Fourth Quarter & Full Year 2020
Transcript of Fourth Quarter & Full Year 2020
Innovative Vehicle Solutions
Fourth Quarter & Full Year 2020 Investor conference callFebruary 11, 2021
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Innovative Vehicle Solutions
Business overviewFinancial overviewTechnology updateSummary and Q&A
PresentersHelene Svahn, President & CEOLottie Saks, CFO
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Today’s agenda
Innovative Vehicle Solutions
Sequential recovery – strong performance in trailer segment and aftermarket
n Continued market recoveryn Sales drop limited to 6%, currency adjusted n Achieved flat sales globally in aftermarketn Focus on trailer segment paid off, increasing
our market sharen Pre-series installation agreement with
Chinese bus OEM for electromechanical brake system
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Commercial Highlights Q4
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Sales – Group and Regions
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§ Organic sales -6%
§ Improved market share in
trailer and aftermarket
segments
§ Truck sales down -24%
§ Trailer sales flat
§ Aftermarket sales flat
§ Currency head winds
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Sales bridge
Strong market recovery in Q4, especially in EMEA
572
1 076989
303
2650
Trailer
0
Sales Q4 19
-64
Truck
-87
Aftermarket Curr Adj Sales Q4 20
Curr effect Sales Q4 20
Truck
Trailer
Aftermarket
1 140-6%
(24)%
0%
0%
1 ) Growth Q4 vs Q4Currency Adjusted
57 41 20 36 39146 143 152 127 164 111 121 113 123
420 480 448 413 357 417302 351 368
615671 732
685571 611
431464 459
45Q2-19Q4-18
45Q1-19
57
1 140
Q3-19
1 389
49Q4-19 Q1-20 Q2-20 Q3-20 Q4-20
1 2251 340 1 282
1 180
875964 989
North America South AmericaEurope Asia & Middle East
(10)%
7%
(21)%
1 ) Growth Q4 vs Q4Currency Adjusted
12%
(6)%
(5)%
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§ Organic sales -20%‒ COVID-19 effects
‒ North America also impacted by loss of
large OEM customer beginning of 2020
‒ Increased aftermarket share of sales
§ Truck sales down -41%
§ Trailer sales down -20%
§ Aftermarket sales down -8%
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Sales bridge
Low sales FY 2020 due to COVID-19
2 397
4 140 4 007
1 502
1 252-195
Sales YTD 2019
Trailer Aftermarket
-5115 151
Truck
-305
Curr Adj Sales YTD
2020
-133
Curr effect Sales YTD 2020
Truck
Trailer
Aftermarket
-20%
4 140 4 007
586
1 698
2 659
208
-637
Sales YTD 2019
N America
-241
Curr effect
Sales YTD 2020
North America
Europe
S America
APACSouth America
-133-29-104
Europe
5 151
Asia Curr Adj Sales YTD
2020
-20%
(41)%
(20)%
(8)%
1 ) Growth 2020 vs 2019Currency Adjusted
(24)%
(14)%
(18)%
1 ) Growth 2020 vs 2019Currency Adjusted
(14)%
Innovative Vehicle Solutions
North America§ Cautious post-COVID-19 recovery
§ OEM revenue down 27%
§ The aftermarket, 70% of sales, was stable, with volumes in line with the previous year, despite COVID-19
§ Haldex gained market share in aftermarket and grew 7% better than peers*
§ Continued focus on driving aftermarket sales and increasing efficiency
§ Beginning of 2021, signed an important entry-level contract with one of the largest garbage carriers in the United States
§ Strong OEM market outlook for 2021
RevenueSEK m
Build ratesnew vehicles
ThousandsCurrent fleetThousands
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
0
500
1 000
1 500
2 000
2 500
3 000
2018 20212019 2020 2022 2023
Market predictions 2021 Truck +36% Trailer +60%
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Sales, SEKm Oct-Dec2020
Oct-Dec2019 ∆¹
Truck 58 116 -44%Trailer 79 94 -6%Aftermarket 322 361 -1%Total 459 571 -10%
1) Currency adjusted
*) Mackay after market index
363 346416 392 361 397
321 329 322
99 135126 132
94105
64 81 79
153190
190 162
116109
46 54 58
0
100
200
300
400
500
600
700
800
Q2/19Q4/18 Q2/20Q4/19Q1/19 Q3/19 Q1/20 Q3/20 Q4/20
