SAF-HOLLAND adjusts its outlook for the 2017 financial year
SAF-HOLLAND adjusts its outlook for the 2017 financial year
- Preliminary figures show Group sales in the third quarter of 2017 at approx. EUR 277.1 million (previous year: EUR 255.8 million) and organic growth at roughly 9.6%
- Pick-up in demand coinciding with current US plant consolidation results in temporary additional expenses in the third quarter of approx. EUR 4.0 million
- 2017 financial year sales forecast raised to a range of EUR 1,125 million to EUR 1,135 million (previous forecast: tending rather towards the upper end of the EUR 1,060 million to EUR 1,090 million range) due to stronger-than-expected organic growth
- Adjusted EBIT margin in 2017 expected within the originally planned range of 8-9%, but from today's perspective should rather tend towards the lower end of this range (previous forecast: mid-point of this range)
Organic sales growth accelerates in the third quarter
Luxembourg, October 09, 2017 +++ Based on preliminary, unaudited Group figures, SAF-HOLLAND S.A. ("SAF-HOLLAND") generated sales in the third quarter of approx. EUR 277.1 million (previous year: EUR 255.8 million), representing year-on-year growth of 8.3%. On an organic basis (excluding currency and consolidation effects), year-on-year growth amounted to roughly 9.6%, which demonstrates that sales gained further momentum after an already strong first half-year (+7.4%). The third quarter of 2017 saw a particularly strong year-on-year rise in short-term demand from OEM customers in the US truck and trailer industry. Sales in APAC/China in the third quarter remained brisk, buoyed by the statutory maximum load restrictions for commercial vehicles, while in Europe the essentially solid market trend continued.
Strong increase in demand during the current US plant consolidation causes a temporary rise in expenses
As part of the consolidation of the US plant network announced at the start of the year, and particularly as a result of the transfer of production from the Holland and Muskegon (Michigan) locations to the Cincinnati (Ohio), Warrenton (Missouri), Dumas (Arkansas) and Wylie (Texas) sites, one-time restructuring expenses for the plant consolidation of roughly EUR 3.0 million were incurred in the third quarter of 2017 and excluded in the calculation of the adjusted EBIT.
Given the noticeably stronger-than-expected demand from many OEM customers in North America, which coincided with the late-stage transitioning measures being undertaken as part of the current plant consolidation and the resulting temporary limitations on capacity, there were also appreciable production inefficiencies in the third quarter of 2017. In order to manage the high production quantities, there was a temporary need for a significantly higher number of employees than originally planned, and freight and logistics costs were forced sharply higher. The sum of additional unplanned expenses in the third quarter of 2017 totaled approx. EUR 4.0 million. These expenses placed equal pressure on the gross profit, operating result and adjusted EBIT of the Americas region. Despite the strong performance in the EMEA/I region, this effect could not be compensated for. The Group's preliminary total adjusted EBIT figure in the third quarter of 2017 reached approx. EUR 20.9 million (previous year: EUR 21.6 million), representing an adjusted EBIT margin of 7.5%. The reported EBIT in the third quarter of 2017 amounted to roughly EUR 15.6 million (previous year: EUR 17.1 million) and included one-time restructuring expenses totaling EUR 4.0 million (EUR 3.0 million of which was attributable to the US plant consolidation) and purchase price allocation effects of around EUR 1.3 million.
CEO Detlef Borghardt in his comments about the development in the United States at the end of the third quarter stated: "The temporary, higher-than-expected costs necessary to manage the brisk pick-up in production quantities in North America burdened earnings short-term. Nevertheless, we are confident that maintaining a clear and continuous focus on our customers' needs is the right decision for our long-term success. It helps us build a strong foundation for our future relationship with our customers and gain further market share."
2017 sales forecast raised to EUR 1,125 million to EUR 1,135 million
Given the high level of organic growth generated year-to-date and the business development expected for the remainder of the 2017 financial year, SAF-HOLLAND now expects full-year 2017 organic Group sales to be in the range of EUR 1,125 million to EUR 1,135 million (previous year: EUR 1,042 million). As a result, Group sales should significantly exceed the original forecast of tending towards the upper end of the EUR 1,060 million to EUR 1,090 million range. SAF-HOLLAND already stated with the publication of its 2017 half-year report that Group sales for the full 2017 financial year could presumably come in rather towards the upper end of the EUR 1,060 million to EUR 1,090 million range that was projected in the annual report for the 2017 financial year.
2017 adjusted EBIT margin expected to rather tend towards the lower end of the range of 8-9%
The transfer of production facilities from their location in Holland, U.S., was completed at the end of September 2017. The transfer of production from the Muskegon location is still underway and will be completed by the end of the year. In light of the strong demand situation, SAF-HOLLAND expects to incur further additional operating expenses in connection with the US plant consolidation in the current fourth quarter. As a result, SAF-HOLLAND still expects to reach the 2017 earnings expectations set out in the 2016 annual report for an adjusted EBIT margin in the range of 8-9%. Yet whereas, until now, the expectation was that the margin would tend towards the mid-point of this range, based on the temporary cost situation in North America described above, the Company from today's standpoint expects that the adjusted EBIT margin will rather tend towards the lower end of the 8-9% range planned.
For the 2017 financial year, the Group expects to incur one-time restructuring expenses for the consolidation of the North American plant network in the range of US$ 11 million to US$ 12 million. These expenses mainly consist of relocation costs, asset impairment charges and severance payments. This range compares to the originally planned amount of US$ 10 million for restructuring expenses. Important to highlight is that these expenses are excluded in the calculation of adjusted EBIT, the Group's key performance indicator. Unchanged SAF-HOLLAND expects a reduction in the direct cost base in North American of roughly US$ 5 million p.a. after the successful completion of the restructuring measures.
Conference Call on October 9, 2017, at 13:00 p.m. CEST
With the announcement of the preliminary results for the third quarter of 2017, SAF-HOLLAND will host a conference call for analysts and investors with CEO Detlef Borghardt and CFO Dr. Matthias Heiden today, October 9, 2017, at 13:00 p.m. CEST.
To join the conference call and web presentation, please use the following dial-in numbers:
+49 30 232531428 Germany (local)
+44 1635 598058 United Kingdom (local)
+1 312 4799419 United States (local)
+41 44 5112190 Switzerland (local)
+45 38 323125 Denmark (local)
Link to web presentation Event Manager:
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 1,042 million in 2016, 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 and Neway. SAF-HOLLAND sells its products to Original Equipment Manufacturers (OEMs) 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 "SMARTSTEEL - ENGINEER BUILD CONNECT", SAF-HOLLAND combines mechanics with sensors and electronics and drives the digital networking of commercial vehicles and logistics chains. A total of 3,200 committed employees worldwide are already working on the future of the transportation industry.