Second Quarter 2020 - Investor conference call · 2020. 7. 16. · +15% 11% +8% North America APAC South America EMEA. Innovative Vehicle ... renewed with major ADB customer ... 1

Innovative Vehicle Solutions

Second Quarter 2020 - Investor conference call

1


Presentation of the second quarter 2020

Business overview

Financial overview

Key priorities going forward

Q&A

2

Today’s agenda

Helene Svahn, President & CEO

Lottie Saks, CFO

Presenters


Sharply reduced sales, signs of recovery in

aftermarket at end of the quarter

▪ Extremely weak market conditions due

to covid-19

− Currency adjusted sales down -37%

▪ Adjusted operating margin -0.3%

− Non-recurring items of SEK 148m

▪ Powerful Savings programs initiated of

SEK 200m. Implementation on track

▪ Long-term financing solution in place

− A new directed share issue of SEK

157m

− Prolongation of loans until April 2022

▪ New Board and Chairman of the Board

elected at AGM

3

Highlights Q2


▪ The global truck market outlook has deteriorated dramatically, with an initial

supply shock emanating from China in Q2 turning into a wide-ranging global demand

drop

▪ Global truck production declining by 23%, during the financial crisis the drop was 38%

▪ A recovery is expected by 2022

Recovery of the truck market after Covid-19 crisis is

expected 2022, similar recovery as after the 2008/09

crisis

4

Global Truck Production [million CVs]

