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SAF-HOLLAND generates sales of EUR 1.3 billion in 2018 for the first time and reaches the lower end of the adjusted EBIT margin forecast range as expected; planned earnings improvement firmed up for 2019

SAF-HOLLAND generates sales of EUR 1.3 billion in 2018 for the first time and reaches the lower end of the adjusted EBIT margin forecast range as expected; planned earnings improvement firmed up for 2019

 

- Group sales increase 14.2% to EUR 1,300.6 million in 2018; organic growth reaches 12.2% and is above the October 2018 upward revised forecast range of 9 to 10%

- Acquisitions contribute sales of EUR 70.9 million and exceed forecast of EUR 65 to 70 million

- Adjusted EBIT reaches EUR 89.6 million (previous year: EUR 91.2 million); adjusted EBIT margin at 6.9%, as expected, at the lower end of the forecast range adjusted in October 2018 of 7.0 to 8.0%

- Basic earnings per share increase by 11.6% to EUR 1.06 (previous year: EUR 0.95)

- 2019 Outlook: Sales growth of 4 to 5%; adjusted EBIT margin around the midpoint of the range of 7 to 8% and below original 2019 adjusted EBIT margin forecast of a minimum of 8%

- Company confirms mid-term sales and adjusted EBIT margin targets under the 2020 Strategy

 

Luxembourg, February 20, 2019 – SAF-HOLLAND S.A. ("SAF-HOLLAND"), the supplier to the trailer, truck and bus industries, increased its sales by 14.2% in the 2018 financial year and reached a new record EUR 1,300.6 million (previous year: EUR 1,138.9 million), based on preliminary, unaudited figures. On an organic basis (before exchange rate and acquisition effects), sales increased by 12.2%, which was higher than the upward revised organic growth forecast of 9 to 10% announced in October 2018. The Group’s initial growth expectation at the start of 2018 had been 4 to 5%.
 

The newly acquired companies V.ORLANDI, York Transport Equipment (Asia) Pte. Ltd. ("York") and Axscend Ltd contributed a total of EUR 70.9 million to Group sales in the 2018 financial year. This level exceeded the upward revised range of EUR 65 to 70 million announced in October 2018. The acquired companies also performed well in 2018 in terms of profitability. As expected, V.ORLANDI achieved an adjusted EBIT margin in the low double-digit percentage range. York steadily improved its margin over the course of the year, exceeding the Group’s average for the first time in the fourth quarter of 2018.
 

Organic sales increase 9.0% in the fourth quarter of 2018
Sales in the fourth quarter of 2018 increased by 16.6% to EUR 319.7 million (previous year: EUR 274.2 million) and organic sales rose 9.0%. Regional performance varied widely with the Americas region increasing sales by 25.1% (organic growth: 22.2%) to EUR 117.8 million (previous year: EUR 94.1 million). After nearly doubling its sales in the first nine months, however, the APAC/China region recorded growth of 35.2% in the fourth quarter of 2018 (organic growth: -16.3%) to EUR 43.8 million (previous year: EUR 32.3 million). Business in China was impacted by a significant decline in the export business of Chinese customers with the US, as a result of the trade conflict between the two countries. With sales in the EMEA region reaching EUR 158.2 million in the fourth quarter (previous year: EUR 147.7 million), growth of 7.1% (organic growth: 6.1%) remained roughly in line with the level generated in the first nine months.
 

Full-year 2018 adjusted EBIT margin at 6.9% at the lower end of the 7.0 to 8.0% range, as expected
The Group’s adjusted EBIT in the 2018 financial year was EUR 89.6 million (previous year: EUR 91.2 million) and the adjusted EBIT margin 6.9% (previous year: 8.0%). SAF-HOLLAND thus achieved its target of an adjusted EBIT margin at the lower end of the revised target range of 7.0% to 8.0% announced in October 2018. Adjusted EBIT included non-recurring income of EUR 4.4 million from the settlement of a US Medical Plan, recognized in the third quarter of 2018.
 

