Haldex interim report, January - March 2016: Solid operating margin in spite of weaker market conditions

Market conditions continued to weaken in Q1, resulting in lower sales,
especially in North America. Lower actuator sales were the single biggest cause
of the lower net sales figures. Solid cost controls, implemented cost savings
and an improved gross margin partially offset the decrease in sales and had a
positive impact on the operating margin. Cash flow improved compared with the
same period of the previous year.
Net sales for Q1 totaled SEK 1,097 (1,246) m, equivalent to a 12% decrease
compared with the same period of the previous year. After currency adjustments,
net sales decreased by 11% in Q1.

Operating income for Q1 excluding one-off items amounted to SEK 77 (115) m,
which is equivalent to an operating margin of 7.0 (9.3)%. No one-off items were
recognized in Q1, which resulted in an operating margin of 7.0 (9.2) including
one-off items as well.

Net income after tax totaled SEK 48 (79) m and earnings per share totaled SEK
1.08 (1.78) for Q1.

Cash flow from operating activities in Q1 totaled SEK 42 (2) m.

The board of directors has proposed to the annual general meeting that a
dividend of SEK 2.00 (3.00) per share be distributed. In addition, the board has
proposed that shares be repurchased for use in acquisitions or to be cancelled,
thus increasing shareholder value. Haldex will hold its annual general meeting
on May 3, 2016.

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

  · Net sales, SEK m   1,097 (1,246)
  · Operating income, excl. one-off items, SEK m   77 (115)
  · Operating income, SEK m   77 (114)
  · Operating margin, excl. one-off items, %   7.0 (9.3)
  · Operating margin, %   7.0 (9.2)
  · Return on capital employed, excl. one-off items,%1    19.6 (22.4)
  · Return on capital employed,%1   13.9 (13.5)
  · Net income, SEK m   48 (79)
  · Earnings per share, SEK   1.08 (1.78)
  · Cash flow, operating activities, SEK m   42 (2)

1)     Rolling twelve months

Comment from Bo Annvik, President and CEO:

“Net sales for Q1 were down substantially year-on-year. The decline in demand in
North America combined with the effects of the product recall impacted our sales
significantly. However, we saw some improvement in March which continued into
April and I therefore see no signs that the situation for Haldex will further
deteriorate.

We had solid cost controls in Q1 and raised our gross margin. The change in the
operating margin is directly correlated with lower net sales and not higher
expenses. Currency fluctuations also impacted the operating margin negatively by
0.7 percent, resulting in an operating margin of 7.7% after currency
adjustments. A Haldex that can deliver high profitability even when net sales
are down significantly remains one of our highest priorities and we are
continuing to work toward the target of at least 10% operating margin we set for
the long term.

North America

The product recall of one type of our actuators on the US market is continuing
to impact us. About half of the sales decline we experienced in Q1 is related to
actuators. The improved version of the recalled actuator will be launched after
the summer, but we will already initiate customer discussions in Q2, which will
give us indications of how well we have succeeded in regaining the customer
confidence.

In late February, we relaunched our disc brake in the US after several years of
being unable to sell and market this product due to a patent dispute. The
response from both customers and media has been very positive and several
customers expressed interest in getting to know the product better straight
away. Our goal is to secure a contract on the US market with a trailer customer
before the end of the year, which would be of great strategic value.

We have everything we need to get back to previous net sales levels in North
America. However, it will take time due to the generally weak market conditions.
Visible effects cannot be expected until the end of the year.

Products driving growth

Haldex has a strong product portfolio with the disc brake serving as its main
growth driver. As previously announced, net sales from this product category are
expected to increase by one-third this year and then gradually reach even higher
volumes over the coming years. In Q1, one of our customers renewed a delivery
agreement for 2016-2018, guaranteeing us a certain minimum volume. We are the
primary supplier in this contract, which is a strong signal that we have
succeeded in gaining the confidence of the customer in spite of our size
relative to competitors. However, the delivery levels they have now confirmed
were included in our previous forecasts, which means that this agreement does
not change our expected net sales from this product group, but it does give us a
stronger position with the customer and a better reputation on the market.

Other discussions with major truck manufacturers have proceeded according to
plan. No customer has made a final decision on their choice of supplier yet in
ongoing processes. A decision is not expected until the fall. It is worth noting
that the long planning times which are standard in our industry and revenue from
these contracts is expected to start coming in 2020.

Stable aftermarket

The aftermarket is usually relatively stable when new production decreases.
There is a transitory period though where accumulated inventories are used first
before there is a noticeable change on the aftermarket. However, the aftermarket
has had a stabilizing effect in Q1, which is positive.

Haldex is aiming to broaden its range of products for the aftermarket, which is
even more important now that new production is decreasing. In mid-April, we
launched our two new brands on a broad front – Midland for North America and
Grau for Europe. This is a part of our efforts to put out a broader range of
products focused on third and fourth vehicle owners, which have shorter service
life requirements and do not want to pay for a premium product. We also launched
our new website which has a new addition: an e-commerce platform, which is
mainly geared toward our aftermarket customers. Our North American customers are
the first to get access to the e-commerce platform, followed closely by our
European customers later this year. Haldex has never previously offered e
-commerce to a major customer group and we are confidently looking forward to
how this channel can supplement our current sales.

Market outlook

Our outlook for 2016 remains unchanged in comparison to the previous quarterly
report. The European market is looking promising in 2016 with an increase in
order intake, while North America is forecast to see a decline from a strong
year in 2015. However, 2016 is forecast to be a year of above-average volumes in
North America from a historical perspective. The positive trend will continue in
India, but we expect no significant improvement in Brazil and China in 2016.

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. However, our goal is to continue ensuring solid profitability, and the
operating margin for Q1 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: Friday April 22 at 11.00 CEST

The press conference is broadcasted at:
http://financialhearings.nu/?160422/haldex

To join the telephone conference:

Sweden: : +46 8 56 64 26 98
UK: +44 20 3008 9809
US: +1 646 5025 116

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/presentations
For further information visit www.haldex.com or contact:

Bo Annvik, President & CEO, 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 Swedish
Financial Instruments Trading Act. The information was submitted for publication
on April 22, 2016 at 7.20 am CEST.
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.