Data Source: LMC automotive

2013 2014 2015 20162006 2018 2019 2020 2021

2,4

20232022

2,53,0

1,5

2,12,22,7

3,2 3,32,9

3,54,0 3,9 3,8

3,5

2007

3,7

2017

3,02,5

20092008 20122010 2011

-38%

+42%

30%

+18%

-23%

+15%

11%

+8%

North America

APAC

South America

EMEA


North America

▪ Sharp decline due to covid-19. OEM revenue down

65%, OEM customers resumed production towards

the end of the quarter

▪ The aftermarket was down 24% but shows resilience

with positive signs in June

▪ Uncertainty regarding the impact of accelerating

number of covid-19 cases

▪ Closure of Blue Springs and Friction Centers run

according to plan

▪ Continued focus on driving aftermarket sales and

increasing efficiency

SEK million Q2/20 Q2/19 change1

Truck 46 190 -76%

Trailer 64 126 -49%

Aftermarket 321 416 -24%

Total 431 732 -42%1 currency adjusted

RevenueSEK m

Build rates

new vehicles

Thousands

Current fleet

Thousands

349 363 346416 392 361 397

321

122 99 135

126 13294

105

64

158 153190

190162

116109

46

0

100

200

300

400

500

600

700

800

Q2/19Q1/19Q4/18 Q2/20Q3/18 Q4/19Q3/19 Q1/20

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

20232018 20202019 2021 2022

Market predictions

2020

Truck -59%

Trailer -50%

5


Europe

▪ Sharp decline due to covid-19. OEM revenue

down 40%. OEM customers resumed

production towards the end of the quarter

▪ Aftermarket revenue down 20% but shows

resilience with positive signs of recovery in

June

▪ New contract signed with Wielton Group for

EBS and air control products. Another contract

renewed with major ADB customer

▪ Closure of Heidelberg plant is on track and will

be fully completed in q4

▪ Continued development work with major truck

OEM based on successful winter tests 2020 of

SBS

6


Truck 25 49 -46%

Trailer 137 224 -39%



RevenueSEK m

Build rates

new vehicles

Thousands

Current fleet

Thousands

186 161 188 175 189 166 178140

209211

241224 184

153

198

137

4547

5149

40

37

41

0

50

100

150

200

250

300

350

400

450

500

Q4/18Q3/18 Q2/19Q1/19 Q1/20Q4/19Q3/19

25

Q1/20

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

2018 20232022202120202019

Market predictions

2020

Truck -34%

Trailer -20 to -30%

6


Asia & Middle East

• The business in China recovered from initial covid-

19 disruptions. OEM revenue down 6% in the

quarter

• India severely impacted, OEM revenue down 82%

• Aftermarket revenue down 33% mainly due

reduced bus travels throughout the region

• Vehicle tests of the electromechanical braking

system continue and additional test vehicles were

equipped during the second quarter


Truck 68 84 -18%

Trailer 42 49 -15%



RevenueSEK m

Build rates

new vehicles

Thousands

Current fleet

Thousands

21 19 21 19 17 21 14 12

4337

50 49 4653

44 42

9489

72 84

64

90

53 68

0

20

40

60

80

100

120

140

160

180

Q4/18Q3/18 Q2/19 Q4/19Q1/19 Q3/19 Q1/20 Q2/20

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

20212018 2019 2020 2022 2023

Market predictions

2020

Truck -14%

Trailer 2%

7


South America

▪ Build rates for 2020 is expected to drop -32%

for trucks which is the most important category

▪ OEM revenue in South America dropped 67% as

several OEMS closed their production

▪ Negative currency effects impacted profitability


Truck 5 32 -76%

Trailer 3 4 2%



RevenueSEK m

Build rates

new vehicles

Thousands

Current fleet

Thousands

20 19 18 21 22 25

1612

4

4

21 24 24

32 3221

21

5

0

5

10

15

20

25

30

35

40

45

50

55

60

Q2/19Q4/18

3

Q1/19Q3/18

32 3

Q3/19

3

Q4/19 Q1/20

3

Q2/20

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

202020192018 2021 2022 2023

Market predictions

2020 Truck -32%

8

Innovative Vehicle Solutions9

Financial highlights second quarter


▪ Truck sales decreased -58%– Sharp downturn in North America, -

76%

‒ Lockdown in India 2mts -90%

‒ 1% growth in China

▪ Trailer market dropped -39%‒ Still weak demand in EMEA, -39%

‒ North America down -49%

▪ Aftermarket drop -23%‒ Aftermarket dropped more than

expected in Q2

‒ North America poor development -24%

‒ EMEA -20% but June improved after

April-May lockdowns

▪ Almost no currency effects

10

Sales bridge second quarter 2020

Sharp downturn in Q2 for Total Haldex Sales but

signs of improvement in Aftermarket

631

879 875

403

355

Sales

Q2 19

Curr Adj

Sales

Q1 20

Trailer

-147

-206

Aftermarket Sales

Q2 20

Truck

-156

-5

Curr effect

Truck

Trailer

Aftermarket

1 389

-37%

57 41 20216 158 146 143 152 127 164 111 121

485439 420 480 448

413 357 417302

629628 615

671 732685

571 611

431

454441

Q2 2018

45

Q3 2018 Q1 2019Q4 2018

57

Q2 2019 Q3 2019

49

Q4 2019 Q12020 Q2 2020

1 3711 2821 271

1 2251 180

1 3401 389

1 140

875

Asia & Middle EastNorth America Europe South America

(42)%

(32)%

(19)%

(58)%

(39)%

(23)%

1 ) currency adjusted

1 ) Growth Q2 vs Q2

Currency Adjusted

1 ) Growth Q2 vs Q2

Currency Adjusted


▪ Truck sales decreased -47%– Softer market in Q1 in North America

with additional Covid-19 effect in Q2, -

61% ytd

‒ Lockdown in India, no demand -70%

‒ China -9% YTD, with Q1 Covid effect and

flat in Q2

▪ Trailer market dropped -29%‒ EMEA dropped , -28%, main effect from

Q2 Covid-19

‒ North America down -37%

▪ Aftermarket drop -11%‒ Strong Q1 was followed by a weak Q2

‒ Aftermarket expected to recover quicker,

positive signals from EMEA end of Q2

▪ Small currency effects, positive 1%

11

Sales bridge year to date 2020

First half year with really low Sales

1 205

2 027 2 055

832

691

Curr Adj

Sales

YTDQ2 20

-137

TruckSales

YTD 19

AftermarketTrailer

-323

-241

28

Curr effect

2 728

Sales

YTD 20

Truck

Trailer

Aftermarket

-26%

(47)%

(29)%

(11)%

1 ) Growth Q2 vs Q2

Currency Adjusted


Major Sales Drop and high focus on Cost Cutting

▪ Substantial drop in net sales volume in Q2

-37%, highly impacting EBIT

▪ Favorable Product mix where After market

increased from 45% to 55% of total sales.