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Europe§ Good recovery in all segments, truck, trailer and
aftermarket‒ OEM revenue up 9%‒ Aftermarket revenue up 4%
§ New prototype order for Haldex’s electromechanical braking systems from one of the major OEMs
§ Strengthened position
§ Continued focus on the aftermarket and trailer segment
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1 currency adjusted
RevenueSEK m
Build ratesnew vehicles
ThousandsCurrent fleetThousands
161 188 175 189 166 178 140 157 167
211241
224 184153
198
137160 163
47
5149
40
37
41
34 38
0
50
100
150
200
250
300
350
400
450
500
Q1/20Q4/18
25
Q1/19 Q2/20Q2/19 Q3/19 Q4/19 Q3/20 Q4/20
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
0
500
1 000
1 500
2 000
2 500
3 000
202120192018 2020 20232022
Market predictions 2021Truck +14% Trailer +16%
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Sales, SEKmOct-Dec
2020Oct-Dec
2019 ∆¹
Truck 38 38 8%Trailer 163 153 9%Aftermarket 167 166 4%Total 368 357 7%
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Asia & Middle East
§ Commercial pre-series EMB agreement signed with electric bus manufacturer in China
§ Turnover was adversely impacted by COVID-19
§ OEM revenue down 23% in the quarter
1 currency adjusted
RevenueSEK m
Build ratesnew vehicles
Thousands
Current fleetThousands
19 21 19 17 21 14 12 16 18
3750 49 46
5344 42 45 42
89 72 8464
90
53 68 53 63
0
20
40
60
80
100
120
140
160
180
Q4/18 Q2/19Q1/19 Q2/20Q1/20Q3/19 Q4/19 Q4/20Q3/20
0
2 000
4 000
6 000
8 000
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12 000
14 000
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0
500
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1 500
2 000
2 500
3 000
20222018 20232019 2020 2021
Market predictions 2021Truck -12% Trailer +4%
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Sales, SEKm Oct-Dec2020
Oct-Dec2019 ∆¹
Truck 63 90 -26%Trailer 42 53 -18%Aftermarket 18 21 -9%Total 123 164 -21%
Innovative Vehicle Solutions
South America
§ Heavy-duty vehicle production reached record levels in the fourth quarter
§ Aftermarket is returning to normal levels, while trailer sales were at a high level for the whole year of 2020
§ OEM revenue up 36%
§ Negative currency effects impacted profitability
1 currency adjusted
RevenueSEK m
Build ratesnew vehicles
ThousandsCurrent fleetThousands
19 18 21 22 2516 12
19 16
44
24 24
32 3221
21
5
14 20
05
1015202530354045505560
Q2/19 Q3/19
2
3
Q1/19
3
Q4/18
3
Q4/19 Q1/20
3
Q2/20
3
Q3/20
3
Q4/20
0
500
1 000
1 500
2 000
2 500
3 000
0
50
100
150
200
250
300
350
400
2018 2019 202320222020 2021
Market predictions 2021 Truck +24%Trailer -12%
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Sales, SEKm Oct-Dec2020
Oct-Dec2019 ∆¹
Truck 20 21 32%Trailer 3 3 59%Aftermarket 16 25 -11%Total 39 49 12%
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Financial highlights Q4
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Sequential recovery and improved margins
Financial highlights Q4
n Earnings § Organic sales -6%§ Gross margin increased 3pp vs Q4 2019 to 28.6%,
corresponding to a FY increase from 26.0% to 27.3%.§ Strong contribution from savings program, SEK 65m.§ Adjusted operating margin of 6.7 (3.8)%, best Q4 adj
operating margin since Q4 2015.§ Negative currency effects of SEK 20m.§ Non-recurring items net of SEK 22m including income of
SEK 35m from property sale in Blue Springs, USA
n Continued focus on cash flow protection§ Cash flow from operating activities total SEK 123m (239)§ Improved earnings and prudent capex strengthened
cash flow, increasing financial self-sufficiency§ Large payouts of approx. SEK 100m due to restructuring
but also received payment from the property divestment in Blue Springs
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Innovative Vehicle Solutions
Cost cuts supported adj. Q4 EBIT improvement
§ Organic sales decrease of 6%, resulted in an EBIT reduction of SEK 22 m.
