Equipment specialist, SAF-Holland, has published its Q1 2021 financial results.
Alexander Geis, Chairman of the Management Board of SAF-Holland SE said: “We have had a very good start to the financial year and were able to follow on seamlessly from the positive development of the preceding two quarters. The positive business momentum in the EMEA and APAC regions, the favourable business mix and the structural cost reduction and process optimisation measures contributed to the significant improvement in the EBIT margin to 7.7 per cent.”
“Incoming orders continue to develop in a very pleasing fashion. In the EMEA region, for example, capacity is currently utilised until autumn. I am therefore more than optimistic that we will achieve our annual targets for Group sales and adjusted EBIT margin.”
Adjusted EBIT margin of 7.7 per cent was significantly above the previous-year figure.
Due to market conditions and Covid-19, Group sales in the first quarter of 2021 came to €285.6 million, 0.8 per cent above the previous year’s level of €283.4 million. Currency effects amounted to €-13.7 million and resulted primarily from currency changes of the US dollar, the Turkish lira, the Australian dollar and the Brazilian real against the Euro. Adjusted for currency translation effects, sales increased by 5.6 per cent.
Sales in the OE business decreased by 0.8 per cent or €1.8 million to €207.5 million in the reporting period from January to March 2021. The share of Group sales accounted for by the OE business decreased from 73.8 per cent to 72.6 per cent. By contrast, sales in the spare parts business increased by 5.4 per cent or €4.0 million to €78.2 million. Consequently, the share of the spare parts business in Group sales increased from 26.2 per cent to 27.4 per cent.
Adjusted gross profit improved to €56.0 million in the first quarter of 2021 due to the sales and cost situation (previous year: €52.3 million). Due to a favourable product mix, the broad customer base and the structural cost savings, the adjusted gross margin came to 19.6 per cent, which lies significantly above the gross margin achieved in the comparable period of the previous year of 18.4 per cent.
Adjusted EBIT amounted to €22.0 million in the first quarter of 2021 (previous year: €18.4 million). This corresponds to an adjusted EBIT margin of 7.7 per cent (previous year: 6.5 per cent). The lower ratio of selling expenses and administrative expenses to Group sales was slightly margin accretive.
Disciplined investment policy with a focus on automation.
Additions to property, plant and equipment and intangible assets, including capitalised development costs of €0.5 million (previous year: €1.0 million), totalled €5.3 million in the first quarter of 2021 (previous year: €6.7 million). This breaks down into €2.4 million (previous year: €2.1 million) for the EMEA region, €0.5 million (previous year: €3.8 million) for the Americas region and €2.4 million (previous year: €0.8 million) for the APAC region. The focus of investing activities was on the further automation of production processes at various locations in the Americas region and Germany. The capex ratio was only 1.9 per cent in the first quarter of 2021 (previous year: 2.4 per cent) due to the timing of billings, but will settle at the expected rate of 2.5 per cent for the full year.
Operating free cash flow balanced despite demand-driven increase in net working capital.
The net cash flow from operating activities reached a level of €5.7 million in the first quarter of 2021 (previous year: €32.0 million). The decrease can be attributed primarily to changes in net working capital as a consequence of the rapidly increasing business activity.
The net cash flow from investing activities in plant, property and equipment and intangible assets of €-5.2 million lay €1.1 million, or 17.7 per cent, below the comparable figure for the previous year. Operating free cash flow was balanced at €0.5 million (previous year: €25.7 million).
“In the first quarter, top priority was given to securing our delivery performance. The fact that this was at the expense of net working capital and thus operating free cash flow was calculated into the equation,” said SAF-Holland SE CFO, Inka Koljonen. “In the further course of the year, the situation with regard to net working capital should ease significantly.”
Leverage ratio improved according to SAF-Holland.
In comparison to December 31, 2020, equity has improved by €24.7 million to €325.2 million. Equity was bolstered by the addition of the result for the period of €11.3 million as well as exchange differences on the translation of foreign operations of €13.5 million. Coupled with the 8.5 per cent increase in the balance sheet, this led to an unchanged equity ratio of 32.6 per cent.
Net financial debt (including lease liabilities) decreased by €1.1 million to €195.6 million as of March 31, 2021 compared to the reporting date of December 31, 2020. As of March 31, 2021 SAF-Holland carries cash and cash equivalents of €179.5 million (31 December 2020: €171.0 million).
“Due to the significant improvement in EBITDA, we have managed to further reduce the leverage ratio from 2.40x EBITDA at the end of 2020 to 2.25x EBITDA,” said Koljonen. “The very robust financial profile overall creates further headroom for investing in growth.”
EMEA Region: Adjusted EBIT margin remains stable at a high level, SAF-Holland reports.
Sales in the EMEA region improved by 7.1 per cent to €168.3 million (previous year: €157.2 million) in the first quarter of 2021, primarily on account of a strong upturn in OE business and further gains in market share. Adjusted for currency translation effects, sales growth of 9.4 per cent was recorded.
The EMEA region generated an adjusted EBIT of €16.2 million in the reporting period from January to March 2021 (previous year: EUR 14.8 million) and an adjusted EBIT margin of 9.6 per cent (previous year: 9.4 per cent). The OE business and spare parts business had a similarly positive impact on the gross margin.
Americas region: EBIT margin significantly improved.
In the Americas region, sales declined in the first quarter of 2021 by 14.2 per cent to €90.2 million (previous year: €105.1 million) due to streamlining of the product portfolio and the winter storms in Texas. Adjusted for currency translation effects, sales decreased by 5.4 per cent.
In spite of the decline in sales, the Americas region generated an improved adjusted EBIT of €5.4 million in the first quarter of 2021 (previous year: €4.1 million) and a significantly improved adjusted EBIT margin of 6.0 per cent (previous year: 3.9 per cent). The OE business had a slightly negative impact on the gross margin, which, however, was more than compensated for by the spare parts business. In addition, the significantly lower ratio of selling expenses, administrative expenses and research and development expenses to segment sales was margin accretive.
Operating result back in the black: APAC region.
The APAC region generated sales of €27.1 million in the first quarter of 2021 (previous year: €21.1 million). Adjusted for currency translation effects, sales increased by 32.6 per cent in comparison to the previous year. The main cause for the significant increase in sales was the jump in business in India and the pleasing development of demand in Australia.
Adjusted EBIT improved by €0.9 million to €0.4 million. The adjusted EBIT margin amounted to 1.4 per cent (previous year: -2.4 per cent). In this regard, the product mix and economies of scale had a positive impact on the gross margin. The significantly lower ratio of selling expenses, administrative expenses and research and development expenses to segment sales was margin accretive.
Outlook for the 2021 financial year confirmed.
In light of the expected macroeconomic environment and the sector-specific framework conditions and after weighing up the risk and opportunity potentials (including the currently foreseeable impact on business from the coronavirus SARS-CoV-2) the Management Board of SAF-Holland SE continues to expect Group sales for the 2021 financial year of between €1,050 million and €1,150 million (2020: €959.5 million).
Under this assumption, SAF-Holland is still expecting an adjusted EBIT margin of around 7.0 per cent for the 2021 financial year (2020: 6.1 per cent).
In order to support its strategic objectives, the company is planning investments of approximately 2.5 per cent of Group sales once again for the 2021 financial year. This capital expenditure will focus primarily on continuing the introduction of a Global Manufacturing Platform, further automation and the programme FORWARD 2.0 as well as IT.
This year’s Annual General Meeting of SAF-Holland SE will be held on 10 June 2021. The half-year financial report for the period from January to June 2021 will be published on 12 August 2021.