six months report, jan‐jun 2019market uncertainty has continued in q2 – brexit ... cash flow,...

SIX MONTHS REPORT, JAN‐JUN 2019TELEPHONE/AUDIO CONFERENCE 10 JULY 2019, AT 11:00 CETANDERS NYSTRÖM, PRESIDENT AND CEO | HELENA WENNERSTRÖM, EVP AND CFO

DIRECT LINK AUDIOCAST: HTTPS://TV.STREAMFABRIKEN.COM/BULTEN‐Q2‐2019.TELECONFERENCE: SE: +46856642695, UK +443333009262, US +18335268347

AGENDA

1. Bulten in brief2. Market development3. Second quarter 20194. In focus 2019

ABOUT BULTEN

3SIX MONTHS REPORT 2019

STRONG CUSTOMER BASE AND RELATIONSHIPS WITH MAJOR VEHICLE OEMS AS WELL AS SUPPLIERS

LIGHT VEHICLESHEAVY VEHICLES

SUPPLIERS

Selection of customers. Share of Bulten’s sales YTD

9%

15%76%

SIX MONTHS REPORT 2019 4

BULTEN RECEIVES SUSTAINABILITY AWARD

Being a peer leader in environmental impact reduction is in line with Bulten’sstrategy

Increasingly important for all stakeholders of Bulten– Car makers increasing their focus on full value

chain sustainability– Young talents choosing their employers more

carefully– Rigorous requirements from authorities in

production permit concessions

Secures future viability as an industrial enterprise


In June, Bulten received an award from EcoVadis for its sustainability work. Bulten reached the gold medal level in

EcoVadi's sustainability ranking and is also ranked in the top 1% layer among companies in the same industry.

2 MARKET DEVELOPMENT

CONTINUED MARKET VOLATILITY IN CAR SALES

Market uncertainty has continued in Q2– Brexit– Transition to WLTP emissions testing

Reported car sales estimates– LMC Automotive: Western European passenger Car sales for the first six months, 2019

down 3.5% compared to 2018– LMC Automotive: key markets down YTD May 2019

Stable raw material prices, on a high level


Source: LMC Automotive sales statistics May and June, 2019

LMC AUTOMOTIVE REPORTS FOR AUTOMOTIVE PRODUCTION IN EUROPE

8

LMC Automotive (Q2 2019 report) has decreased its forecast of LV production 2019 compared to the Q1 2019 report. LMCA forecast a decrease of 1.1% compared to 2018.

LMC Automotive (Q4 2018 report) will release data on HCV 12thof July.

PRODUCTION GROWTH RATE (YEAR ON YEAR) LIGHT VEHICLES EUROPE

2,8% 2,6%3,0%

-0,4%

-1,1%

3,3%

‐2%‐1%‐1%0%1%1%2%2%3%3%4%4%

2016 2017 2018E 2019E 2020E 2021E

Q1 2019 Q2 2019

PRODUCTION GROWTH RATE (YEAR ON YEAR) HEAVY COMMERCIAL VEHICLES (>15t) EUROPE

5,1%4,1%

6,4%

-1,2%

4,1%

1,6%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

7%

2016 2017 2018E 2019E 2020E 2021E

Q1 2019 Q1 2019

Source: LMC Automotive Q1 2019 & Q2 2019

SIX MONTHS REPORT 2019

BULTEN MARKET SHARE DEVELOPMENT

Management estimates*:– Market share approx. 18% of the European

market of fasteners for the automotive industry 2018, 1 pp above 2017

– Market share of FSP contracts for the same market to be approx. 65% 2017, 5 pp above 2017

Expected development – Demand somewhat weaker compared to

previous year and ramp up slower than anticipated

– The production rate will continue to be lower in the beginning of Q3

– Contracts signed (approx. 67 MEUR/year at full volume 2021) will support

BULTEN MARKET SHARE DEVELOPMENT

45%56% 60% 60% 60%

0%20%40%60%80%

Market share of European fastener FSP contracts

2013 2014 2015 2016 2017 2018* Based on data from EIFI (European Industrial Fasteners Institute)

11%14%

17% 17% 17%

0%

5%

10%

15%

20%

Market share of total European fasteners

2013 2014 2015 2016 2017 2018

18%

65%


3. SECOND QUARTER 2019

OPERATIONAL HIGHLIGHTS AND FINANCIAL SUMMARY FOR Q2

Net sales SEK 781 m (810)

Operating earnings amounted to SEK 21 m (57)

