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2016-10-25

Haldex: Haldex interim report, January - September 2016: Solid operating margin in spite of continuing weak market conditions

Market conditions continued to be weak in North America in Q3, which
was the main factor contributing to lower sales. Disc brake sales
increased significantly, but did not compensate for lower actuator
and brake adjuster sales. The company's operating margin is in line
with previous quarters of this year in spite of lower net sales.
Earnings per share for the first nine months of the year were also up
compared with the same period of the previous year.

Net sales for Q3 totaled SEK 1,076 (1,189) m, equivalent to a 10%
decrease compared with the same period of the previous year. After
currency adjustments, net sales also decreased by 10% in Q3.
Currency-adjusted net sales fell by 10% for the first nine months of
the year.

Operating income for Q3 excluding one-off items amounted to SEK 80
(116) m, which is equivalent to an operating margin of 7.4 (9.7)%.
The operating margin excluding one-off items for the first nine
months of the year amounted to 7.3 (9.9)%. The operating margin
including one-off items was 6.3% for Q3 and 6.9% for the first nine
months of the year.

The net income after tax for Q3 totaled SEK 37 (-22) m and the
earnings per share for Q3 totaled SEK 0.82 (-0.50). The earnings per
share for the first nine months of the year came in at SEK 3.29
(3.20) per share.

Cash flow from operating activities totaled SEK 65 (133) m in Q3 and
SEK 168 (109) m for the first nine months of the year.

A bidding process for Haldex was initiated on July 14 and is still
ongoing. Three companies have submitted bids with different price
levels. At the time of publication of this interim report, a bid from
Knorr-Bremse for SEK 125 was still valid.

Bo Annvik, President & CEO, has given the board notice of resignation.
He will remain in his position for the time being. Three positions on
Haldex's management team were filled in the quarter: SVP North
American Sales, SVP Product Management and SVP R&D.

Key figures for July - September 2016
(same period previous year in brackets)

· Net sales, SEK m 1,076 (1,189)
· Operating income, excl. one-off items, SEK m 80 (116)
· Operating income, SEK m 68 (8)
· Operating margin, excl. one-off items, % 7.4 (9.7)
· Operating margin, % 6.3 (0.7)
· Return on capital employed, excl. one-off items,%1 14.6 (23.3)
· Return on capital employed,%1 14.1 (14.3)
· Net income, SEK m 37 (-22)
· Earnings per share, SEK 0.82 (-0.50)
· Cash flow, operating activities, SEK m 65 (133)

1) Rolling twelve months

Key figures for January - September 2016
(same period previous year in brackets)

· Net sales, SEK m 3,320 (3,725)
· Operating income, excl. one-off items, SEK m 244 (368)
· Operating income, SEK m 232 (256)
· Operating margin, excl. one-off items, % 7.3 (9.9)
· Operating margin, % 6.9 (6.9)
· Return on capital employed, excl. one-off items,%1 14.6 (23.3)
· Return on capital employed,%1 14.1 (14.3)
· Net income, SEK m 147 (143)
· Earnings per share, SEK 3.29 (3.20)
· Cash flow, operating activities, SEK m 168 (109)

1) Rolling twelve months

Comment from Bo Annvik, President and CEO:

"Q3 was largely characterized by the bidding situation Haldex is
currently undergoing. The primary focus will be to continue driving
the business toward agreed targets and in accordance with the
strategy previously adopted, in order to ensure that we retain our
sales and profitability. The outcome in Q3 was in line with the
previous quarters of this year. Market conditions in North America
continued to be weaker, which is impacting our sales significantly.
The operating margin was at par with previous quarters, which is at a
reasonable level given our current net sales.

North America

The official forecast for the number of vehicles produced in North
America has deteriorated quarter after quarter, which is in line with
our own estimates. Similarly to previous quarters of this year, about
half of the sales decline we experienced in Q3 was related to
actuators. This is primarily related to our strong position in Truck,
which experienced the greatest decline in North America, and was only
partially related to the product recall. We can also see a decrease
in brake adjuster sales due to the weaker market conditions.

