CEO report

Favourable organic growth in the Group

VBG Group’s main markets remain strong and we can see no clear indications of a slowdown. The market situation is also clearly reflected in sales by the divisions. They again reported earnings at favourable levels and we continue to note, on the whole, good Organic growth in the Group, particularly for Mobile Climate Control, which — with its robust growth agenda — expanded significantly by winning market shares in a growing market. The greatest cause for rejoicing this quarter is, however, Edscha Trailer Systems. It is positive to now witness the real effect of the measures taken by the division.

Earnings per share in the second quarter are higher year-onyear, though slightly lower year-on-year for the first half of the year. This is due to the higher number of shares in the company in 2018 compared with the previous year, arising from the new share issue in the first quarter of 2017.

VBG Truck Equipment — continued scope to build for the future

VBG Truck Equipment’s profit for the second quarter met expectations. The division reported healthy profitability and, in absolute terms, a slightly better operating profit compared with the corresponding quarter of the preceding year. Earnings are still impacted by our investments in product development and the digitalisation of marketing and sales, though this is entirely according to plan. Now is the time for VBG Truck Equipment to build for the future.

Edscha Trailer Systems — very pleasing progress

Edscha Trailer Systems noted a strong start to the year and I am delighted to report that the highly positive development continued in the second quarter. Profitability has not been higher for this quarter since 2008 — shortly before the financial crisis hit. I consider the good performance as confirmation that the measures implemented by the division to optimise operations have been successful and that the drop in earnings in recent years was temporary. The new management is now well established and is working energetically with developing the business towards continued growth and solid profitability.

The divisions have again reported earnings at favourable levels and we continue to note, on the whole, good organic growth in the Group, particularly for Mobile Climate Control, which expanded significantly.

Mobile Climate Control — accelerating organic growth but unchanged profitability

Mobile Climate Control accounted for a large share of the Group’s organic growth during the second quarter of the year. Strong demand in the off-road vehicles and bus segments, in combination with gains in market shares in the bus segment, is fuelling growth in the division. Growing transport needs in society not only increases sales of new vehicles, it also creates higher demand for spare and wear parts, because the existing vehicle fleet is being used extensively. This trend also noticeably favours Mobile Climate Control’s aftermarket business. Taken together, this has enabled Mobile Climate Control to report very strong sales for both this quarter and the first half of the year. However, the growth has resulted in considerable pressure on internal processes, primarily in “supply chain”, as the division’s products must be adapted to new customers’ vehicles. Mobile Climate Control’s  suppliers are also working at high capacity and have sometimes found it difficult to deliver on time, which gave rise to disruptions in production. Therefore, the division’s profitability did not fully reach the level I expect to see.

It is positive that a growing number of the division’s deliveries are products adapted to electric vehicles, even if this business is still relatively small. It is reassuring to see that Mobile Climate Control is part of the electrification of the vehicle automotive industry and is winning contracts, as we are investing substantial resources in this area.

Ringfeder Power Transmission — as expected but with potential for improvement

For the second quarter, Ringfeder Power Transmission presented results that were entirely as expected, both in terms of sales and profitability. Restructuring in recent years to improve profitability has established the division at a higher level of profitability, though there is still potential to improve profitability further. Some areas of the restructuring work are still ongoing and I expect to see the full effect of these measures in 2019.