§ Positive product mix in Q4, aftermarket share 53% (50) of total sales.
§ Cost reductions total of SEK 65m, related to footprint changes, reduced headcount and general savings initiatives in bonus, travel, etc.
§ One-time costs of net SEK 22m related to the communicated cost saving programs SEK 48m, external services concerning the ownership structure SEK 4m, write-down of intangible assets related to ERP system SEK 5m as well as a positive result from building sale in US SEK+35m.
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EBIT Bridge Q4 2020 vs. Q4 2019
6,0%
-1,5% 0,9%
0,5%0,2%
6,1%
Cost reduction
ADJ EBIT Q4
2019
176
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Product Mix
One-time 2019
Volume Material savings
65
Other (inc. FX efftect)
ADJ EBIT Q4
2020
-22
One-time 2020
44
EBIT Q4 2020
44
-133
66
EBIT Q4 2019
-22
-30
3
1
1 2
3
2
3
4
4
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Adjusted EBIT supported by cost reductions
§ Substantial drop in net sales in YTD -20%.§ Customer segment mix favorable, AM share
increase from 47% to 53%. § Direct material savings favorable, mainly in
North America (Mexico).§ Cost reductions total SEK 161m whereof
SEK 92m general savings in bonus, travel, furlough etc.
§ Cost reduction includes SEK 44m for closure of Friction center, Blue Springs and Heidelberg.
§ One-time cost includes write-down of intangible assets SEK 176m, restructuring SEK 109m, external services related to ownership structures SEK 13m. One-time cost also includes the positive result from the property sale in Blue Springs of SEK 35m.
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EBIT bridge YTD Q4 20 vs. YTD Q4 19
6,0%
-1,5% 0,9%
0,5%0,2%
6,1%
One-time 2019
EBIT YTD 2020
Volume
48-263
Product Mix
-45
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Material savings
Cost reduction
ADJ EBIT YTD 2020
One-time 2020
-100
105
EBIT YTD 2019
ADJ EBIT YTD 2019
-100
163
317
212
Other (inc. FX efftect)
-335161
1 2 3 4
1
3
2
4
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Margin Optimization and Profit Protection
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Substantial long-term structural program with SEK ~300m in annual savings
To summarize long-term structural savings program total§ Annual savings of SEK ~300m.§ Estimated non-recurring cost of SEK ≈ 275m.§ Savings 2020 SEK 69m.§ Cost Base Adjustment 2 covers among other things workforce
reductions of 70 positions located across all regions.
