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edited transcript of sfq.de earnings conference call or presentation 8-nov-18 10:30am gmt

by:QY Precision      2019-12-15
Q3 Holland SA earnings 17, 2018 (Q3 2018)
Thomson StreetEvents)--
Edit transcript of Saf Holland SA earnings conference call or presentation, Thursday, November 8, 2018 at 10:30:00 am GMTTEXT versionHolland S. A. -
President of Asia Pacific/China, member and director of management committee * Matthias HeidenSAF-Holland S. A. -
Chief financial officer and member of management committeeHolland S. A. -
Research Conference call attendees Alexander * Research Department Alexander Walman First Bank Co. , Ltd. , vice president of communications, IR and the company-
Analyst * BitterHauck Frederick & Aufh äuser Privatbankiers AG, Research Office,
Analyst LorrainJoh Philip.
Berenberg of Gosler
Research Department-KG
Analyst introduction--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------
Ladies and gentlemen, welcome to the Sudanese armed forces. HOLLAND S. A.
Conference Call on Third Quarter Results of 2018. (
Operator instructions)
Now, sir, let me give the floor to your master. Stephan Haas. --------------------------------------------------------------------------------
Stephen Haas, Sudanese armed forcesHolland S. A. -
Vice President of IR and Corporate Communications [2]--------------------------------------------------------------------------------Yes. Thank you.
Good morning, ladies and gentlemen, thank you for joining the Sudanese armed forces
What the Netherlands understands today is a rather crowded publishing day.
Let us note that this call came after the call we made in October 19 to release the preliminary figures and refine the guidance.
As usual, you are used to it, our CEO, detrov bejard; and Dr.
Matthias Heiden, our CFO, will take turns presenting slides.
With this, I want to give it to Delev. Thanks. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [3]--------------------------------------------------------------------------------
Stephen, thank you very much.
Also a warm welcome and good morning on my side.
I\'m Beverly.
Thank you for calling today.
Our agenda for today, which I have covered on the second page of our speech, mainly 4 points, I will try to guide you through it.
I will start with a business summary of 2018 for the third quarter.
Next is the market update.
This means that we are now in November 2018 and we will tell you where we are, where the market is, what is expected and what will happen in the future.
Next, we will outline the situation and profit trends in our different regions, from North America or the Americas, to be exact, in Asia Pacific and China, this will be finalized in conjunction with the group\'s sales and revenue targets for the full year of 2018.
As usual, as Stephan said, today\'s presentation will be divided between Matthias and me, and I will do the first part.
That being said, jump to page 3 in our demo.
As you can see on the title, we will confirm our preliminary numbers.
You can see this in the title that we have already shown in October 19.
In the third quarter of 2018, our sales increased by 22. 9%.
With this number, we can report it. -
Or we report the highest group sales in the third quarter.
In absolute terms, we are talking about 340 euros.
Compared with EUR 6 million in the previous year, it was 277. 1 million. Organically --
This means that without our M & A activities, especially those from India and New York, it will contribute to the high growth of sales.
Our sales have only grown organically by 15%, which is a very high number.
Please allow me to make a side comment.
We have been able to track the market, especially in North America, which is a very popular market these days.
I will talk about this in more detail later.
Despite all the problems in the supply chain, labor market tension and so on, we are able to grow significantly to provide our customers with products, whether in OE or after-sales market.
The same is true in Europe and there is a lot of supply chain pressure.
So to reach that number-
By the way, I also have to mention China because here we have almost the same problem and we can only have the opportunity to increase sales by 15%.
In my opinion, this is a very good achievement.
Compared to other market players on the supplier side, the customer side, we believe we are doing very, very well in achieving this high sales. Yes.
On the third point, you will see the ongoing burden of increased operating costs associated with our US businessS.
Factory consolidation and rising steel prices in North America. But --
It is very important to mention this here, and we have seen and reported continuous profitability improvements in the Americas in the third quarter of this year.
That\'s what we promised before.
On the fourth point, you can see the sales mix in the US. S.
First, it came in--
Total sales in the United StatesS.
As expected, revenue for the third quarter was much higher, a positive side of the coin.
Negative, usually always, this high sales is accompanied by significantly lower-
In these stormy days, the group\'s average profit margin associated with the product portfolio. Yes.
Special income
We booked 4 euros.
Third quarter 4 million special income based on partial US cash settlementS. medical plan.
We will explain this in more detail later.
Still, at 2018 in the third quarter, the group\'s adjusted EBIT was 27 euros.
1 million, or a margin of 8%, respectively.
Last year was 7. 5%.
Since we wanted to be as transparent as possible and we were always very transparent, we created a similar thing called a clean adjustment EBIT margin.
So we took out 4 euros.
Additional 4 million-
As an extraordinary income.
Then you get an EBIT margin if you do the calculation ---
The adjusted EBIT margin is 6. 7%.
Net income doubled, up 104%, to 15 euros, compared with last year.
Compared to 3 million euros, 7.
5 million last year.
On the next 3 pages, I would like to talk about the market situation.
First, start as usual with the trailer market in North America.
I\'m on page 4 of our speech.
As you can see on the title, we see that the number of orders in the North American trailer market is still very strong.
Backlog of most trailer original equipment manufacturers in the United StatesS.
More than 6 months
Even the big players on the market are now booked for 5 to 6 months, which is very unusual.
When you see the order intake for September, especially 56,000 units, I don\'t know when we saw 56,000 units in a month-
For more than a year.
This is a very high number, 59% higher than last month. over-
133% months-over-year.
So that means the trailers are now tracking the truck side more or less, this truck section.
