 222 million (147), an
increase of SEK 75 million.

The increase can mainly be explained by the acquisition of Anton Kft.
in Hungary and AQ Enclosure Systems AB and AQ Wiring Systems in
Mexico having turned last year's losses to profit.

In conjunction with the liquidation of our Norwegian subsidiary AQ
Wiring Systems AS, accumulated

translation differences have had a negative effect on the result.
These costs amount to SEK 6.7 million

and are included in the item other operating costs.

Goodwill and other intangible assets have increased with SEK 12
million since the start of the year. The

increase is due to the acquisition of Magnetica in Italy and Serbia
and some currency effects.

The investments in material assets of the group in the first nine
months were SEK 88 million (44). Investments during the period have
been made in metal-cutting machines in Hungary and in injection
moulding machines in Sweden and Bulgaria.

Interest bearing debts of the group...

Författare ATORG

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