In the interim report for January to September, VBG Group reports strong profitability in an increasingly stable market.
Third quarter 2020
Comment from VBG Group´s President & CEO, Anders Birgersson:
In the third quarter, the market showed signs of recovery from the low levels of the second quarter. Despite the continued spread of COVID-19 and high levels of uncertainty, demand for VBG Group’s products has picked up. Consolidated sales for the third quarter decreased to SEK 759.6 M (909.1), but operating earnings for the third quarter increased to SEK 113.0 M (109.4). The Group reported a strong operating margin of 14.9% for the quarter.
We can state that, with our thorough work in-house on proper cost control and strict prioritizing, we have succeeded in both accelerating and braking during the third quarter. Our employees have done an impressive job in keeping focus and meeting increased demand while we managed to keep costs down. During the pandemic, we were able to use our experience from previous crises, and scenario planning has been an important tool in quick decision-making.
Broad business base – a strength
One of the strengths of VBG Group is its diversified business base. We work in carefully selected niches, which creates an equalizing and dampening effect in the event of economic fluctuations. This means we can deliver at stable levels over time as regards both sales and earnings.
Ringfeder Power Transmission showed during the first nine months of the year that deliveries could safely be made in a volatile business environment, something we also noted during the 2008–2009 financial crisis. Despite sales being primarily in Europe and the US, the division’s deliveries were stable throughout the pandemic. Ringfeder Power Transmission achieved a record high operating margin of 21% in the third quarter. Moreover, we are pleased to note a robust increase in sales in Australia and New Zealand, albeit from low levels.
We noted a recovery in the North American market in the third quarter, above all in the off-road segment for Mobile Climate Control. Buses and public transportation were severely affected by the pandemic, as travel decreased sharply; to protect its operations, the division received state support. The segment recovered in the third quarter, which is positive going forward.
The strategic and structural review of Mobile Climate Control, begun during the second quarter, continues and a number of measures have been initiated to increase profitability. Mobile Climate Control’s operating margin, including state support, was 14.0% for the third quarter. Setting the support aside, we achieved a break in the profitability trend.
In parallel with the strategic review, Mobile Climate Control is continuing its work on product development toward more electrified customer solutions in order to meet future needs.
During the first nine months of the year, Truck & Trailer Equipment displayed a great deal of adaptability. When the pandemic broke out and borders were closed, the division managed to rapidly reduce its costs. In the midst of the pandemic, the division successfully carried out forward-looking investments in manufacturing and ensured continued rationalization of production. After the summer, when the market really picked up steam, increased demand could be met in a flexible manner without compromising on customers’ needs.
As of 1 October, Truck & Trailer Equipment operations have come to a halt with short-time working. There is a positive pull in the organization when employees return from their furloughs
with a desire to get things moving and meet future needs. The major OEM companies in Europe got up to full capacity during the quarter, which bodes well for the future. The division also noted increased demand from Australia and New Zealand during the third quarter.
In the third quarter, we demonstrated that we could maintain healthy profitability despite the turbulent times, which is a strength.
Once again, this quarter, I am pleased to state that the Group’s personnel have been relatively spared from COVID-19. We have had isolated cases of infection globally in the Group—from which the staff have now recovered—and we have also had a somewhat lower total rate of sick leave than normal.
Despite the prevailing pandemic, the Group reported stable earnings with healthy profitability in the third quarter. I would like to take this opportunity to thank all our employees who have displayed a great deal of commitment and a strong desire to help the company through a tough period. The ability of our personnel to manage the sharp changes that this pandemic has entailed has been impressive to watch, and I am cautiously optimistic about the future.