Remind me that at the end of last year, at the beginning of this year, one of the two companies in North American car prediction, in this case, I am talking about ACT
Another thing that is well known is FTR.
ACT spoke earlier this year about the growth of the North American trailer market. 1%.
As you can see here, what they say is 51% higher than last year.
Therefore, this is very different from the original forecast and actual figures of the North American trailer market. I heard --
Or at the same time, we heard from some manufacturers of trailer original equipment that stopped selling.
They stopped 2019 of their sales because they had booked for the whole year.
Since no one knows the price and--
2020 cost and price, they stop selling and stop accepting new orders.
So what does that mean.
We don\'t know how much air, how much hot air, and how many bubbles are in this order.
We don\'t think that\'s much.
We are confident that what we are seeing is reliable orders that the fleet needs.
So is the truck market.
With this, I want to turn your attention to page 5 of today\'s annual report.
Orders for all months of the year are much higher than the previous year, and units are much higher than 2016, and you can look at the numbers yourself.
In the first nine months of this year, Grade 8 net orders, which is our main market, heavy
Duty trucks soared 140%.
Remind me, I just talked about 133% on the trailer side, and the speed on the truck side is about the same.
As a reminder, ACT also said this here ---
Earlier this year, at the end of last year, the order intake of 8 categories will increase by 26 to 2018. 6%.
We have about 140% people now.
So the difference is quite big. Why so much?
We put some text behind it.
First of all, electronics-
Locking device, so-
Known as ELD, all trucks have to use it from April.
Booming e-commerce
We call it the Amazon effect.
Our ton mileage is growing fast and our freight is getting higher and higher.
This means that the fleet makes money, can make money, and still has a modest fuel cost.
The backlog of orders for trucks is 6 to 7 months.
What we have recently heard from all the truck OEMs in North America is that they are asking for an increase of about 10% to 15% capacity next year, and if we can do that, they hope to see this from us and we will be able to do so.
So, in general, North America is very strong and continues to be strong.
The outlook for next year is also very optimistic.
Coming to Europe, this is our most important market for trailers. Year-to-
Date, on page 6, you can see the world of trucks.
Just to remind everyone, there are only 3.
Accounting for 5%-4% of our total SAF sales
The Dutch group has some sort of connection with the European truck market, so it doesn\'t matter to us.
But this is a good indicator anyway.
As you can see,-
For example, on September, the order--
Sorry, this is registration, not order now.
The number of new registrations for heavy commercial vehicle trucks above 16 tons has increased by one. 7%.
In the first nine months of this year, the European truck market grew by seven. 3%.
Also here, looking back, the forecast for this year is 4. 3%.
So it\'s almost twice as predictable.
Very solid, very strong.
In terms of trailers, as long as we say it verbally, we still see that, also after the Academy of Aerospace Sciences, held in Hanover on September and September, the manufacturer of trailer original equipment is fully loaded with orders.
Even for large trailers, trailers are usually supplied up to 4 weeks, some of which have been supplied in 2 weeks.
Now they have a backlog of orders for 3 to 4 months, so very stable.
So far we have not seen a drop in European trailers.
This means that the outlook for next year is also positive.
This is about the market.
The most important markets in the United States, the United States and Europe.
Let\'s take a look at the numbers on page 7 and talk about our group sales and adjusted EBIT quarterly.
As you can see on the left
The hand side of this-
On the slide, if you compare sales for the third quarter of this year to 0. 34 billion euros, as I have already said, SAF-
Dutch group, 2017 euros in the third quarter, 0. 277 billion euros.
You will see 255 euros if you only return to 2016. 8 million.
So that means for the third year in a row, there is a very good growth on top line.
On the adjusted EBIT, on the right-
On the hand side of the slide, we saw the bar 8%, orange, or 27 euros.
The absolute number is 1 million.
Also, if you deduct 4 euros.
Additional 4 million-
We also talked about this as a special booking for this year, and then, we were on it ---
Definitely, over Q3 2017 is a good thing.
On the next page, page 8, you can see our group sales share by sales channel and region in the third quarter of this year. On the left-
On the one hand, you can see that almost 76% of our total business is related to OEMs, about 1/4, 24.
1%, related to the after-sales market. Very stable.
As you know, our target is 25% and we are there.
Of course, as you can see before, the OEM market is very optimistic.
As a result, the after-sales market has been somewhat affected, especially in North America.
We can\'t meet all orders because the demand from Europe is so high, but it\'s still--
This is mainly due to the very good development of Europe.
Our overall after-sales market share is very stable at around 25%. On the right-
On the other hand, you now see a big difference in the share by region.
Europe is 45%. It was 52%.
Works in North America or the United States are almost 40%.
We are 38% now.
At present, the rest of the world, mainly the Asia-Pacific region and China, are very different. now they have contributed 16.
Accounting for 4% of our total sales, twice the original
More sensible than last year.
This is our 2020 strategy.
In order to achieve our goal, we are on a very good path to expand our sales in today\'s core markets, EMEA and outside the US.
And the rest of the world, and--
Mainly due to the acquisition of York, but also contributed to the development of sales in China and the Asia-Pacific region.
But I will talk about this in more detail later.
Before I do this, I want to give it to Matthias to talk--
More details about our sales development. --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [4]--------------------------------------------------------------------------------Yes.
Thank you, Delev.
Good morning from my side to everyone.
When looking at the development of sales in more detail in the next 2 slides, let\'s start with the usual break-up and look at 22.
9% of non-organic food, we spent 340 euros.
The third quarter was 6 million and was broken down in individual growth segments.
If we remove the negative translation effect of 3 euros7 million or [1. x%]
With the M & A contribution, I will comment on this in more detail in a second, slightly above 9% or 25 euros.