Long-term savings programInitiative
Saving from: Estimated annual saving (SEKm)
Estimated non-recurring cost (SEKm)
Actual non-recurring cost (SEK m)2019 2020
Friction Centers, US May 2019 28 0 5 6Heidelberg, Germany September 2020 50 156 143 13Blue Springs, US October 2020 25 40 24 16Total Footprint related programs 103 196 172 35Cost Base Adjustment 1 July 2020 100 33 - 33Cost Base Adjustment 2 Q2 2021 100 tba - 41Total 303 229 172 109
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Long Term Savings ProgramInitiatives, SEKm Start Total Q2 YTD Q2 Q3 YTD Q3 Q4 2020
Foot Print Optimisation May 2019 103 5 9 14 23 21 44Cost Base Adjustment July 2020 100 0 0 12 12 13 25Total 203 5 9 26 35 34 69
Short Term SavingsInitiatives, SEKm Start Total Q2 YTD Q2 Q3 YTD Q3 Q4 2020
Short Term Savings Program April 2020 70 27 28 21 49 31 80Furlough 10 10 2 12 0 12Adjustment Accrual 7 0 0 0 0 0Total Short term Cost impact 44 38 23 61 31 92
Margin Optimisation and Profit Protection
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Savings program overview
§ Additional short-term savings program initiated− 2020 reduction of bonuses and savings in travel, consultants and furloughs.− Saving 2020 SEK 92 m (80+12). Impact Q4 ~SEK 31m (31+0).
In total all savings efforts reduced cost by SEK 161m in 2020
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Financial development
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Sales & Profitability Q1 2019 – Q4 2020, improved trend 2H 2020
Truck
403
1,340
2019 Q2
355
430
2019 Q1
349
190
384
224
407
210
296
265
366
206
414
1,282
1,389
155
2019 Q3
224
303
195
377
2019 Q4
352
395
2020 Q1
144
245
165
335
171
321
2020 Q2
289
IAM
2020 Q3
989
178
1,140
288
188
2020 Q4
OES
Trailer
3361,180
875
964
-13%
4%
2019 Q1
2019 Q2
0
97
7%
18
73
2020 Q2
7%
17
6%
68
7%
2019 Q3
57176
-133
4%
2019 Q4
12
30
2020 Q1
97
148
-151
0%
91
80
-23
22
44
7%
2020 Q4
2020 Q3
44
-2
66
42
85
+51%
NRI Adjustments Adj. EBIT margin
Reported EBIT
334
358 355
292
313
228
269283
2019 Q3
2019 Q2
2019 Q1
26%
2019 Q4
25%28%
26%27%
2020 Q1
26%
2020 Q2
28%
2020 Q3
29%
2020 Q4
-3%
Gross marginGross Profit
Sales(SEK m)
Gross Profit (SEK m & %)
Operating Profit(SEK m & %)
Reported
NRI Adjustments
Adjusted
Actual currency rates.
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Financial position
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Working capital and no. of cash conversion days substantially reduced in Q4, rather flat inventory
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§ Working capital reduced in Q4 and for FY 2020§ Cash conversion days in 2020 suffered from lower
volumes due to covid-19.§ No. of cash conversion days reduced to 82 in Q4
850
892934 911
860
757 723 747 733 712 717
8893 94 93
109118
124
98 9994
8994
0
1020
3040
5060
708090
100110
120130
0
100200
300400
500600
700800900
1 0001 100
1 2001 300
JunMarDec. 19
FebJan Apr May
106
Jul Aug
815
Sep Oct Nov Dec
849
12%
Haldex Days of Inventory Inventory
SEK m # Days
§ Long lead times and global sourcing cased increased inventories in 2020 as sales dropped due to covid-19
§ Inventory more normal in 2H 2020 following inventory reduction program and sales increase of 3% vs H1 (currency adjusted)
Inventory Monthly 2020 Development
0102030405060708090100110120130
200
900
0
400
600
100
1.100
500
1.000
300
700
800
1.029
Q1-20
Ø 898785
Q4-18
SEK m
Q3-20
#Days
Q2-19Q1-19 Q3-19 Q4-19 Q2-20 Q4-20
945
777796
1.0431.082
912
712
Working Capital Cash Conversion Cycle
Actual currency rates.
