SAF-HOLLAND's preliminary figures for Q3 2018 show an increase of 15.0% in organic sales and an adjusted EBIT margin of 8.0% (including extraordinary income of EUR 4.4 million); Company refines its outlook for 2018
SAF-HOLLAND's preliminary figures for Q3 2018 show an increase of 15.0% in organic sales and an adjusted EBIT margin of 8.0% (including extraordinary income of EUR 4.4 million); Company refines its outlook for 2018
- According to preliminary figures for Q3 2018, Group sales increase by 22.9% to EUR 340.6 million (py: EUR 277.1 million)
- EBIT includes extraordinary income from the settlement of a US medical plan in the amount of EUR 4.4 million and increases by 45.2% to EUR 22.5 million (py: EUR 15.5 million)
- Adjusted EBIT improved to EUR 27.1 million (py: EUR 20.9 million)
- Organic growth forecast for 2018 increased to a range of 9% to 10% (previously 5% to 7%)
- Adjusted EBIT margin for full-year 2018 (including extraordinary income of EUR 4.4 million) seen rather tending to the lower end of the target range of 7.0% to 8.0%
Strong organic sales growth continues in the third quarter of 2018
Luxembourg, October 19, 2018 - SAF-HOLLAND S.A. ("SAF-HOLLAND"), the supplier to the trailer, truck and bus industries, increased its sales in the third quarter of 2018 by 22.9% to EUR 340.6 million (py: EUR 277.1 million) on the basis of preliminary figures. On an organic basis - before exchange rate and acquisition effects - sales increased by 15.0% to EUR 318.8 million. The acquired companies V.ORLANDI, York Transport Equipment (Asia) Pte. Ltd. and Axscend Ltd. contributed a total of EUR 25.6 million to Group sales.
Adjusted Group EBIT margin reaches 8.0% and 6.7% before extraordinary income
The development of adjusted Group EBIT in the third quarter of 2018 was still influenced by additional operating expenses related to the alignment of the restructured production network in the United States and significantly higher steel prices. Nevertheless, adjusted EBIT improved by EUR 6.2 million to EUR 27.1 million (py: EUR 20.9 million). This figure includes extraordinary income of EUR 4.4 million from the settlement of a medical plan in the United States. The adjusted EBIT margin reached 8.0% (py: 7.5%) and 6.7% before extraordinary income. Pre-tax profit in the third quarter of 2018 increased to EUR 19.5 million (py: EUR 11.0 million). Supported by a lower income tax rate net income rose to EUR 15.3 million (py: 7.5 million). Undiluted earnings per share reached EUR 0.34 (py: EUR 0.17).
Steel prices and additional operating expenses affect profitability in the Americas segment: strong increase in sales accompanied by sequential earnings improvement
Despite the remaining production inefficiencies and related capacity bottlenecks in the United States, the Americas region in the third quarter of 2018 achieved sharply better-than-planned sales growth of 17.3% to EUR 129.0 million (py: EUR 110.0 million). As a result, the share of Group sales stemming from this region increased noticeably when compared to the prior quarter.
The Americas region's adjusted EBIT continued to improve in the third quarter of 2018 on a purely operational basis versus the prior quarter and rose to EUR 2.1 million (Q2 2018: EUR 0.7 million). In addition, the settlement of a US medical plan resulted in additional extraordinary income of EUR 4.4 million. This will immediately lead to annual cost savings of EUR 0.4 million. Overall, adjusted EBIT in the region amounted to EUR 6.5 million (py: EUR 5.0 million). Steel prices that have been weakening slightly since the middle of the third quarter of 2018, nevertheless remained at a very high level on a quarterly average and continued to weigh on earnings. The additional cost of materials resulting from the steel price increase totaled EUR 3.9 million in the Americas region in the third quarter of 2018 (Q2 2018: EUR 4.3 million). In addition, start-up costs and lingering production inefficiencies within the restructured US production network resulted in additional operating expenses of EUR 2.0 million in the third quarter of 2018 (Q2 2018: EUR 2.3 million; Q1 2018: EUR 3.9 million). SAF-HOLLAND has made a conscious decision to give priority to the timely delivery of its customers. Increased express freight and logistics costs resulted primarily from continued strong demand in North America and the extremely tense situation in the supply chain in the industry as a whole.
