Growth and increased operating profit in a weaker market. Strong cash flow.
Third quarter of 2019
- Net sales rose by 17 percent to SEK 1,044 million (895). Organic growth was slightly positive
- Order intake increased 17 percent and was in line with net sales
- Operating profit (EBITA) rose to SEK 89 million (81) and the operating margin to 8.5 percent (9.1)
- Earnings per share amounted to SEK 1.57 (1.37)
- Operating cash flow amounted to SEK 122 million (50)
- At the beginning of the quarter, the acquisition was completed of HT BENDIX A/S, with annual sales of circa SEK 500 million
January-September 2019
- Net sales rose by 14 percent to SEK 3,223 million (2,820). Organic growth was 3 percent
- Order intake increased 14 percent and was in line with net sales
- Operating profit (EBITA) rose to SEK 311 million (285) and the operating margin was 9.6 percent (10.1)
- Earnings per share rose to SEK 5.72 (5.14)
- Operating cash flow increased to SEK 255 million (112)
The Group in brief
| Quarter 3 | D | Jan-Sep | D | 12-months rolling | Full year | |||
| SEK million | 2019 | 2018 | % | 2019 | 2018 | % | 2018/19 | 2018 |
| Order intake | 1,042 | 893 | 17 | 3,206 | 2,816 | 14 | 4,188 | 3,798 |
| Net sales | 1,044 | 895 | 17 | 3,223 | 2,820 | 14 | 4,190 | 3,786 |
| Gross profit | 279 | 259 | 8 | 886 | 817 | 8 | 1,157 | 1,088 |
| % | 26.7 | 28.9 | 27.5 | 29.0 | 27.6 | 28.7 | ||
| Operating expenses | -191 | -178 | 7 | -575 | -532 | 8 | -764 | -721 |
| % | 18.3 | 19.9 | 17.8 | 18.9 | 18.2 | 19.0 | ||
| Operating profit (EBITA) | 89 | 81 | 10 | 311 | 285 | 9 | 393 | 367 |
| % | 8.5 | 9.1 | 9.6 | 10.1 | 9.4 | 9.7 | ||
| Operating cash flow | 122 | 50 | 144 | 255 | 112 | 127 | 318 | 175 |
| Operating profit | 85 | 79 | 7 | 302 | 279 | 8 | 393 | 358 |
| % | 8.1 | 8.8 | 9.4 | 9.9 | 9.4 | 9.5 | ||
| Profit after tax | 59 | 51 | 15 | 214 | 193 | 11 | 276 | 255 |
| Earnings per share, SEK | 1.57 | 1.37 | 15 | 5.72 | 5.14 | 11 | 7.37 | 6.79 |
CEO’s overview
During the third quarter, Bufab experienced a clearly weaker demand than earlier in the year and compared with 2018. Nonetheless, sales, operating profit and cash flow increased compared with a strong third quarter 2018. This development was mainly attributable to positive contributions from acquired companies. During the quarter, we continued to invest in our “Leadership 2020” strategy.
The weaker demand was particularly noticeable in Sweden, Eastern Europe and China. The slowdown is due to lower production among many customers, as well as customer destocking. Despite a continued increase in market shares, we achieved only a slightly positive organic growth in the quarter.
In Segment International, we noted a lower growth than previously despite an increased market share. We continued to invest in strategic areas. The operating profit and margin declined somewhat during the quarter, but increased during the first nine months of the year.
In segment Sweden, the slowdown was stronger and resulted in negative organic growth despite retained market shares. The gross margin was strengthened organically compared with the recent two quarters and last year. This improvement was mainly due to comprehensive price increases. Our two most recent acquisitions also performed well, which, combined with effective cost control, facilitated a strong increase in operating profit despite the weaker market.
During the quarter, we continued our focus on the “Leadership 2020” strategy, with the aim to become the leading company in our industry next year. We strive to increase our customer value and efficiency. Both of these factors are particularly important in times of low market growth.
In July, Bufab completed the acquisition of HT BENDIX A/S, a leading Danish supply chain partner with approximately SEK 500 million in sales. This acquisition is a strong and significant complement to our existing operations in the Nordic region. The company has integrated well with the operations and is already contributing to the Group’s earnings. We continue our search for attractive acquisition candidates that can contribute with growth synergies, customer relations, supplier bases and expertise.
The former uncertainty regarding demand was replaced in the quarter by a clear, but nonetheless limited slowdown. This situation presents challenges and opportunities. We are addressing the weaker demand using stricter cost control and through efficiency enhancement of structure and processes. The digital tools that we have developed and deployed in recent years play an important role in this. In this way, we intend to create the scope for continued investments in our Leadership strategy, but still adapt the cost base to the prevailing market.
We can also see many business opportunities in a weaker market. Lower demand enables purchasing savings. A strong focus on realising these will be of high priority during the coming year. Customers intensify their productivity efforts, which creates sales opportunities for Bufab. Weaker competitors come under pressure. Acquisition candidates become more inclined to sell. All of this creates opportunities for Bufab to strengthen our position.
On this basis, we feel quite confident even in the prevailing market situation. Our strategy remains unchanged and we aim at a continued good development also going forward.
Jörgen Rosengren
President and CEO
Conference call
A conference call will be held on 25 October 2019 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: +44 2071 928 000, UK 08 445 718 892, Sweden 08 506 921 80 or the US 1 631 510 7495. Conference code: 9983815.
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 contact on 25 October 2019 at 7:30 a.m. CET.
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