Interim report January - March 2021
Best first quarter to date
Sold units in Russia/CIS up 31% in recovering market
Record first quarter operating result and margin despite currency headwinds
Growing aftermarket sales in Germany
Continued investments in service network and organisation
Strong cash flows as working capital remains low
Credit facility with Nordea renewed and expanded
Selected key Group ratios*
Q1 | Q1 | ||
SEK M | 2021 | 2020 | % |
Revenue | 1,267 | 1,118 | 13% |
Operating profit | 80 | 51 | 57% |
Result for the period | 56 | 20 | 176% |
Earnings per share | 3.85 | 1.39 | 176% |
Gross margin | 17.0% | 16.3% | |
Operating margin | 6.3% | 4.6% | |
Return on capital employed | 21% | 23% | |
Working capital / Revenue | 4% | 13% | |
Net debt / (cash) | -33 | 531 | |
* Definitions and purposes of the key ratios are presented on page 26.
1
Lars Corneliusson
CEO
Total revenue in Russia/CIS grew 54% in RUB terms and 20% in SEK
In Germany, we continued to invest in our network
The German trucks market recovered during the quarter as business activity improved
Operating profit increased 57% to SEK 80m, which is the best first quarter to date
In a longer perspective, we remain positive
Interim report January - March 2021
CEO comment
The first quarter of 2021 was another solid quarter, characterised by strong equipment sales in Russia/CIS, improving aftermarket sales in Germany and good profitability.
In Russia/CIS, the market for our main product groups grew by 26% on a combination of economic recovery, pent-up demand and supply concerns. Our new machine sales in units increased by 31%. Thanks to great efforts from our team, supported by our digital sales system, aftermarket revenue caught up with last year's sales in Swedish crowns, as we managed to tackle a 29% average depreciation of the ruble. Extreme weather conditions slowed the ramp-up of our new projects in contracting services. Other projects, however, performed well and production continued to grow. In our machine and component rebuild centre, we started to utilise the extra capacity added at the end of 2020. Production slots are now filled until October. We also took another exciting step in business development as we became a dealer for Sandvik mobile crushers and screens in all of Russia, effective from April.
Revenue in Russia/CIS grew by 54% in local currency in the quarter and 20% in SEK due to a sharp decline in the ruble. The operating margin improved as costs declined despite higher sales volumes. As a result, Russia/CIS had its best first quarter operating result and operating margin to date.
In Germany, we continued to invest in our service network and our organisation. We announced the acquisitions of three additional workshops as well as the construction of a new site in Hannover. We also appointed a new head of the German operations.
The German trucks market recovered during the quarter as business activity improved. Our new trucks sales however declined. By contrast, our aftermarket sales grew and performed well, which is part of our strategy and the objective of our network investments. Partly as a result of the increased aftermarket sales, and despite continued restructuring costs, the operating loss in Germany declined compared to Q4 2020.
For the Group as a whole, revenue was up 13%. Operating profit increased 57% to SEK 80m, which is the best first quarter result to date, despite the negative contribution from Germany. Working capital remained low at 4% of revenue. Strong cash flows supported a net cash position of SEK 33m.
The business environment remains uncertain, mainly as regards supply chain constraints. Despite this, we expect our markets to continue to recover in the remainder of 2021. In Russia/CIS, our optimism is supported by higher commodity prices and increased activity on the so-called national projects, but moderated by the risk of increased utilisation fee. In Germany, we expect a broader European economic recovery to boost demand. In a longer perspective, we see strong underlying fundamentals and business opportunities in our markets.