6 million euros, an organic increase of 41 euros.
7 million or 15%.
From the M & A point of view, I think it is worth it to you, at least for the moment, as we agree that this will help you in the modeling process. The EUR 25.
6 million consists of about 20 million euros from New York, slightly higher than Orlandi\'s 5 million euros, and 200 euros from Axscend, which was recently acquired in the United States. K.
Having said that, please note the comments I made during the second quarter conference call, where I highlighted the view that it is difficult to normalize the speed at which these businesses operate.
For example, if you take the Orlandi work for 5 euros as an example.
3 million in the third quarter, you divide it by 3, which gives you a different run speed than when we first incorporated it.
I think it\'s important to understand this because--
A bit like what we sometimes see in the business.
In this case, a big customer has a summer vacation, no cancellation of the product, no orders, so the income of the reservation is less.
This has nothing to do with slower activity.
This is a common seasonal pattern.
Turn the page to 10 pages.
I would like to base on the comments from Delev, because when we see the above --
It is important to plan organic sales growth in all regions, stressing that this paves the way for the value realization of the after-sales market in subsequent stages.
This is clearly where we get value.
This is where we consciously decide to serve our OE. -
Our OE customers support future aftermarket sales.
Of course, this is confirmation of the strength of our portfolio and our market positioningto-Market Strategy.
When we look at it in more detail, we see that EMEA continues to grow beyond market research forecasts.
In the third quarter, growth was 4. 1%.
As we address the challenges of North America, we see it continue and grow very strongly.
At the age of 18, this is the whole of America. 6%.
Now, when this grows on the OE side, this is also a partial explanation of the contribution to the profit.
Then, the Asia-Pacific region/China is 66 strong.
Compared with the strength of the previous year, it was 2%.
On the last side, I would like to simply point out that for those who notice the asterisk next to the EMEA number and the APAC/China number, you will find a footnote explanation, because we do redistribute India from EMEA to the Asia Pacific/China section, EMEA used to be called India\'s emai.
While these numbers are small, this needs to be noted in order to fully disclose, because if you put the initial disclosure next to this, you will find a small difference.
With this, dertleff will start from the area and I will be back in a few minutes. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [5]--------------------------------------------------------------------------------Yes.
He will come back after 2 slides.
The next few slides are me.
I want to talk about the Americas division.
I\'m on page 11 of my speech today.
Talk about sales first.
As you can see on the right.
On the one hand, there are some explanations, but I think a little more than we say in writing.
We still see very strong customer demand across all businesses, whether it\'s trucks, trailers or after-sales markets.
As I explained earlier today, the problem is--
The problem is that the complete supply chain is very tight.
This means that-
Although we are in the fourth quarter now, it means a year and it\'s very fast to see this
With the development, the supply chain has not been able to meet orders in the past and now.
This means that in North America, everyone has the same problem, starting with insufficient capacity and insufficient installed capacity, it doesn\'t matter which part we are talking about first.
Second, we all face a very tight labor market.
This means the availability of Blue
Limited Foreman;
Very limited in some areas.
We know from suppliers and also from customers that some of them want to start a third shift or work on weekends anyway.
Because they have no one, they can\'t do it at all.
The third point is the high turnover rate, which, of course, needs to be seen in the tight labor market.
This means that you can get new people to train them on the device, on the machine, on the craft.
After 3 weeks and 4 weeks or 2 months, they leave and go to the next company.
All this means that the supply chain is under pressure, and we are under pressure.
This means, how to say, everyone is turning a big wheel, but in this case it is difficult to make money with it.
But everyone is facing this problem and we are part of it.
Despite our efforts to increase sales and profitability, we did our best.
As you can see on the left, at the first point, sales have increased
On the one hand, the work is very good.
We have increased sales from 0. 11 billion to 2017 euros Q3 of 0. 129 billion euros.
That means the sales are 18.
6% higher than we expected.
We have a negative exchange rate effect of negative 1. 3%.
If you look at the summary and sales, what we can report is an increase of 17.
3%, that\'s the same, just to mention that the euro was over 6 million in the second quarter of 2018.
In terms of profitability, the adjusted EBIT is € 6. 7 million (sic)[EUR 6. 5 million]
It was 5 million euros before.
But that includes our contribution to partially resolving the US debt problem. S.
4 euro medical plan.
4 million, which brings us about 400,000 euros a year.
As we say now, the clean adjustment EBIT margin is now 1 compared to Q2.
6% contrast 0. 7% in Q2.
So you see improvements in EBIT as well.
We also have an additional operating fee of 2 million euros.
This is 2 euros compared to the second quarter. 3 million.
So here we see a step-by-step reduction.
Steel prices, I will discuss this issue in more detail on the next page, the burden of 3 euros. 9 million.
So it\'s down now because it\'s 4 euros in the second quarter.
At 3 million, the quarterly average steel price index remained high.
Having said that, I would like to focus your attention on the next page, which is page 12, to talk in more detail about steel price development in North America, something that is seen globally, very special.
Steel prices in other parts of Europe and China are also rising, but not as high as in North America.
Of course, this has to do with the tariff situation, and with North American steel companies raising prices to the highest level we can see.
But in any case, we are part of this game and we need to play this game.
As you can see on this chart, here we show the hot rolled coil price index for 2016 as the actual number and you will see the low point at the end of 2016. And then all-
The record high for the second quarter of this year was almost $940, $930, $940 /[tonne]. So --
But since then--
The price has fallen.
We also expect steel prices to fall for the rest of the year, as will next year.
This means that for us, most of you know that in the contract, most of our customers have all the important accounts, and we are able to pass the price difference on the steel.
