Truck and trailer component supplier, SAF-Holland, has reflected on 2021 performance and its response to emerging megatrends.
Due to strong customer demand, group sales were around €1.247 billion, around 30 per cent up on the prior-year figure of €959.5 million and slightly above the target corridor of €1.1 billion to €1.2 billion. Exchange rate effects amounted to around €-19 million (2020: €-22.6 million). Adjusted for exchange rate effects, sales increased by around 32 per cent to approximately €1.265 billion. All three regions (EMEA, Americas and APAC) contributed to the sales growth.
Despite high cost increases, particularly for steel, freight and energy, the company increased adjusted EBIT to around €93 million (2020: €58.8 million). The adjusted EBIT margin of around 7.5 per cent (2020: 6.1 per cent) meets the margin guidance of around 7.5 per cent. The margin was boosted in particular by the significantly lower selling and administrative expense ratio.
“We look back with pride on 2021, which was characterised by strong demand from our customers,” said SAF-Holland SE CEO, Alexander Geis.
“Despite strained supply chains, we succeeded in serving all customer requests on time. Once again, we proved that we are a reliable partner for our customers in the challenging environment of 2021. Unfortunately, cost increases, particularly for steel, freight and energy, weighed heavily on us. Without the strong cost inflation, adjusted EBIT margin would have been significantly higher.”
EMEA region: Adjusted EBIT margin slightly below previous year due to high cost pressure
In the EMEA region, sales in 2021 improved by almost 33 per cent to around €735 million (previous year: €552.9 million), due in particular to the significant upturn in the original equipment business. Adjusted for exchange rate effects, sales growth of just under 34 per cent was recorded.
High steel prices and high freight and transportation costs had a disproportionate impact on the cost of sales ratio, while the share of selling expenses declined significantly. Overall, this resulted in adjusted EBIT of just over €67 million in the EMEA region in 2021 (2020: €52.7 million). The corresponding adjusted EBIT margin of slightly above 9.0 per cent is slightly below the previous year (9.5 per cent).
Americas region: Adjusted EBIT margin improved significantly
In the Americas region, sales in 2021 increased by almost 21 per cent to around €402 million (previous year: €332.3 million) due to the strong Aftermarket and truck OE business. Adjusted for exchange rate effects, sales improved by 25 per cent.
Cost increases for steel and higher freight and energy costs also impacted the Americas region, but to a lesser extent than the EMEA region. At around €24 million, adjusted EBIT was significantly higher than in the previous year (2020: EUR 13.5 million). Adjusted EBIT margin improved significantly from 4.1 per cent to around 6.0 per cent.
APAC region: India and Australia fuel sales and EBIT margin
The APAC region generated sales of around €110 million in 2021 (2020: €74.3 million), an increase of slightly above 48 per cent. Currency effects had no significant impact, with the result that currency-adjusted revenues increased by almost 48 per cent year-on-year. This significant increase in sales was due in particular to the strong upturn in business in India and the encouraging development of demand growth in Australia. The Aftermarket business also made a pleasing contribution to sales growth.
Compared to the strong increase in sales, the rise in the cost of sales was disproportionally low. Margins were additionally boosted by the significantly lower selling and administrative expense ratio. Adjusted EBIT improved from €-7.3 million to just under €2.0 million. Adjusted EBIT margin was approximately 1.7 per cent (previous year: -9.9 per cent).
Capex ratio of around 2.0 per cent due to high sales growth
The capex ratio in 2021 was influenced by the strong increase in sales with virtually unchanged capital expenditure and was therefore only around 2.0 per cent. Additions to property, plant and equipment and intangible assets amounted to around €25 million in 2021 (2020: €24.5 million). The investment focus was on further automation of production processes, mainly in Germany, and capacity expansions in Turkey, Russia and Mexico.
Leverage ratio improved significantly to 1.58x
Net financial debt as of December 31, 2021 of approximately €198 million remained stable compared to 31 December 2020 (€196.7 million). The leverage ratio (ratio of net financial debt to unadjusted EBITDA) improved significantly from 2.40x to 1.58x in the same period and is attributable to the significant improvement in operating profit.
Business performance in Q4 2021
Sales of around €322 million in Q4 2021 were significantly higher than the prior-year figure of €250.8 million and slightly higher than sales in Q3 2021 (€316.6 million). The main driver was high demand, which led to very high utilisation of production capacities.
Adjusted EBIT is around €22 million, an improvement on the Q4 2020 figure of €20.3 million. Compared to Q3 2021 (€24.3 million), adjusted EBIT has decreased due to high cost pressure. EBIT margin in Q4 2021 is slightly below 7.0 per cent (Q4 2020: 8.1 per cent).
2022 will be characterised by positive trends, but also by challenges: SAF-Holland
Possible adverse factors for 2022 continue to include geopolitical and global economic developments. It is also difficult to predict how the Covid-19 pandemic, supply chains and prices for steel, energy and freight will develop.
Megatrends such as increasing urbanisation, sustainability, digitalisation and increased mobility are leading to further rising requirements in the commercial vehicle industry. With the tyre testing system SAF TIRE PILOT and the TrailerMaster telematics system, among others, SAF-Holland has product solutions that address the topics of safety, electrification, connectivity and automated driving. This year will also see the start of serial production of the SAF TRAKr recuperation axle.
Currently, SAF-Holland expects a positive market environment in 2022. However, the high cost burden, particularly in Q1 2022, will be a challenge.
“The continued high order intake in our most important regions allow us a positive outlook to the new year,” said Geis.
“We have made a good start to the year and overall production capacity utilisation is good to very good. The new plant in Russia and our capacity expansions in Turkey, Mexico and India set the course for further growth.
Despite the positive outlook, we should, however, not forget that cost pressure from the unprecedented increase in raw material and freight costs continues to be challenging.”
In other news, SAF-Holland announced a change to its Board.