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 following our strengths and passions,
we combine both the operating speed and flexibility required by the market.
Collaborative innovation is not only the essence of our products – it is also
our philosophy. Our 2,100 employees, spread on four continents, are constantly
challenging the conventional and strive to ensure that the products we deliver
create unique value for our customers and all end-users. We are listed on the
Nasdaq Stockholm Stock Exchange and have net sales of approximately 4.8 billion
SEK.