Our disc brake continues to garner attention in North America. We are
continuing to sign small contracts and are working hard to secure a
major contract on the US market in the trailer segment by the end of
the year, which would be of major strategic value to us.

Products driving growth

Disc brake sales increased significantly during the quarter. This is
in line with previously announced expectations that this product
category would be on the rise this year and then gradually reach even
higher volumes over the coming years. In addition, EBS sales have
risen, which is another promising product for Haldex in which major
product development investments are being made. It is very exciting
to see that both of these product areas, in which we invest
development resources, are growing in terms of net sales.

Major quality improvements efforts have been made internally in the
wake of the product recall, which impacted Haldex significantly since
late 2014. Haldex has analyzed its product portfolio to aim for our
products to not only meet industry safety standards, but clearly
exceed them. As a part of this process, we decided to further
validate the actuator that was the cause of the product recall and
launch it early next year instead of in the fall. We must ensure that
the product we are launching now exceeds customer expectations in
every way.

Collaboration on electromechanical breaks

In Q2, we announced a joint venture with Chinese VIE. We will jointly
develop electromechanical brakes for electrical commercial vehicles.
This joint venture took several steps forward in Q3. Staff has been
recruited, premises have been commissioned and testing of various
prototypes has commenced. We have great confidence in the future of
this joint venture and how we can develop products for this rapidly
growing market.

Uncertainty due to bidding situation

Since the first bid on Haldex was placed on July 14, our primary
objective has been to continue running our business in accordance
with previously set targets and I would venture to say that we have
done a good job internally. However, customer reactions have impacted
us negatively in the meantime. This fall suppliers will be chosen for
several major contracts. Some of these contracts reach five years
into the future with additional aftermarket sales after that. How
Haldex will develop is therefore of major importance when choosing
supplier. Haldex will be a high risk choice for as long as the
ownership situation remains unclear. We are working hard to
counteract the effect of the on-going bidding process on contract
discussions. We have a good dialogue around solutions to reduce the
degree of uncertainty in our efforts to secure a disc brake contract
with a truck manufacturer, but there is an impending risk that we
will lose the contract if the ownership situation ir not soon
resolved. This in turn will impact our growth opportunities in the
long term.

Moving on to a new position

One week ago, I made the tough decision to resign as the CEO of
Haldex. These past years have been very fruitful since I began
working on our strategy and the path toward profitable growth in
2012. The intensive bidding process the company is currently
undergoing is itself an indication that what we have jointly created
at Haldex is held in high esteem. I have a very strong management
team supporting me that will continue to lead the company in the
right direction in collaboration with me until my successor is found.

Market outlook

Our forecast for the market is essentially the same as in previous
quarters. The European market is looking stable in 2016 with a slight
increase in order intake, while the North American market is forecast
to continue on a very weak trend. The positive trend will continue in
India, but we expect no significant improvement in Brazil in 2016.
China has had a good first half of the year with indications that the
second half will be slightly worse.

We are sticking with our forecast that 2016 will be a year where we
will still be feeling the effects of the events in North America and
struggle to generate growth. We aim to continue ensuring solid
profitability, and the operating margin for the first nine months of
the year can be considered realistic under current market
conditions."

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 Bo Annvik, President and
CEO, and Åke Bengtsson, CFO. The presentation will also be webcasted
live and you can participate with questions by telephone.

Date & Time: Tuesday October 25 at 11.00 CEST

The press conference is broadcasted at:
https://wonderland.videosync.fi/2016-10-25-haldex-q3-report

To join the telephone conference:

Sweden: +46 8 56 64 26 99

UK: +44 20 3008 9808

US: +1 85 5831 5947

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:

Bo Annvik, President & CEO, +46 418 476000
Åke Bengtsson, 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 Tuesday, October 25,
2016 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.

About Haldex

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 followin...

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