EBIT margin 2.7%– Lower sales volume– Production under‐absorption, SEK ‐25 m– High raw material prices– Relocation costs, SEK ‐6 m

Order bookings SEK 752 m (855)

Bulten has won new contracts in H1– FSP of approx. EUR 13 m at full pace in 2021– Several smaller contracts with a total annual value

of approx. EUR 2 m

EcoVadis award for sustainability work


Q2

FINANCIAL SUMMARY (MSEK) 2019 2018 ∆

Net sales 781 810 ‐3.5%

Gross profit 129 160 ‐31

Earnings before depreciation (EBITDA) 54 80 ‐26

Operating earnings (EBIT) 21 57 ‐36

Operating margin, % 2.7 7.1 ‐4.4

Earnings after tax 14 40 ‐26

Earnings per share before dilution, SEK 0.71 1.99 ‐1.28

Order bookings 752 855 ‐12.0%

RTMJuly 2018‐June 2019

Full Year2018

∆

Return on capital employed, % 9.0 12.8 ‐3.8

Return on capital employed excluding IFRS 16 financial lease, %

9.5 12.8 ‐3.3

New accounting principles as of January 1, 2019

VOLATILE MARKET AFFECTED SALES AND ORDER INTAKE

Sales down 3.5% in Q2 vs last year (down 5.8% currency adjusted)

Order intake down 12% in Q2 vs last year

– The slowdown is due to market volatility and tough comparables

SEK m

781

752

0100200300400500600700800900

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217

Q317

Q417

Q118

Q218

Q318

Q418

Q119

Q219

Net SalesQ1: 61 days Q2: 60 days Q3: 53 days Q4: 59 days

AVG. NUMBER OF PRODUCTION DAYS PER MONTH 2019QUARTERLY VOLUMES

Order Intake

12

20 2021

1921

20

1517

2123

21

15

Jan Feb March April May June Jul Aug Sep Oct Nov Dec


COMPARABLE EARNINGS AFFECTED BY INVENTORYADJUSTMENT, CURRENCY AND RELOCATION

13

Quarter EBIT margin 2.7% (7.1), adj. for currency effect and relocation 3.3% (6.6)

Underlying profitability lower level in the quarter due to– Lower sales volume– Production rate and under‐

absorption, SEK ‐25 m– High raw material prices– Relocation costs, SEK ‐5.4 m – Currency SEK 0.3 m


2,7%

7,1%

3,3%

6,6%

1,0%1,5%2,0%2,5%3,0%3,5%4,0%4,5%5,0%5,5%6,0%6,5%7,0%7,5%8,0%

2019‐Q2 2018‐Q2

Quarter EBIT margin currency effect and relocation costs

EBIT margin

EBIT margin excl. currency effect andrelocation costs

4,9%

7,4%

5,2%

6,9%

3,0%3,5%4,0%4,5%5,0%5,5%6,0%6,5%7,0%7,5%8,0%

YTD 2019 YTD 2018

YTD EBIT margin currency effect and relocation costs

EBIT margin

EBIT margin excl. currency effect andrelocation costs

21,0 26,157,1 53,4

78,5 82,6123,8 114,8

INVENTORY IN FOCUS

0

100

200

300

400

500

600

700

800

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Inventory % of sales

Inventory in relation to sales

SIX MONTHS REPORT 2019 14

Inventory build‐up driven by• Slowing market• New project ramp‐ups• Preparation for re‐

location in China• Anticipated 2019 Q1

Brexit Decision made in 2019 Q1

to balance inventory to actual demand

MSEK

CASH FLOW, BALANCE SHEET AND NET CASH


Q2 JAN‐JUNE FULL YEAR

CASH FLOW STATEMENT, MSEK 2019 2018 2019 2018 2018

Cash flow from operating activities before changes in working capital 48 66 105 142 254

Cash flow from operating activities including changes in working capital 52 54 ‐5 80 125