2
New machines (units sold)
350
300
250
200
150
100
50
-
Q1 | Q2 | Q3 | Q4 | |
2019 | 2020 | 2021 |
Revenue (SEK m)
- 200
-
000
800
600
400
200
-
Q1 | Q2 | Q3 | Q4 | |
2019 | 2020 | 2021 |
Operating margin (%)
16,0%
14,0%
12,0%
10,0%
8,0%
6,0%
4,0%
2,0%
0,0%
Q1 | Q2 | 2020 | Q3 | Q4 |
2019 | 2021 |
In Q1 2021, we delivered 297 new units, which is an increase of 31%
Operating profit from the operations in Russia/CIS increased by 55% to SEK 94m
Working capital declined from 3% in Q4 2020 to 2% of revenue in Q1 2021
Interim report January - March 2021
Russia/CIS
In Q1 2021, the market for our main product groups (measured in units) grew by 26%. The market was supported by several factors, including easing Covid restrictions, pent-up demand and stronger commodity prices. Concerns about supply chain disruption and expectations of potential increases in the so- called utilisation fee may have temporarily contributed to higher demand. Our new machine sales in units grew by 31% to 297 machines. We increased our sales of articulated haulers, excavators, wheel loaders and forestry equipment. The average sales price increased 25% in local currency but declined 3% in SEK. Customer activity and demand for service and parts remained high during the quarter. Our aftermarket sales in SEK were on par with last year, despite a ruble depreciation of 29%. In contracting services, we expanded our operations at our projects in Norilsk and Irkutsk under challenging weather conditions.
Total revenue in Russia/CIS in Q1 2021 increased by 20% (54% in local currency) to SEK 1,007m (SEK 842m). Equipment sales increased by 22% (+57% in local currency), aftermarket sales were flat (+28% in local currency) and contracting services increased by 55% (+99% in local currency). The aftermarket share of revenue declined by 4pp to 22%, while contracting services increased 4pp to 16%. The gross margin declined to 18.3% (18.5%), mainly as a result of the changed revenue mix and lower margin in contracting services.
Selling, general and administrative expenses declined by 6% due to cost control and the weaker ruble. As a percentage of revenue, these costs declined to 8.7% (11.1%). As a result of higher revenue and lower costs, the operating margin increased to 9.3% (7.2%) and the operating profit increased by 55% to SEK 94m (SEK 60m).
Cash flows from operating activities were strong at SEK 101m as working capital as a percentage of revenue declined from 3% in Q4 2020 to 2% in Q1 2021.
Russia/CIS
Q1 | Q1 | ||
SEK M | 2021 | 2020 | % |
New units | 297 | 227 | 31% |
Revenue | 1,007 | 843 | 20% |
Gross profit | 185 | 156 | 18% |
Operating profit | 94 | 60 | 55% |
Gross margin | 18.3% | 18.5% | |
Operating margin | 9.3% | 7.2% | |
3
New trucks (units sold)
200
180
160
140
120
100
80
60
40
20
-
Q1 | Q2 | Q3 | Q4 |
2020 | 2021 |
Revenue (SEK m)
300
250
200
150
100
50
-
Q1 | Q2 | Q3 | Q4 |
2020 | 2021 |
Operating margin (%)
0,0%
-2,0%
-4,0%
-6,0%
-8,0%
-10,0%
-12,0%
Q1 | Q2 | Q3 | Q4 |
2020 | 2021 |
During the first quarter, the German market for heavy trucks grew 10%
Revenue in Germany amounted to SEK 260m (SEK 275m)
Working capital increased from 9% to 11%
Interim report January - March 2021
Germany
The German market for heavy trucks, based on registrations, increased by 10% Y-o-Y and 7% Q-o-Q. Market growth was mainly driven by the tractor segment as a result of both economic recovery and pent-up demand. Our sales area represented approx. 17% of the total German market and grew more slowly at 4% Y-o-Y and declined 5% Q-o-Q. Our new truck sales in units declined by 21% to 136 units, as some customers waited for deliveries of the new Volvo model range, which started in April. As a result, our market shares for Volvo and Renault Trucks declined during the quarter. Customer activity and demand for service and parts improved during the quarter, despite remaining Covid restrictions.