Still, sales drop higher than expected

▪ Cost reductions total SEK 49m whereof 37

was related to general savings initiative in

bonus, travel, furlough etc, 7 reversal of

bonus accrual from Q1

▪ Cost reduction also included impact from

Strategic Structural savings program of 5

for closure of Friction center in NA

▪ One-time costs related to Cost Base Adj

savings program SEK -34m. Costs for

Structural savings program Friction Center

SEK-8m and Heidelberg SEK-6m.

▪ In addition, write-down of Intangible Asset

Module-T SEK-40m, write down of AX12

intangible SEK-60m

12

EBIT Bridge Q2 20 vs Q2 19

6,0%

-1,5% 0,9%

0,5%

0,2%6,1%

73,091,0

-3,0

-151,0

18,0

4,0

One-

time

2019

ADJ

EBIT

Q2 20

EBIT

Q2 19

VolumeADJ

EBIT

Q2 19

-179,0

26,0

Product

Mix

DM

savings

49,0

Cost

reduction

6,0

other

-148,0

One-

time

2020

EBIT

Q2 20

1

1 2

3

2

34

4


Sales drop puts pressure on profitability

▪ Substantial drop in net sales in YTD -26%

▪ Aftermarket product mix favourable. AM

share increase from 44% to 53%. Q1 good

progress, but Q2 big drop

▪ DM savings favourable, mainly from North

America

▪ Cost reductions total SEK 47m whereof 38 is

related to general saving in bonus, travel,

furlough etc

▪ Cost reduction also included impact from

Strategic Structural savings program of 9 for

closure of Friction center in NA

▪ One-time costs related to Cost Base Adj

savings program SEK -34m. Costs for

Structural savings program Friction Center

SEK-14m and Heidelberg SEK-6m. Legal

costs SEK -6m

▪ In addition, write-down of Intangible Asset

Module-T SEK-40m, write down of AX12

intangible SEK-60m

13

EBIT Bridge YTD 20 vs YTD 19

6,0%

-1,5% 0,9%

0,5%

0,2%6,1%

170,0188,0

39,0

-121,0

One-

time

2019

54,0

EBIT

YTD 19

18,0

Fixed

Cost

reduction

ADJ

EBIT

YTD 19

-276,0

Volume Product

Mix

ADJ

EBIT

YTD 20

11,0

DM

savings

47,0

15,0

other

-160,0

One-

time

2020

EBIT

YTD 20

1 2 3 4

1

3

2

4


Margin optimisation and Profit Protection

14

Substantial Long-term Structural savings program of SEK ~200m in annual saving

▪ Foot-Print Optimisation related savings program implemented

− Annual savings of SEK ~100m

− Expected saving 2020 SEK 35m. Impact Q2 ~SEK 5m, YTD Q2 SEK ~9m

▪ Cost Base Adjustment (FTE) savings program implemented

− Annual target savings of SEK 100m

− Expected saving 2020 SEK 25m. Impact from Q3

Non-recurring cost

Initiatives, MSEK Start Total 2019 2020

Estimated

Annual

Savings

Friction Center May 2019 18 5 13 28

Heidelberg Sep 2020 156 143 13 50

Blue Springs Oct 2020 29 24 5 25

Cost Base Adjustment July 2020 tba 0 34 100

Total 203 172 65 203

▪ Summary Long-term Structural savings program

− Annual savings of SEK ~200m

− Expected saving 2020 SEK 60m. Impact Q2 5, YTD Q2 SEK ~9


Initiatives, MSEK Start Total Q2 YTD Q2

Rest of

Year 2020

LONG TERM STRUCTURAL SAVINGS

PROGRAM

Foot Print Optimisation May 2019 103 5 9 26 35

Cost Base Adjustment jul-20 100 0 0 25 25

Subtotal 203 5 9 51 60

Short Term Savings Program apr-20 70 32 33 27 60

Subtotal Initiatives 37 42 78 120

Furlough 5 5 5 10

Adjustment Accrual 7 0 0 0

Subtotal Other items 12 5 5 10

Grand Total Short term Cost impact 44 38 32 70

GRAND TOTAL Cost Reductions 49 47 83 130

Margin optimisation and Profit Protection

15

Short-term savings program

▪ Additional Short-term savings program initiated

− 2020 reduction of bonus and savings in travel, consultants plus furlough

− Expected saving 2020 SEK 70m (60+10). Impact Q2 ~SEK 37m (32+5), YTD Q2 38 (33+5)

