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2017-02-09

Concentric AB: CONCENTRIC INTERIM REPORT JANUARY - DECEMBER 2016

FOURTH QUARTER

· Net sales: MSEK 473 (504) - down 7% y-o-y, after adjusting for
currency (+1%).

· Operating income: MSEK 86 (83), generating an operating margin of
18.2% (16.4) - underlying operating margin was 17.4% (16.9),
adjusting for restructuring expenses and pension related items
affecting comparability.

· Earnings after tax: MSEK 64 (54); basic EPS of SEK 1.57 (1.32).
· Solid cash flow generated from operating activities: MSEK 100
(127) driven by continued tight management of working capital.

· Dividend: Based on the Group's earnings and strong financial
position, the Board of Directors intend to propose a total dividend
of SEK 3.50 (3.25) per share and to renew the current mandate for
share buybacks.

FULL YEAR

· Net sales: MSEK 2,004 (2,306) - down 10% y-o-y, after adjusting
for currency (-3%).

· Operating income: MSEK 341 (381), generating an operating margin
of 17.0% (16.5) - underlying operating margin was 16.8% (16.6),
adjusting for restructuring expenses and pension related items
affecting comparability.

· Earnings after tax: MSEK 246 (271); basic EPS of SEK 6.01 (6.45).
· Strong cash flow generated from operating activities: MSEK 409
(366).

· Group's net debt: MSEK 300 (488); gearing ratio of 35% (57) - own
share buybacks of MSEK 85 (142) during the year.

Sales development
The group's sales for the fourth quarter and the full year were down
year-on-year by 7% and 10% respectively in constant currency, which
was broadly in line with published market indices. The primary reason
for the decline in sales was the 20% reduction in end-customer demand
and 30% reduction in production of Class 8 heavy duty trucks
following the peak in the US replacement cycle during 2015 and a
subsequent correction of inventory levels. European truck sales
softened in the second half of 2016 as the demand for trucks in
Southern Europe was satisfied. Commodity prices continued to
strengthen in the fourth quarter and, whilst it has not impacted our
demand yet, there is some evidence of increased activity within raw
material production areas. However, demand for Construction equipment
in North America and Europe remained soft with the macro economic
uncertainty.

Addressing the market conditions
Growth remains the highest priority for Concentric and during the year
we have continued to invest in product development and strengthen
both our sales team and engineering resources. At the same time we
cannot disregard the current tough market conditions in Europe, North
and South America. We therefore recently announced the impact of the
restructuring plans initiated during the second half of 2016 as a
direct response to the sustained weak outlook for end-markets in
these regions. The restructuring corresponds to a 7% reduction of the
group's total workforce, primarily affecting operations in Chivilcoy,
Argentina and Hof, Germany. Additionally, warehousing facilities will
be rationalised. All in all, these measures will result in annual
savings corresponding to MSEK 30 as of 2017.

All parts of the business also continue to participate in the
Concentric Business Excellence programme ("CBE") and this has also
provided a framework for the restructuring plans. The successful
implementation of CBE has continued to support the consolidated
results, ensuring that the underlying EBIT margin for both the
quarter and the full-year actually improved to 17.4% and 16.8%
respectively, in spite of the market headwinds.

New product launches
We recently exhibited at the IAA 2016 where Concentric presented its
extensive range of pumps, including new product developments such as
the Mid-range 2-speed controllable cooling pump, which received a lot
of positive feedback.

We also continue to explore acquisition opportunities for enabling
technologies that will enhance our solutions for variable
displacement pumps and provide us with an even greater presence
alongside our global customers.

Outlook
2016 was a rather tough year due to suppressed prices for many
commodities and a down-turn for trucks sales. Looking ahead, the
increase of public spending in the US on infrastructure investments
promised by the new Trump administration could have a positive impact
in 2017 for most of our end-markets in the region. We will continue
to focus on CBE to enable us to respond to the prevailing market
conditions. Market indices suggest that production volumes blended to
Concentric's end-markets and regions will be flat year-on-year for
2017. We have seen a number of truck OEMs recently release their
financial results and we note that the sales development in Europe
was generally stronger and that Volvo Trucks raised its guidance for
truck sales in Europe in 2017. This more favourable development in
Europe is naturally also beneficial to Concentric's outlook.
Concentric remains well positioned both financially and
operationally, to fully leverage our market opportunities.

For further information, please contact:
David Woolley (President and CEO) or David Bessant (CFO) at Tel: +44
121 445 6545 or E-mail: info@concentricab.com

The information in this report is of the type that Concentric AB is
obliged to make public pursuant to the EU Market Abuse Regulation and
the Securities Markets Act. The information was submitted for
publication, through the agency of the contact persons set out above,
at 08.00 CET on 9 February, 2017.

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http://news.cision.com/concentric-ab/r/concentric-interim-report-january...
http://mb.cision.com/Main/1643/2183928/625839.pdf

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