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§ Net Debt1) down by SEK 70 m in Q4. § Our focus on becoming financially self-
sufficient during 2H, 2020 paid off§ Pension liabilities was down by SEK 80
mainly due to higher interest rates
Strong Q4 cash flow, net debt1) back to year-end 2019 level
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SEK m2)Dec 31
2020Dec 31
2019
Assets as part of the net debt:
Cash and cash equivalents 440 315
Liabilities as part of the net debt:
Interest-bearing liabilities including derivative instruments -888 -768
Pension liabilities -578 -562
Net debt in total, excluding IFRS16 – financial leasing -1 026 -1 015
Debt related to IFRS16 -334 -423
Net debt in total -1 360 -1 438
§ Cash flow from operating activities in Q4 positively impacted by improved earnings
§ Working capital in Q4 negatively impacted by payout of restructuring reserve from 2019.
-100
-50 200
0
100
50
250
150
200
600
800
1.400
1.000
1.200
0
400
Net debt, SEKmCash flow, SEKm
12397
Q1/18 Q2/18 Q3/18
-43
Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q3/20
74
Q4/20
-64
65
199
Q2/20-96-84
76
239 231
Cash flow from operating activities
Net debt, excl IFRS16
1) Excl IFRS16 2) All numbers at actual currency rates
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Technology update - electrification
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EMB supports e-mobility by its unique efficiency
SBS is a platform project meeting new demands on braking systems in connected, electric and autonomous trucks and trailers.
§ Modular solution with open architecture
§ Pneumatic and electrical platforms
§ Integrates with OEM´s control systems
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Haldex Scalable Brake System (SBS)
Electromechanical brake (EMB)
Electromechanical brake (EMB)Electromechanical brake is a core module of the SBS portfolio. § Reduced energy consumption, enabling increased range,
or reduced battery cost in electrified vehicles § Reduced CO2 emissions in combustion vehicles
Other advantages of the electromechanical brake:§ Improved controllability, reduced braking distance,
improved stability, and increased comfort§ Simplified pneumatics reducing vehicle installation time
and enable battery§ It requires less space and thus increase packaging space
§ Reduced noise supporting nighttime deliveries
Innovative Vehicle Solutions
Haldex EMB is well positioned to meet increasing demand of electric braking systems
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Overview of powertrain concepts
1) Mainly diesel-electric hybrids, but also gas-electric 2) Includes NOx, PM and CO2
Diesel
• Proven concept capable of both long-haul and urban duties
• Possible to reduce particle matter and CO2emissions through new technology (e.g common rail injection systems)
• Fossil fuel driven with increasingly unfavorable TCO due to rising fuel prices
CNG/LNG
• Ready concept available for city buses, short and long-haul
• Dramatically reduced PM and NOx levels makes gas vehicles urban compatible
• Current fueling infrastructure is in need of continued expansion –route planning somewhat difficult
Hybrid1) Electric
• Emerging segment attracting both traditional OEMs and new entrants
• High potential for last mile delivery with low emissions, but short range and high weight of battery pack
• Rapidly expanding passenger car infrastructure beneficial for commercial vehicles
Fuel Cell
• Latest technology mainly driven by newcomers (e.g. Nikola)
• High cost, but enables the highest range making FC suitable for long-haul freights
• Very limited charging infrastructure and currently unproven technology means adoption after 2030
Outlook
Emission levels2) 4 2 2 0 0
Market readiness 4 3 2 2 0
• Increased weight due to dual fuel systems means city environment and urban areas are best suited for hybrids
• Limited fuel consumption improvements –relatively high costs for limited additional effects
NegativeStablePositiveLowMediumHigh 024
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Summary and outlook
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Summary and outlook
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*According to market data
§ Satisfied with the trends in Q4§ Strong performance in our aftermarket and
trailer market segments§ Strong customer interest in EMB§ Cost savings program implemented as
planned, full effect expected 2H 2021
Outlook§ We expect Haldex growth to be somewhat
lower than the global growth rate of newly produced heavy vehicles as global growth primarily comes from truck segment and trailer segment in North America.