This means it\'s two-way. Now --
This means that from now on, if steel prices continue to fall, we will see a positive trend in profitability, because we will be able and we will be able to pass on these high steel prices in the future.
So let\'s hope that steel prices in North America will still fall in 2019, and then we will see a positive impact on our gains and losses.
I want to talk about this. -
I would like to hand it over to Matthias as P & L may be the right word.
Yes, I will give it to you. --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [6]--------------------------------------------------------------------------------
Starting from page 13, this is a continuation of our regular visualization of the adjusted EBIT situation in the Americas.
When Delev discussed the comments on page 11, he talked about that.
But from my point of view, I might use this slide to explain again the introduction of a clean adjusted EBIT measurement, which I know is another performance measurement, however, we decided to do so in order to be fully disclosed and transparent and to be able to conduct a financial analysis, because we did receive additional revenue from the addition of the solution to the overall medical plan, the United States, that\'s why we call it a partial solution.
We did not terminate the medical plan for all employees, which gave us 4 euros.
4 million on P & L
Given our definition of Adjusted EBIT, we consider this to be part of our adjusted EBIT, first;
However, secondly, taking into account the reasons why the accrued items have been recorded as part of the personnel costs for the previous periods.
The release is therefore considered to be a credit for the cost of personnel in the area.
You can see two numbers at the same time.
The last comment on this topic is that the adjusted EBIT does include 4 euros.
4 million extraordinary harvest, I. e. , the EUR 6.
5 million will give us an adjusted EBIT margin of 5% in the region.
I think I can skip the burden effect on this slide as deleuve has already covered this on page 11.
If we turn 14 pages, then we can take advantage of what I said just now around the clean adjustment EBIT margin, which is the axis on the very right --
On the hand side, this explains why the margin is from 0 in turn. 6% to 1.
6%, did not jump to the 5% I just explained.
However, you see the strategy of continuously improving the quarter --over-
The quarter is in place and is being worked out.
We continue to work on this, but since the low point at the end of last year, we have recovered our profitability and, in fact, it has also played a role in profit and loss.
I\'ll post a comment later, because now I\'ll pass it on to detriff in order to make some comments about EMEA. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [7]--------------------------------------------------------------------------------Yes.
Very good news from--in Q3.
This is EMEA and the next APAC/China.
So the next two slides are definitely my favorite.
So starting with EMEA, you might read-
As Matthias has said, I am no longer a part of EMEAI.
That means India is part of our Asia-Pacific report.
But EMEA is still very strong in terms of sales and profitability.
In the third quarter of this year, our sales increased by 8% to 155 euros.
5 million, before 0. 144 billion euros, this is a very good growth.
Of course, the latest acquisitions of Orlandi and Axscend are also part of it.
If you deduct this on an organic basis and adjust the forex, sales are up 4% --over-
It is also a very good development based on the European trailer and truck market, which is also soaring but not that high.
After-sales market growth is higher, 6.
From the already high base of 3%, this is very important for us because it is well known that profitability is much higher than OE in the after-sales market.
So if we can develop the after-sales market faster than the OE business, then the EBIT business starts ---
Gross and EBIT lines.
This is what you see on this slide below.
In the third quarter, our adjusted EBIT rose by 20. 7% to EUR 17.
5 million, absolute number or percentage 11. 3%.
As I said, this is based on this positive mix effect, high after-sales market contribution.
But here, we are now clearly reaping the results of our plant integration in Europe in 2015 and 16.
Now we see that the factory is integrating.
We now see the effect on the operational level.
So everything is green for Europe.
Also, as with the side comments I have already said, the last time we did the preliminary figures we talked about this point at the world\'s largest commercial auto show in Hannover at the end of September.
I would say that we showed ourselves there in a very positive way.
Some of you visited us.
Thank you for coming.
The comments we got-
We have also made positive progress, which means the portfolio of products that we show, which means traditional products, but with great improvements, including all new products, talking about digital, automatic coupling, electronic
I think all these new product portfolios are welcomed by customers.
Since the Academy of Aeronautics and Astronautics, our feedback and discussion has been enormous, not only in Europe, but also globally.
So this is a very good performance and it also shows that EMEA is in very good condition.
And, as I have already said, the outlook for next year is positive.
Come to Asia Pacific/China on page 16 of our speech.
As you can see on the title, the percentage of organic sales growth within the group is the highest, which means that internal competition is going on.
Who will grow so fast?
It looks like Asia Pacific/China will succeed.
You can see in the third quarter 2017 that we did 23 euros. 2 million.
So compared with other regions, there is still less.
But now, as we acquire York, the leader in trailer axles and suspension in the Indian market, we can now report sales of 56 euros. 1 million.
In the third quarter of this year, New York alone contributed nearly 20 million euros to our sales.
If you look at our organic sales growth, we have seen a very strong 66. 2% increase.
Therefore, we are developing very fast in China and the Asia-Pacific region.
Of course, this is based on China\'s new regulations on heavy commercial vehicles.
We have talked about it many times in the previous phone call and it is still going on.
There is demand.
For our quality products, this means trailer axle with air suspension, trailer axle with air disc brake, customer seeking weight reduction, total cost of ownership, of course, we look forward to reliable products.
This is where we are very good at, especially in Europe, in this region, and one of the market leaders of this product, in the United States, we are 2.
So now our client sees this company, SAF-
Netherlands, very good in this field, they want to buy from us.
This means that our production in Xiamen, China\'s largest factory, is now fully loaded.
We work there 7 days a week, 3 shifts.
Our abilities are absolutely limited.
We are also using new facilities now, for example, we get new facilities from New York, their headquarters is based in Singapore, but the main facilities are located in Pune, India.
But there is also some business in China, in Qingdao in northern China.
