Stable result despite a very weak market. Gradual recovery during the quarter. Cost savings program expanded to SEK 100 million. Focus on increased market share.
Second quarter of 2020
- Net sales declined by 6 percent to SEK 1,022 million (1,089). Organic growth
was -25 percent and order intake was lower than net sales - Operating profit (EBITA) declined to SEK 92 million (103) and the operating margin was 9.1 percent (9.5)
- Operating cash flow increased to SEK 116 million (94)
- Earnings per share declined to SEK 1.24 (1.91)
- The cost savings programme from 2019 was expanded to SEK 100 million, with full effect from January 2021
January – June 2020
- Net sales rose by 7 percent to SEK 2,337 million (2,180). Organic growth
was -15 percent and order intake was lower than net sales - Operating profit (EBITA) was SEK 218 million (222) and the operating margin was 9.3 percent (10.2)
- Operating cash flow increased to SEK 201 million (131)
- Earnings per share declined to SEK 3.54 (4.14)
The Group in brief (for definitions, see page 20)
| Quarter 2 | Δ | Jan–June | Δ | 12-months rolling | Full year | |||
| SEK million | 2020 | 2019 | % | 2020 | 2019 | % | 2020/19 | 2019 |
| Order intake | 987 | 1,080 | -9 | 2,308 | 2,164 | 7 | 4,498 | 4,354 |
| Net sales | 1,022 | 1,089 | -6 | 2,337 | 2,180 | 7 | 4,505 | 4,348 |
| Gross profit | 258 | 303 | -15 | 609 | 607 | 0 | 1,185 | 1,183 |
| % | 25.2 | 27.8 | 26.1 | 27.8 | 26.3 | 27.2 | ||
| Operating expenses | -165 | -200 | -18 | -391 | -385 | 2 | -805 | -799 |
| % | -16.2 | -18.4 | -16.7 | -17.6 | -17.9 | -18.4 | ||
| Operating profit (EBITA) | 92 | 103 | -10 | 218 | 222 | -2 | 379 | 384 |
| % | 9.1 | 9.5 | 9.3 | 10.2 | 8.4 | 8.8 | ||
| Operating profit/loss | 85 | 100 | -15 | 203 | 217 | -6 | 355 | 368 |
| % | 8.3 | 9.2 | 8.7 | 9.9 | 7.9 | 8.5 | ||
| Profit/loss after tax | 46 | 71 | -35 | 132 | 155 | -14 | 230 | 253 |
| Earnings per share, SEK | 1.24 | 1.91 | -35 | 3.54 | 4.14 | -14 | 6.15 | 6.75 |
CEO’s overview
Bufab delivered a stable result for the second quarter of 2020 despite a very weak market in the wake of the corona pandemic.
We established three main goals at an early stage: to protect our employees, our customers and Bufab from the effects of the pandemic. Our 43 subsidiaries in 28 countries embraced these goals and took the actions required.
We can now see the result of these efforts. We have avoided any spread of the disease in our workplace. We are also very proud that we have maintained unbroken precision deliveries with good quality to our thousands of customers throughout the world. This has been achieved despite the major disruptions to global supply chains during the spring. From April onwards, the pandemic forced many of our customers to reduce their production, which led to a strong decline in organic growth. To address this, we rapidly introduced comprehensive short-time work schemes and other cost-saving measures in all our subsidiaries.
As a result of these measures, we retained a stable operating margin of 9 percent, despite negative organic growth of 25 percent for the quarter. But the impact varies across our operations. Subsidiaries with broad exposure to the automotive or energy industries, to Southern Europe or the UK, and our manufacturing companies were more severely affected, which is apparent in the relatively weak performance by our Segments West and North. In Segment UK/North America, the weak market was offset by the strong contribution from our most recent acquisition in the US. In Segment East, we achieved our best operating margin ever, over 16 percent, thanks to a strong recovery in China and Singapore, and effective cost control.
We were pleased to see a gradual recovery in demand in all segments during the quarter. June was considerably stronger than April. Our view is that the stepwise recovery will continue successively during the second half of the year. However, there is still a great uncertainty and accordingly, we have chosen to expand our cost savings programme from SEK 40 million to SEK 100 million on a full-year basis, with full effect as from January 2021. In most subsidiaries, this will be achieved through enhanced efficiency, general cost-savings and natural turnover. Redundancies may be required in some subsidiaries. Thanks to significant investments made in the organisation, processes and IT in recent years, the programme can be implemented without any negative impact on the sales organisation.
Bufab is a growth company. We have had growth for 27 consecutive quarters. This strategy stands firm and is not affected by a single quarter of negative growth.
For this reason, we will focus even more on building strong customer relations during the second half of the year and onwards. We have taken market share every year for several years and intend to increase the pace further. To help the sales organisation succeed in this, we will continue to invest in our Sales Excellence program. During the autumn, Bufab’s entire organisation will be fully focused on these activities, under the theme of “Restart”.
Crises create business opportunities for the strongest companies with investment capacity. We are seeing many such opportunities in all markets. We are continuing to work with promising acquisition candidates. Further reduced costs, a stable margin and strong cash flow will provide flexibility and strength, even if the market situation becomes even more difficult. With the plan that we have established, we intend to continue the investments in our organisation, processes and systems, as well as in new acquisitions, during 2021 and onwards.
I want to extend my sincere thanks to the whole team at Bufab. With hard work, personal sacrifices and cooperation, everyone has demonstrated that Bufab is a dynamic and flexible company. As a result of this, we can focus fully on the market and our customers and on continuing Bufab’s profitable growth.
Jörgen Rosengren,
President and CEO
Conference call
A conference call will be held on 16 July 2020 at 10:00 a.m. CET. Jörgen Rosengren, President and CEO, and Marcus Andersson, CFO, will present the results. The conference call will be held in English.
To participate in the conference, use any of the following dial-in numbers: Standard Intl. +44 (0) 2071 928000, UK 08 445 718 892, Sweden 08 506 921 80 or the US 1 631 510 74 95. Conference code: 2070146.
Please dial in 5–10 minutes ahead in order to complete the short registration process.
Contact
Jörgen Rosengren
CEO
+46 370 69 69 00
jorgen.rosengren@bufab.com
Marcus Andersson
CFO
+46 370 69 69 66
marcus.andersson@bufab.com
This information is such that Bufab AB (publ) is obliged to disclose in accordance with the EU’s Market Abuse Regulation. The information was submitted for publication by the aforementioned contacts on 16 July 2020 at 7:30 a.m. CET.
Bufab AB (publ) Box 2266 SE-331 02 Värnamo, Corp. Reg. No. 556685-6240
Tel: +46 370 69 69 00 Fax +46 370 69 69 10
www.bufab.com
Attachment