Total reduction

2020


Earnings

SEK m Earnings per share

16

SEK 148 m in one-off

items in Q2

SEKSales & Margins

Revenue

Gross

margin

Operating

margin

Q2/20 Q2/19 change

Gross margin, % 26.1 25.7 0.4

Operating income, SEK million -151 73 -224

Operating income (excl one-off items), SEK million -3 91 -94

Operating margin, % -17.2 5.3 -22.5

Operating margin (excl one-off items), % -0.3 6.5 -6.8

Operating margin (excl new technology), % 0.8 7.4 -6.6

Net income, SEK million -139 49 -188

Earnings per share, SEK -2.95 1.11 -4.06

%

-5,0

0,0

5,0

10,0

15,0

20,0

25,0

30,0

0

200

400

600

800

1 000

1 200

1 400

Q4/19Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q1/20

875

Q2/20

26

0

-3

-1.00

-4.00

0.00

-3.00

2.00

-2.00

1.00

Q3/18 Q4/19Q4/18 Q1/19 Q2/19 Q3/19 Q1/20 Q2/20


Financial position


Cash flowCash flow & Inventory development

18

SEK m

Cash flowoperating activities

-96

-100

-50

0

50

100

150

200

250

Q4/18 Q4/19Q3/18 Q1/19 Q2/19 Q2/20Q3/19 Q1/20-100

▪ Cash-flow from operating activities highly

affected by the low revenue and loss of

operational profit.

▪ Working capital developed negatively during

the quarter.

849 850

934 911860

8893 94 93

109

118124

0

10

20

30

40

50

60

70

80

90

100

110

120

130

0

100

200

300

400

500

600

700

800

900

1 000

1 100

1 200

1 300

May

815

MarDec. 19

892

AprJan Feb Jun

+6%

Haldex Days of Inventory Inventory

SEKm# Days

77 (32)SEKm

Change

In Q

▪ Long lead time and global sourcing led to

increased inventory levels despite sudden drop in

sales from covid-19 impact mid-march

▪ Positive trend noted from June. Inventory turn

planned to be normalised during second half of

2020 as Inventory reduction program initiated.

Inventory Monthly 2020 Development


▪ Capital Injection of 4 421 597 new shares issued on May 11th to

AMF and AFA Försäkring. Total Amount 157,2Msek

▪ Current financing prolonged 12 months until 21 Apr 2022

▪ Pension Liabilities increased due to big reduction in interest rates

in Q2

▪ Working capital increase and purchase of Heidelberg facility

increased need of interest bearing liabilities and thus increasing

net debt. Hidelberg facility expected to be divested in Q3.

Net Debt

19

Net Debt

SEK mJun 30

2020

Jun 30

2019

Assets as part of the net debt:

Cash and cash equivalents 260 196

Liabilities as part of the net debt:

Interest-bearing liabilities including

derivative instruments-920 -731

Pensions liabilities -651 -511

Net debt in total, excluding IFRS16 –

financial leasing-1 311 -1 046

Debt related to IFRS16 -321 -397

Net debt in total -1 632 -1 443


Key priorities going forward


Secure a strong and agile Haldex

▪ Increased focus on growing the aftermarket

to mitigate drop in OE demand in North

America and Europe

▪ Secure launch of new EBS for trailers in

Europe

▪ COVID-19 mitigation and profit protection

▪ Continued focus on long-term structural

cost savings

▪ Adapt to customers priorities in terms of

increased focus on electrification

21

Key priorities


Appendix


Regional performance

23

Sales Q2 2020

Truck sales down -18%

Trailer sales down -15%

Aftermarket down -33%

Total Sales -19%

Market predictions 2020

Truck -14%

Trailer up 2%

North America Europe ASIA & Middle East

South America

Sales Q2 2020




Total Sales -42%


Truck -59%

Trailer -50%

Sales Q2 2020




Total Sales -32%


Truck -34%

Trailer -20 to -30%

Sales Q2 2020


Trailer sales up 2%


Total Sales -50%


Truck -32%

49.0%

35.0%

2.0%

14.0%

Asia

North America

EMEA

South America

Documents

Second Quarter 2020 - Investor conference call · 2020. 7. 16. · +15% 11% +8% North America APAC South America EMEA. Innovative Vehicle ... renewed with major ADB customer ... 1