We will also be using this factory more and more to relieve the pressure for Xiamen now, but our capacity is limited.
This is one of the main reasons why we are now building new facilities in Yangzhou. The [
The roof told me so many years
This Friday, right, or next Friday? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [8]--------------------------------------------------------------------------------No.
It\'s actually this Friday. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [9]--------------------------------------------------------------------------------
This Friday, so tomorrow.
So we are completely satisfied with this 46,000 square building.
We are in the instrument building, the largest factory in the world.
We are building this facility and it will also start in the second quarter of next year as we need more capacity.
As you can see, in terms of profitability in Asia Pacific/China, it is lower-
Slightly lower on this page, the adjusted EBIT is added at a price of 3 euros.
1 million euros compared to 1 euro.
4 million last year.
Calculated by percentage, 5. 5%.
This is to be expected, because so far, in terms of profitability, sales in New York are lower than the group ---
Average group profit margin, but we definitely have a goal to get York to the average overall group profit margin in the future.
The last point is that I will also try to explain that the main business in China and India has no after-sales market so far.
So it\'s just OE business, which means having [with this]
The contribution of the after-sales market has been very low so far, but this will come.
Achieving a profit margin of 5% to 6% EBIT is a good result.
Matthias, will you see the next page, I\'m sure? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [10]--------------------------------------------------------------------------------
Yes, the next page is about me as I owe you full P & L discussion and net working capital.
So let\'s start on page 17 and look at the gross profit at the end of the third quarter with a gross profit of 50 euros.
8 million, gave us a gross profit margin of 4. 9 --sorry, 14.
9% compared to last year\'s figure 16. 8%.
Of course, as shown in the middle of the slide, this is still affected by those burden factors that we discussed again on this call, mainly the additional operating expenses of 2 million euros, from the United StatesS.
Price of steel for 3 euros.
9 million, the restructuring cost at the group level is 0 euros.
6 million, only a small percentage of them are actually from the United States. S.
If we take it back, we will actually adjust the gross margin to 16. 8%.
If you look right-
On the other hand, please allow me to make some brief comments at this time.
This is the positive and negative qualitative analysis I am referring.
Of course, it also reminds us that there is still a temporary labor force here, and they are supporting a lot of challenges, but we are also trying to make up for some of the inefficiencies that we still have and are getting rid.
Of course, in terms of volume, it is unhealthy for plants with a long running utilization rate of more than 100%, which is why you have a minus sign and a plus sign, because in terms of additional sales, the plus sign is positive of course.
However, we did make a conscious decision this year to focus on the OE side and meet the needs of our customers, which explains this.
Of course, in the portfolio you \'ve seen on previous slides, clear customer focus in OE also has a different profit profile.
These comments, like a quick reminder, because we can already transfer the page to the coordination of the report\'s EBIT, now all the way to the clean EBIT, given the treatment and reports I have discussed earlier on special income.
Here, I would like to make an additional comment on the depreciation and amortization of the PPA, which is 2 euros in depreciation and amortization.
It was 6 million euros at the end of the second quarter and now 2 euros.
8 million, should drop to a more normal operating speed of about 2 million euros, 2 euros-point-
X million next year
Here we have some inventory steps
Ups that need to be explained will have a temporary impact.
Go to page 19 because we now need to move from pre-interest earnings to net income.
Here we have a very positive result, and Delev has mentioned in his first slide that net income has doubled to 15 euros.
Total 3 million
This is mainly after the EBIT section was driven by our debt repayment at the end of April, which gave us a very good financial result on the one hand, but the tax rate was reduced by 25.
Compared with the previous year, the growth rate was 5%.
2%, this also has a significant impact on net income.
Quick Review on tax, where did this come from?
I want to limit my explanation to two main factors: one of them is the return on earnings in the USS.
Obviously, let\'s benefit from the new tax system, which is mainly lower corporate income tax on the one hand, and on the other hand, it\'s actually a bag of mixed effects, starting with our global profits, the tax system, but in terms of tax rates in the future, it\'s a bag of mixed technical effects that helped us.
This could be between 26% and 28% instead of below 26%.
If we take into account the stock quantity still exists on page 20 of Page 2 ---
The number of outstanding persons remained at 45. 4 million.
A significant increase in net income directly translates into a significant increase in EPS numbers.
You see, 0 euros.
34 euros per share, basic earnings per share, and then adjusted earnings per share are 0 euros.
39 euros per share, compared to 0 euros.
25 more than the previous year.
On page 21, you will find a summary of what I just quickly introduced, that is, the year of change-over-
On these financial key figures, whether from a relative perspective or from an absolute perspective, we find it more helpful.
With this, we can already go to page 22, stock and net working capital.
Although we have a lot of text behind our usual coverage or color, we give this topic on the right --
On the other hand, I want to solve the problem in a different way and pay more attention to it ---
Because at this point in time, I think this is also of interest to the audience. -
Pay more attention to the comparison between the third and second quarters, because you obviously want to know how we treat the topic, how it develops, and what we do in terms of management.
Here, we can summarize as follows, because although organic sales growth accelerated again, we explained our inventory in detail at the end of the third quarter, which is shown as 0 euros in the chart in the upper left corner.
4 million ends below q2.
As a result, organic growth did not result in a re-increase in absolute inventory.
€ 0. 207 billion, if I now give a more detailed picture of the situation with respect to cyber capital, our trade receivables have barely changed compared to the level as at June 30.
Therefore, what I said just now in terms of inventory applies equally to accounts receivable, which means that we have put a lot of effort into collection to ensure that the funds due come in as well.
In terms of trade payables, they are falling at the same time, which is of course an important impact, which undermines the point of view, just as they have fallen by 15 euros.