In the fourth quarter of 2018, the Group achieved an adjusted EBIT of EUR 18.5 million (previous year: EUR 18.5 million) and an adjusted EBIT margin of 5.8% (previous year: 6.7%). Despite continuing burdens due to the existing capacity bottlenecks in the North American plant network, the Americas region was able to improve adjusted EBIT to EUR 2.0 million (previous year: EUR -3.9 million) and the adjusted EBIT margin to 1.7% (previous year: -4.1% ). The adjusted EBIT margin also increased slightly compared with the prior quarter (adjusted EBIT margin of 1.6% excluding the aforementioned non-recurring income), although the fourth quarter is usually weaker due to the lower number of working days. Additional operating expenses in the fourth quarter amounted to EUR 1.4 million, which was a reduction of EUR 0.6 million on a sequential basis (Q3: EUR 2.0 million). Pressure from higher steel prices was also partially offset by price adjustments and totaled EUR 1.1 million in the fourth quarter of 2018 (Q3: EUR 3.9 million; Q2: EUR 4.3 million; Q1: EUR 2.0 million).
 

The adjusted EBIT margin of the EMEA region was 9.1% in the fourth quarter of 2018 (previous year: 13.2%). The measurement as of the reporting date of foreign currency from trade payables and receivables and a tariff increase in personnel expenses had a negative impact. In the APAC/China region, the adjusted EBIT margin in the fourth quarter was 4.8% (previous year: 9.3%). York, which was acquired in the 2018 financial year, also contributed to the higher adjusted EBIT margin.
 

Outlook for the 2019 financial year: 4 to 5% increase in sales and an adjusted EBIT margin around the midpoint of the range of 7 to 8%
Due to numerous political and economic uncertainties, SAF-HOLLAND’s Group Management Board expects the market environment in 2019 to be more difficult overall than in 2018. Based on its strong position in structurally growing market segments, the Group still expects to be able to further increase its sales in the current year and achieve sales growth in the range of 4 to 5%. The acquisitions in the 2018 financial year, which were not yet consolidated for a full twelve months in 2018, will also contribute to this growth.
 

From today's perspective, the Group’s adjusted EBIT margin is expected to be around the midpoint of the 7 to 8% range. This compares with the originally forecasted adjusted EBIT margin of at least 8% for 2019. The planned improvement in earnings compared to 2018 is mainly due to the continued ongoing reduction in production inefficiencies in the North American plant network. The measures introduced in 2018 to improve efficiency will be vigorously pursued in 2019. In addition, the Group expects that the sharp rise in steel prices in 2018 will no longer have a significant negative impact on earnings. SAF-HOLLAND is also confident that it will be able to achieve further earnings improvements this year in the APAC region, which will be reported separately starting with the 2019 financial year. This improvement will largely come from cost reductions in the wake of York's further integration. In China, the new production center will be launched during the 2019 financial year, which in terms of capacity will be the largest and most modern plant in the SAF-HOLLAND Group. This reflects the optimism that, despite temporary pressure from global trade disputes, the region of China will benefit greatly over the medium term from the transition to premium applications as a result of regulatory changes. Currently, SAF-HOLLAND expects the development of sales in Europe to be largely stable in 2019.
 

Improvement in earnings per share
Based on a total of 45.4 million ordinary shares outstanding, basic earnings per share improved by 11.6% to EUR 1.06 (previous year: EUR 0.95). Adjusted basic earnings per share amounted to EUR 1.19 (previous year: EUR 1.16).
 

Sales and adjusted EBIT margin forecast in the scope of Strategy 2020 confirmed
With respect to Strategy 2020, the SAF-HOLLAND Group Management Board confirms its medium-term targets for sales and adjusted EBIT margin. Due to a higher level of investment, the investment ratio is anticipated to rise from 2.5% to a level of 4 to 5% of sales. Taking into consideration the companies acquired and expected sales growth, the net working capital ratio should amount to 13%, compared to the initial expectation of 12%. After an expected transitional year in 2019, the Group's adjusted EBIT margin should once again reach at least 8% in the 2020 financial year.

SAF-Holland will publish the final results with the publication of the 2018 Annual Report on March 22, 2019.

 


Alexander Pöschl
Senior Manager Investor Relations / Corporate Communications

Tel. +49 (0)6095 301 117
Fax +49 (0)6095 301 102

SAF-HOLLAND GmbH
Hauptstraße 26
D-63856 Bessenbach
Deutschland