Due to lower new trucks sales, total revenue in Germany in Q1 2021 decreased by 6% (-1% in EUR) to SEK 260m (SEK 275m). Equipment sales decreased by 16% (-12% in EUR) while aftermarket sales increased by 21% (28% in EUR). Aftermarket sales in Q1 2021 include SEK 0.4m aftermarket sales from a workshop in Fulda that was acquired on 4 January. As a result, aftermarket sales increased by 7pp as a share of revenue to 32%. Other revenue, mainly consisting of trucks rental and car sales, increased 4% (9% in EUR). Mainly due to the shift in revenue mix, the gross margin increased to 11.6% (9.7%) in Q1 2021.
Selling, general and administrative expenses increased by 22%, partly due to restructuring costs of SEK 2.5m and acquisition related costs of SEK 1.1m. Despite the higher gross margin, due to the higher costs, the operating margin in Q1 2021 declined to -5.3%(-3.5%). The operating loss amounted to SEK -14m (SEK -10m).
Cash flows from operating activities were negative due to the negative result and working capital as a percentage of revenue increased from 9% to 11%. Cash flows from investing activities includes a SEK 31m partial payment for the acquisition of the workshop in Fulda (for more details see note 6).
Germany
Q1 | Q1 | ||
SEK M | 2021 | 2020 | % |
New units | 136 | 172 | -21% |
Revenue | 260 | 275 | -6% |
Gross profit | 30 | 27 | 13% |
Operating profit | -14 | -10 | 45% |
Gross margin | 11.6% | 9.7% | |
Operating margin | -5.3% | -3.5% | |
4
Revenue increased by 13% to SEK 1,267m (SEK 1,118m)
Gross profit in Q1 2021 increased by 18% to SEK 215m (SEK 183m)
The operating margin increased from 4.6% to 6.3%
The result for the quarter increased by 176% to SEK 56m
Interim report January - March 2021
Comments on the Group results
The following foreign exchange rates have been used when translating Q1 2021 (Q1 2020) results to the presentation currency:
- Average rates of RUB/SEK 8.86 (+29% vs 6.88) and SEK/EUR 10.12 (-5.1% vs 10.66) have been used to translate income statements.
- End of period rates of RUB/SEK 8.67 (+11% vs 7.83) and SEK/EUR 10.24 (-7.6% vs 11.08) have been used to translate balance sheets.
The depreciation of the RUB since Q1 2020 of 29% on the average and 11% on the end-of-period rates, respectively, has impacted both income statement and balance sheet items.
Revenue
In Q1 2021, the revenue of the Group increased by 13% to SEK 1,267m (SEK 1,118m). Sales of equipment and trucks increased by 12% and aftermarket sales increased by 5%. Revenue from contracting services increased by 55% in Q1 2021, mainly due to the addition and ramp-up of the new project in Norilsk. Other revenue, mainly consisting of rental and passenger car sales in Germany, declined 13%.
Gross profit and operating profit
In Q1 2021, the gross margin for the Group increased from 16.3% to 17.0% as the share of the revenue from Russia/CIS increased and the gross margin in Germany increased (11.6% vs 9.7%). As a result of a higher margin on higher revenue, gross profit in Q1 2021 increased by 18% to SEK 215m (SEK 183m).
As percent of revenue, selling, general and administrative expenses decreased from 11.5% in Q1 2020 to 10.3% in Q1 2021. The operating profit for Q1 2021 increased by 57% to SEK 80m (SEK 51m). The operating margin during the quarter increased from 4.6% to 6.3%, mostly as higher operating margin in Russia/CIS of 9.3% (7.2%) offset lower operating margin in Germany of -5.3%(-3.5%).
Result
Mainly as a result of a lower net debt position, net finance costs decreased to SEK 6m in Q1 2021 from SEK 17m in Q1 2020. Foreign exchange losses (net) decreased from SEK 5m in Q1 2020 to SEK 3m in Q1 2021. As a result of this, and the higher operating profit, the result before income tax for Q1 2021 increased by 143% to SEK 71m (SEK 29m). The result for the quarter increased by 176% to SEK 56m (SEK 20m).
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Ferronordic Machines AB published this content on 12 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 May 2021 05:51:01 UTC.