9 million, resulting in a net increase in working capital for the quarter-over-
13 euros per quarter.
From 5 million euros to 204 euros.
Between 4 million and 217 euros.
9 million, you can see it in the lower right corner.
Another one--
Or two other comments.
The first is trade receivables.
In this regard, we need to take into account the regional mix.
This is also part of the wording in the lower right corner, as we are currently seeing particularly strong growth in China in areas with longer payment terms.
And other trade payables, this is not an operational issue of any kind, but a conscious decision we make at management to support suppliers and protect supply chains and production, which leads us to pay suppliers, this led to a reduction in trade payables.
Obviously, in terms of net working capital calculations, the increase will be more statistically helpful.
But here, we made a business decision, because de Triff commented on the supply chain that was in trouble, giving you an example, and also to protect our organic growth.
If we turn it to page 23 now, we will see that free cash flow in the third quarter is still negative.
If you increase your net working capital, it will obviously not translate immediately into free cash flow.
But we see improvement in the quarter. over-
From the second quarter to the third quarter, which is positive, we expect that free cash flow will improve significantly by the end of this year as we continue to focus and achieve the usual positive seasonal impact in the fourth quarter.
Just a technical review for those who occasionally stumble upon this, and we do have questions about it.
Note that the FX translation applied to the balance sheet is different from the one applied to the cash flow statement, which is why the amount may be technically different.
If we turn to page 24, look at the net debt and the stock.
Although the picture on the left shows the contrast to December 31, this is what we showed last time and the evolution of the year.
I would like to focus on increasing immediately as this also has a good connection with the next page, fourth quarterover-
In the first quarter, € 16 was added. 6 million.
Therefore, from 0. 252 billion euros to 0. 268 billion euros--or EUR 268.
Q3 at the end of 6 million.
This is mainly due to the cash outflow of Axscend purchase price due to payment.
I will comment on an additional component and an increase in net working capital on the next slide.
On the one hand, if we treat the equity ratio as a healthy 31.
5%, this is because the total assets are almost unchanged compared to last year
If we finish with 30 points
2% as comparable assets, given the increase in net income, the strengthening of equity has resulted in an increase of 13 euros in absolute equity.
5 million and the proportion is 31. 5%.
If we separate it-
Or rather, first of all, a net debt of 25 pages, and then break it down in more detail, we see the contribution of negative free cash flow on the one hand.
I owe you a comment because I mentioned it in M & A as it is not only Axscend.
If you mention the announcement we made, we said we paid a fee
The euro amount of the acquisition reached a figure, so the cash outflow lost about 3 million euros.
This is the net working capital adjustment we paid when we acquired York.
It was agreed at the original spa.
Here, we have reached an agreement in our favor, at least I think so.
While we paid the extra money which had to do with the level of net working capital, this involved the seller in the extra clean up of the net working capital of the assets so that we would not be left behind.
So this is the remainder of 8 million euros.
With this, we have gone through the P & L and covered the part of the balance sheet and I handed it back to Delev and brought it home ---------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [11]--------------------------------------------------------------------------------
Matthias, thank you for your detailed explanation.
Last slide today, I\'m on page 26. We --
In the title, we first discussed our financial target of 2018 as revised in October 19.
I want to talk about this.
So start with the sales slide--
In the fiscal year 2018, we said earlier this year that we saw an organic increase of 5% to 7% for two acquisitions by Orlandi and York, contributing about 60 million euros.
So we refined October 19, and today I want to confirm that it is now organic products that will increase to 9% to 10%, taking into account all the explanations that we have earlier today, these two acquisitions, Orlandi, york, now has Axscend in the United States. K.
We expect 65 million to 70 million, much higher than expected.
All these acquisitions are doing. -
It was very good for us and did a very good job, so we saw a higher sales contribution. -
Earlier than expected.
In terms of the adjusted EBIT profit margin, we said earlier that the fiscal year of 2018 was 7% to 8%, and we now refine it to the low end of the 7% to 8% range, including special income of 4 euros.
4 million, as we have explained before.
The 12% target for net working capital is certainly a challenge.
As Matthias explained, we now have 16% and capital expenditures will be between 38 million and 40 million euros.
We will also confirm the 2020 strategy in the long run.
We definitely see that we can have the opportunity to achieve these numbers and grow our business to 1 euro. 25 million (sic)[EUR 1. 25 billion].
By the end of 2020, the company will total € 1. 5 billion;
Adjusted EBIT margin, 8% or higher;
12% Net working capital;
In addition, capital expenditure is also roughly 2.
Sales of 5% resulted in 26 million euros to 28 million euros.
Yes, with that, our presentation today is over and I want to go back to Stephan. --------------------------------------------------------------------------------
Stephen Haas, Sudanese armed forcesHolland S. A. -
Vice President of IR and Corporate Communications [12]--------------------------------------------------------------------------------
Ladies and gentlemen, you can answer this question now. Go ahead.
Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------(
Operator instructions)
My first question came from Philip Loran Berenberg day. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [2]--------------------------------------------------------------------------------
Philip Lorraine from Berenberg
I have a few questions here.
I mean, one on slide 17, basically--
The exchange rate seems to have a negative impact on gross margin, at least as shown on the slide.
But if I remember correctly, your business is actually quite natural.
So, is this actually the negative effect of forex on the margin or Gross profit we see here? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [3]--------------------------------------------------------------------------------I would --
You\'ll find three people on the phone, Philip.
Ask you a good question.
I think the gross profit margin is more. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [4]--------------------------------------------------------------------------------
For more information on gross margin, OK.
To clarify this, I may need to come back to you.