Adjusted EBIT margin in EMEA region improves versus the prior year
In the EMEA segment, sales improved by 7.9% to EUR 155.5 million (py: EUR 144.1 million) and 4.0% on an organic basis. Despite seasonally weaker quarterly sales, the segment was able to maintain the high margin level of the previous quarter supported by a positive sales mix. The adjusted EBIT margin rose to 11.3% (py: 10.1%).
The APAC/China segment posted sales growth of EUR 33.0 million to EUR 56.1 million in the third quarter of 2018 (py: EUR 23.1 million). The acquired York Group, Singapore, whose operating margin is still below the Group's average, contributed EUR 20.1 million to the region's sales. The adjusted EBIT margin in this region amounted to 5.5% (py: 6.1%).
Company refines sales and earnings forecast for the 2018 financial year
Based on high organic growth in the third quarter of 2018 and continued strong demand for SAF-HOLLAND's products, the Group now expects organic sales growth to reach 9% to 10% in full-year 2018 compared to the previously planned growth of 5% to 7%. Due to the significantly better-than-expected performance of the acquired companies, SAF-HOLLAND is once again refining its target for the sales contributions from the acquisitions. V. ORLANDI, York and Axscend are now expected to contribute EUR 65 million to EUR 70 million to Group sales in 2018. In July 2018, the Group had already increased its expectations from initially around EUR 50 million to EUR 60 million.
Based on the result for the third quarter of 2018, the stronger-than-expected sales development in the Americas region, which currently however contributes below-average margins to the Group's results, as well as the high steel prices, SAF-HOLLAND sees the adjusted EBIT margin in full-year 2018 (including EUR 4.4 million in extraordinary income) rather tending towards the lower end of the 7.0% to 8.0% range taking into consideration the usual seasonal effects in the final quarter of the year.
With regard to the medium-term goals under SAF-HOLLAND's Strategy 2020, the Company confirms its target for a return of the adjusted Group EBIT margin to a level of at least 8.0% in the years ahead. The Company is currently optimizing its process chains and integrating of capacity planning and logistics processes in the North America region in order to continue to gradually improve earnings. In view of the current trend in commodity prices, the Company reckons the negative effects of the sharp rise in steel prices to have peaked and in the mid-term expects these effects to tend to decline, also as a result of largely passing on these effects in its own selling prices. At the Group level, management believes that among others, price adjustments and material cost savings related to attaining specific purchasing volumes, will impact profitability positively.
The final results will be announced with the publication of the interim statement for the third quarter of 2018 on November 8, 2018.
About SAF-HOLLAND:
SAF-HOLLAND S.A., located in Luxembourg, is the largest independent listed supplier to the commercial vehicle market in Europe delivering mainly to the trailer markets. With sales of approximately EUR 1,139 million in 2017, the Company is one of the world's leading manufacturers and suppliers of chassis-related systems and components primarily for trailers, trucks, buses, and recreational vehicles. The product range comprises axle and suspension systems, fifth wheels, kingpins, and landing gear marketed under the brands SAF, Holland, Neway, KLL, V.Orlandi and York. SAF-HOLLAND sells its products to Original Equipment Manufacturers (OEM) on six continents. The Group's Aftermarket business supplies spare parts to the service networks of Original Equipment Suppliers (OES), as well as to end customers and service centers through its extensive global distribution network. SAF-HOLLAND is one of the few suppliers in the truck and trailer industry that is internationally positioned in almost all markets worldwide. With the innovation campaign SMART STEEL - ENGINEER BUILD CONNECT, SAF-HOLLAND combines mechanics with sensors and electronics and drives the digital networking of commercial vehicles and logistics chains. More than 4,100 committed employees worldwide are already today working on the future of the transportation industry.
Conference Call on October 19, 2018, at 10:00 a.m. CEST
On this occasion, SAF-HOLLAND will hold a management conference call for analysts and investors today, October 19, 2018, led by CEO Detlef Borghardt and CFO Dr. Matthias Heiden.
To join the conference call and web presentation, please use the following dial-in numbers:
Telephone numbers:
+49 30 232531173 Germany
+1 862 701 2734 United States
+44 20 3872 0885 United Kingdom
+45 89 87 21 46 Denmark
+41 43 550 14 55 Switzerland
Link to web presentation Event Manager:
https://webcast.meetyoo.de/index.html?e=V5Ebul77z9qf