Cash flow from investing activities ‐49 ‐36 ‐84 ‐75 ‐160

Cash flow for the period 37 ‐17 47 ‐24 ‐32

Cash and cash equivalents at end of period 66 27 66 27 18

BALANCE SHEET, MSEK 2019‐06‐30 2018‐06‐30 2018‐12‐31

ASSETS

Total assets 2,756 2,272 2,338

EQUITY AND LIABILITIES

Equity 1,511 1,498 1,514

Total long‐term liabilities 626 145 201

Total current liabilities 619 629 623

Total equity and liabilities 2,756 2,272 2,338

MSEK 2019‐06‐30 2018‐06‐30 2018‐12‐31

Net debt (‐) ‐595 ‐118 ‐181

Net debt (‐) excluding IFRS 16 lease liabilities ‐382 ‐118 ‐181

Net debt (‐) excluding all lease liabilities ‐347 ‐80 ‐145

KEY INDICATORS – CAPITAL STRUCTURE AND RETURN INDICATORS

12 M ROLLING FULL YEAR

THE GROUP, 12 MONTHS July 2018‐June 2019

July 2017‐June 2018 2018

RETURN INDICATORS

Return on capital employed, % 9.0 14.1 12.8

Return on capital employed, (excluding IFRS 16 financial lease) % 9.5 14.1 12.8

Adjusted Return on capital employed (excluding IFRS 16 financial lease and relocation costs) , %

9.9 14.1 12.9

Return on equity % 7.6 11.2 9.9

CAPITAL STRUCTURE

Capital turnover, times * 1.6 2.0 1.9

Net cash (+) Net debt (‐) / EBITDA ‐2.1 ‐0.4 ‐0.6

THE GROUP 2019‐06‐30 2018‐06‐30 2018‐12‐31

CAPITAL STRUCTURE

Net debt/equity ratio, times ‐0.4 ‐0.1 ‐0.1

Equity/assets ratio, % 54.8 66.0 64.8


*) Adjusted for financial lease IFRS 16, 1.7 times as end of June 2019

FINANCIAL GUIDELINES

NWC higher than our guidelines– Increased since half year ago due to changed

demand, projects and ramp up of new business

Capex higher than our guidelines– as planned and earlier communicated

Depreciations in line with our guidelines– IFRS16 affecting reported depreciation by

+ 0.6%

Tax rate on a higher level 12 months rolling:

THE GROUP 12 M ROLLING

2019

FULL YEAR 2018

GUIDELINES

Average net working capital as % of sales

26.9 23.0 20

CAPEX as % of sales 5.7 5.3 2‐3

Depreciation as % of sales 3.7 2.9 ‐

Depreciation (excluding lease liabilities, IFRS 16) as % of sales

3.1 2.9 2‐3

Tax rate 28.3 29.1 24‐28


VOLUMES AND INVENTORY ADJUSTMENTS AFFECTED THE TARGETS

Profitable organic growth more

strongly than the industry average.

Operating margin of at least 7%.

At least 15%. At least one third of net earnings

after tax.

ROCEMarginGrowth DividendEPS

EPSdevelopment


* Excluding IFRS 16 Financial lease and relocation costs

Q2 R12 Q2 R12 Q2 R12 Q2 R12 DIVIDEND

REPORTED ‐3.5% 0.9% 2.7% 5.4% n.a. 9.0% 0.71 5.60 4.00 SEK/share

ADJUSTED* n.a. n.a. 3.3% 5.6% n.a. 9.9% 0.94 6.00 55,1 % (adj 54,7%) for 2018 (3.75 SEK /share)

R12 TARGET STATUS*

4 IN FOCUS 2019

20

IN FOCUS 2019

Balance inventory against demand

Continue ramping up won contracts

Secure continued efficient, profitable production

Begin capacity investments in Poland

Relocate the production plant in China

Cultivate the American market further

Win new FSP contracts

Continue to promote innovation and sustainability

Define continued growth strategy

Build on existing strengths


USD 5.5 million/year Starts 2018, full pace in 2019/2020, US

EUR 30 million/year Starts late 2018, full pace in 2020. FSP

PREDICTED STRONGER BULTEN GROWTH VS THE MARKET

Existing contracts &

market growth

New signed not yet started contracts

Future contracts

& increased delivery value

in EV’s

Bulten growth Ramp up of new contracts

Market volatility and model shifts

2018 2019 2020 2021

EUR 700 thousand/year Starts 2018, full pace in 2019, Russia

SEK 60 million in totalContract period 2017‐2019 (slightly delayed). China

=

EUR 20 million/year Starts late 2017, full pace in 2019. FSP59% 41%

20% 80%

1% 99%

Ramp up and new contracts not yet started

EUR 67 million/year Of long term sustainable business in full pace 2020‐2021

EUR 2 million/yearStarts 2020, full pace in 2021. FSP

EUR 5 million/yearStarts 2020, full pace in 2021. FSP

50% 50%

12% 88%EUR 13 million/yearStarts 2019, full pace in 2021. FSP


EUR 2 million/yearStarts 2020, full pace in 2021

BULTEN ‐ A STRONGER SOLUTION

six months report, jan‐jun 2019market uncertainty has continued in q2 – brexit ... cash flow,...

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