In addition, I will also catch up with the comments on the higher turnover rate caused by tight labor market, which is in--
During the presentation of the American section on the slide.
I\'m just wondering if this is the same in Germany, and if you really observe something like this, people will come to you and change in a few months.
Or just North America? --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [5]--------------------------------------------------------------------------------
This is definitely not Germany.
Our staff in Germany are very stable.
Our turnover rate is very, very low. digit number.
Almost nothing, so very stable.
Also, if we need more people because we add shifts or whatever, we get these people and we are able to get them.
It\'s not as easy as it used to be, but it\'s not a big problem.
So I\'m happy with that.
How we organize and manage.
The situation is different in the United States and China.
I have talked about the United States before, because this is the biggest problem and the turnover rate is very high.
We\'re talking about 40%--
The highest turnover rate can reach 35%.
For example, I heard from customers that they are talking about a turnover rate of 20% per month.
Imagine.
But this is still a challenge in China.
There are many.
It\'s not a problem than before, because we\'re full now. -
As I said, with the full effort, workers like to do extra time to get extra money. But U. S.
It\'s a big problem.
Germany, no problem at all. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [6]--------------------------------------------------------------------------------Okay, great.
Actually another fast one on the market.
You said at the beginning of the speech that the outlook is very strong for the market that is about to enter 2019, but I think, you mean probably in terms of productivity, maybe more than in terms of orders, because the order strength is hard to really predict. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [7]--------------------------------------------------------------------------------Yes.
You\'re right.
We are talking about production.
To the end ,[
We will make orders. for production. We don\'t [give]
Get orders from people on the customer\'s side, because especially in the third quarter of this year, especially in North America, big teams tend to place orders for their next year, OK.
We can\'t see it.
We received the order just when we needed it delivered.
This means that our order intake is different from what we reported here, but it doesn\'t matter, we can only consume as per the order from the original equipment manufacturer. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [8]--------------------------------------------------------------------------------Okay, great.
Just to rebound, actually in (
Technical difficulty)
Class 8, because it is also mentioned that cancellation is a dunk.
Actually, it seems that the cancellation of orders is really surging, but we have very strong net orders that, of course, also reflect these cancellation levels in my opinion.
So what do you think about it?
Because the argument or bear market argument we hear in the market is because the cancellation rate is soaring, which suggests that the cycle may turn, say, over the next few months
I do understand, or I do see the opposite, if the net order is still high despite the high demand ---
The potential demand is still quite strong.
So, I\'m just here to ask the experts for your opinion. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [9]--------------------------------------------------------------------------------
I will share your opinion on this and I can only talk about what I personally hear when talking to customers in the last few weeks.
Over the past 4 weeks, I have spent a lot of time with clients in North America.
So yes, there are some cancellations, but nothing unexpectedly high, as this is normal due to the business process.
Overall, order revenue [ends]
The capacity utilization rate of the factory is very stable, although some people may cancel some orders, we can\'t see it, and our customers don\'t think it is a problem.
Strong net orders. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [10]--------------------------------------------------------------------------------Okay, great.
The last point is because I didn\'t understand Matthias\'s explanation of the payables situation correctly.
I do understand that inventory is indeed stable as we can see this in order from page 22 of the chart, although there is still some organic growth in the business.
Then I missed the explanation about [payables]versus [peers]? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [11]--------------------------------------------------------------------------------
Philip, you broke up in the last part of the question, but I think you asked me to explain again what I meant in my quick review of accounts payable.
I took it from there.
Of course, one measure of net working capital management is to pay as much cash to suppliers as possible, for example, by extending the DPO.
As a side note, of course, another option is to pay the discount in advance where applicable, and we do the same to support the P & L.
But with respect to accounts payable, what did we do this time instead of extending the DPO to the entire quarter --
We pay specifically to certain suppliers to ensure that the materials arrive in our hands on time and that they continue to be delivered.
So the money left the business.
Now, if you look at the fourth quarter, obviously, seasonality is different, and so on, you can expand that throughout the year
End, and then you will have the opposite effect, which is positive because it is clear that the higher amount of trade payables is mathematically reduced as net working capital.
If not, I hope this is a bit clearer, please ask again. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [12]--------------------------------------------------------------------------------
Yes, I understand, I understand, and of course, you may be able to speed up the collection of accounts receivable.
So, on the one hand, you have reduced the accounts receivable and on the other hand, you have also got an extension of the accounts payable, so it makes sense for me. --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [13]--------------------------------------------------------------------------------
This is our usual approach and model, which is clearly what the team has now been instructed to push. --------------------------------------------------------------------------------Operator [14]--------------------------------------------------------------------------------
The next question comes from the suffering of Frederick Hauck and Aufh äuser. --------------------------------------------------------------------------------
Frederick bitter, Hauck & Aufh äuser Privatbankiers AG, Research Office,Analyst [15]--------------------------------------------------------------------------------
I would like to ask two questions about the Americas, one about net working capital and follow up with Philip earlier.
In the Americas, what guidance do you have on the additional costs for the fourth quarter?
Also, if you look at it Quarterly in 2019? --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [16]--------------------------------------------------------------------------------
Did we give guidance? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [17]--------------------------------------------------------------------------------
I know where you\'re from, Frederick.
We just need to choose our language carefully and how much guidance we give.
I will try to stick my head out as shown below.
It\'s too early to sort out roundup Q4 today in early November, but of course, if we stick to the strategy of continuously improving the quarter --over-
In terms of how you model, please forgive me if I don\'t find the exact number of operating costs.
But I would say that you should see additional reductions and thus continuous improvements as this is something that each of us is working on.
