Bufab Group: Year-end report 2019
Good growth and strong cash flow, but lower demand and margin. Strategic acquisition in North America. Board proposes raised dividend.
Fourth quarter of 2019
- Net sales rose by 16 percent to SEK 1,124 million (966), of which -5 percent was organic
- Order intake increased 17 percent and was higher than net sales
- Operating profit (EBITA) amounted to SEK 73 million (82), corresponding to a margin of 6.5 percent (8.5).
Excluding acquisition costs, operating profit was SEK 82 million (82) and the margin 7.3 percent (8.5)
- Earnings per share amounted to SEK 1.03 (1.65)
- American Bolt & Screw, with annual sales of approximately SEK 500 million, was acquired
- Net sales rose by 15 percent to SEK 4,348 million (3,786), of which 1 percent was organic
- Order intake increased 15 percent and was in line with net sales
- Operating profit (EBITA) amounted to SEK 384 million (367), corresponding to a margin of
8.8 percent (9.7)
- Earnings per share amounted to SEK 6.75 (6.79)
- Operating cash flow increased to SEK 351 million (175)
- Overall, Bufab achieved all-time high sales and operating profit in 2019
- The Board of Directors proposes raising the dividend to SEK 2.75 (2.50) per share
THE GROUP IN BRIEF
|Operating profit (EBITA)*||73||82||-11||384||367||5|
|Profit after tax||39||62||-37||253||255||-1|
|Earnings per share, SEK||1.03||1.65||-38||6.75||6.79||-1|
|Dividend per share, SEK||-||-||2,75**||2.50||10|
|Operating cash flow||94||63||49||351||175||101|
Stronger position in challenging market
Bufab reported healthy growth in both the fourth quarter and the full year 2019. However, the slowdown that was apparent already at the beginning of the autumn intensified during the fourth quarter. We party attribute this to our customers’ unusually long production stoppages at the end of the year, and to destocking. As a result, Bufab experienced negative organic growth of 5 percent in both of its operating segments for the quarter, despite slightly higher market shares. Our focus in 2020, therefore, is to secure further new business, thereby offsetting a potentially weaker market.
The gross margin was considerably weaker, both sequentially and year-on-year. This was mainly due to lower gross margins in acquired companies, but also to a poorer business mix in segment International and low capacity utilisation in our manufacturing companies. On the other hand, price increases and purchasing savings made a positive contribution to the margin. We intend to achieve further purchasing savings in 2020, which will be facilitated by the demand situation.
Upon the first indications of weaker demand in mid-2019, we launched a Group-wide programme for increased efficiency, which was supported by our investment in digitalisation. The programme aims to realise savings of approximately SEK 40 million on a full-year basis, with full effect from the fourth quarter of 2020. The programme began to contribute to the result in the fourth quarter of 2019.
We also completed a key strategic acquisition in North America during the quarter, after searching for a long time for a good platform for continued expansion with our global customers there. We can now welcome American Bolt & Screw to Bufab Group. In 2019, the company had sales of about SEK 500 million with healthy profitability and it has an organisation, business model and culture that are very close to Bufab’s. We have already begun working with the business opportunities brought by this acquisition. Acquisition costs of SEK 9 million were charged to the quarter.
Overall, the operating profit for the fourth quarter, adjusted for acquisition costs, was unchanged compared with the corresponding quarter in 2018. The operating profit is unsatisfactory. Accordingly, we have conducted a thorough review of the organisation and action plans throughout the Group. Our priorities for 2020 are, firstly, to intensify sales and marketing, and secondly, to achieve considerable earnings and margin improvements through purchasing savings, strict cost control and efficiency enhancement, in addition to healthy contributions from our acquisitions.
In the first quarter of 2020, we will implement a reorganisation, by which today’s two operating segments will be replaced by four segments (North, West, East and UK/North America), which in turn will be organised in ten business units. The purpose is to benefit further from Bufab’s large international reach and global expertise, as well as to increase focus on operational improvements in each subsidiary.
Bufab is an entrepreneurial company. We respond quickly and forcefully to weak results. But we also aim to continue Bufab’s positive development over the long term. Despite the weak quarterly result, full-year 2019 was the fourth consecutive year with all-time high sales and operating profit. We also noted our best cash flow ever – twice as high as in 2018. We are continue our systematic efforts to strengthen customer relations and increase market shares, to build the world’s best supplier base, to develop a globally leading “best practice”, and to continue digitalising our processes. The sustainability throughout our value chain took a clear step forward during the year. Two strategic acquisitions contributed to favourable growth and significantly strengthened our customer offering and global reach.
The first quarter has started satisfactorily, but global demand remains uncertain for the rest of 2020. However, our position is significantly stronger than it was a year ago. Our action programme is giving us confidence to be able to deliver a continued positive performance, regardless of market development, and to achieve our goal during this year: becoming the leading company in our industry.
President and CEO
A conference call will be held on 11 February 2020 at 10:00 a.m. CET. Jörgen Rosengren, President and CEO, and Marcus Andersson, CFO, will present the results. The conference call will be held in English.
To participate in the conference, use any of the following dial-in numbers: +44 2071 928 000, UK 08 445 718 892, Sweden 08 506 92 180 34 or the US 163 151 074 95. Conference code: 2195847.
Please dial in 5–10 minutes ahead in order to complete the short registration process.
President and CEO
+46,370 69 69 00
+46,370 69 69 66
This information is such that Bufab AB (publ) is obliged to disclose in accordance with the EU’s Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication by the aforementioned contacts on 11 February 2020 at 7:30 a.m. CET.
Bufab AB (publ) Box 2266 SE-331 02 Värnamo, Corp. Reg. No. 556685-6240
Tel: +46 370 69 69 00 Fax +46 370 69 69 10