I know this is a more qualitative answer, maybe the one you expect, but hopefully it helps anyway. --------------------------------------------------------------------------------
Frederick bitter, Hauck & Aufh äuser Privatbankiers AG, Research Office,Analyst [18]--------------------------------------------------------------------------------No, it is.
My next question in the Americas is if you can share some ideas about your existing capabilities, as you said earlier, the OEMs requested an increase of 10% to 15% of production in 2019. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [19]--------------------------------------------------------------------------------
Yes, mainly--
The 10% to 15% I mentioned is about the truck.
This is what we have heard during our travel over the past few weeks.
In our main factory in Wyley, Texas, we do the fifth round, we are--
Last month, our production reached the highest level ever, which is indeed a huge achievement.
We have installed new equipment there, new CMC machines, etc, very good investment which helps to further increase the capacity.
So far, the new device has not run to level 100%.
They will still improve the utilization of these new machines and equipment.
So, in short, we see, in summary, we see more efficiency improvements next year, next quarter, which will lead to higher capacity.
We believe--
We believe that we cannot meet the additional requirements of the manufacturer of the trailer original equipment-
Also from the trailer OEMs next year.
This is an extension. No problem. -no question.
I don\'t think this is another problem, but we are getting better and better.
So we can meet that demand in terms of trucks.
I also didn\'t mention this on the trailer side, just to cover it up.
We will be adding new welding production lines for trailer axle production in Warrenton, Missouri in order to get more capacity, which is also absolutely needed, as is the case in Warrenton, we run down here--
With over 100% utilization, this is not healthy at all, and Matthias also talks about this.
But new equipment was ordered this year and will be installed in the first quarter of next year, so we will have more capacity there as well.
Questions here-
Please allow me to comment. The issue --
The biggest problem is that the labor market is very tight.
I said. But on top --
I haven\'t mentioned it so far. -
The most important thing is the long lead time for new equipment.
If you need a new welding line, a new robot, whatever it is, a CNC machine, whatever it is, the delivery time is 9 to 12 months.
Now for some special equipment, I believe that many special equipment, it is 1 year to 1 year. 5 years.
So this means that even if you have capital expenditures, if you have a plan, it will take a long time to get it if you order a new machine, a new device.
So, in any case, to answer your question in one sentence, we will be able to solve this additional capacity problem. --------------------------------------------------------------------------------
Frederick bitter, Hauck & Aufh äuser Privatbankiers AG, Research Office,Analyst [20]--------------------------------------------------------------------------------Okay.
Can you--
Maybe, if you can, as a follower
OK, can you share your sales level in the Americas?
Increased peak capacity? --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [21]--------------------------------------------------------------------------------
I will not answer this question.
But this is a good question.
Give us some time because we will-
Earlier next year, we will receive guidance of £ 2019.
We are now--
To be exact, next week is our budget week, our famous internal budget week.
That means we spent a whole week on our budget.
All subsidiaries, all factories, all regions will submit their respective budgets-
Give it to the management team, then we will talk, fight and discuss.
Then by the end of next week, we will know what our budget is for next year, and then we will discuss it with the board for approval.
This is the first week planned for December.
Then in January, we knew what we were going to do, and given the intake of the order, what we could do with the existing capacity, we knew in December, and then, we will have a better picture about 2019 and what to expect. --------------------------------------------------------------------------------
Frederick bitter, Hauck & Aufh äuser Privatbankiers AG, Research Office,Analyst [22]--------------------------------------------------------------------------------
Okay, fair enough.
Then I\'ll ask in a few weeks.
Then, as I said earlier, my last question is, what is your expectation of the absolute value, absolute level of the fourth quarter on Phillip\'s question about net working capital? --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [23]--------------------------------------------------------------------------------When you mean --
I think you\'re still fishing when you say absolute level, right? --------------------------------------------------------------------------------
Frederick bitter, Hauck & Aufh äuser Privatbankiers AG, Research Office,Analyst [24]--------------------------------------------------------------------------------
No, I mean, euro. -
Millions of euros are enough for me. --------------------------------------------------------------------------------
Matthias Hayden, Sudanese armed forcesHolland S. A. -
Members of the CFO and management committee [25]--------------------------------------------------------------------------------
This is a good question.
Let me deal with this from another angle.
Again, you will never find me trying to avoid a problem.
The goal of significantly reducing this remains.
Our organization is still moving towards a relative ratio of 12%.
We think there is a way.
If you consider my previous discussion about Accounts payable, if you turn it in another direction, it\'s 15 euros.
9 million this has a serious impact on net working capital and cash flow and then we need to continue working-
By the way, Delev and I are monitoring the cash collection in person.
So you should go down a lot, about 12%.
If we don\'t hit it, we want to have a 12 before the comma.
I am sorry if this is not accurate enough, but given that organic growth is still high, we also need to take this into account.
I think we showed in the third quarter that we can move in the right direction.
We are absolutely committed to continuing to do so, but somehow it\'s a bit strange this year.
So please bear with me and I will be responsible for this when I give the final number. --------------------------------------------------------------------------------Operator [26]--------------------------------------------------------------------------------
There\'s a clue.
Berenberg\'s question on Philip LORAN. --------------------------------------------------------------------------------
Philip Loran Johnson.
Berenberg of Gosler
Research Department-KGAnalyst [27]--------------------------------------------------------------------------------
We talked a lot about the market, supply chain tension and so on.
If I remember correctly, in the past peak periods, such as 2006, 2007, the demand is very large, you need to weld some axles by hand.
I hope this is no longer the case here. --------------------------------------------------------------------------------
Detlef Borghardt, Sudanese armed forcesHolland S. A. -
President of Asia Pacific/China, member of management committee and CEO of director [28]-----------------------------------------------------
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