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New Company, Great Possibilities
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Ian Dugan
• Second level
• Third level
CEO and President • Fourth level
• Fifth
Q2 2011 Interim Report level
21 July 2011
1 June 2011
Results Summary
Q2 2011
• Sales at SEK 559 m increased by 3% in constant currencies compared to first
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quarter 2011, and 30% compared to second quarter 2010
• Market demand is being sustained with orders slightly ahead of sales activity
• Operating income was SEK 76 m, styles
Click to edit Master subhead textadjusting for SEK 16 m one-off costs associated
with the demerger
Operating income margin for the second quarter 2011 was 13.6% compared to
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• 11.9% for first quarter 2011
Second level
• Third level
• Earnings after tax were SEK 33 m (2); Earnings per share amounted to SEK 0.74
• Fourth level
(0.06); After adjusting for the post-tax impact of one-time de-merger costs, the
• Fifth level
earnings per share was SEK 1.00
• Cash flow from operating activities was SEK 36 m (38)
• Net debt was reduced to SEK 269 m (404) and gearing was reduced to 36% (53%)
21 21 July 2011
June 2011
Market Data
Strong demand in Q2 2011
Q2-11 vs. Q2-10 Q2-11 vs. Q1-11
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Truck +50% +38% +13%
North America
+5%
Europe North America Europe
Construction equipment +16% +9% +6% +4%
Click to edit Master subhead text styles +13%
Agricultural machinery +14% +5% +5%
Industrial applications +28% +20% +16% -1%
Click to edit statistics from Power Systems & Research, Off-Highway Research and International Truck Association Q2 2011 update
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• Second level
• Third level
• Increasing demand in US Heavy Truck sector as industry capacity restrictions are easing
• Fourth level
Fifth level
• Strong sustained• demand across all end markets, driven by:
• New emission requirements for off-road diesel engines
• Global infrastructure growth
• Rising commodity prices (agriculture and mining)
32 21 July 2011
June 2011
Market Data
Continued growth beyond 2011
Truck Construction equipment
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7,000 800
2% 6%
3% Europe, 20% CAGR 700 10% Europe, 13% CAGR
6,000 7% 11%
Engine volumes ‘000s
2%
Engine volumes '000s
600 9%
5,000
North America, 14% CAGR North America, 14% CAGR
500
4,000
400
3,000 China/India, 0% CAGR China/India, 14% CAGR
Click to edit Master subhead text styles 300
2,000
Latin America, 5% CAGR 200 Latin America, 5% CAGR
1,000 100
ROW, 1% CAGR ROW, 6% CAGR
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0 0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
• Second level
Agricultural machinery
• Third level Industrial applications
1,500 2% 1,200 4%
• Fourth level
5%
3% 7%
5% Europe, 5% CAGR 8% Europe, 12% CAGR
Engine volumes ‘000s
Engine volumes ‘000s
1,250 • Fifth level 1,000 8%
1,000 North America, 2% CAGR 800 North America, 10% CAGR
750 600
China/India, 5% CAGR China/India, 8% CAGR
500 400
Latin America, 4% CAGR Latin America, 8% CAGR
250 200
0 ROW, 2% CAGR 0 ROW, 4% CAGR
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Source: Based on statistics from Power Systems & Research, Off-Highway Research and International Truck Association Q2 2011 update
43 21 July 2011
June 2011
Sales & Operating margins
Profitable growth
Sales (constant currencies)
700
3% Above market sales growth driven by:
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650 11%
Sales value (SEKM)
• Inventory replenishment and
600 2%
13% sustained demand thereafter
550 7% Concentric
15%
10% Market • Introduction of new Tier 4
500
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5%
0%
emissions programs in Europe &
450
7%
North America
400 • Market share growth in India
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Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11
and China
• Second level
Operating margins
• Third level
15.0%
13.0%
• Fourth level Improved operating margins driven by:
11.0% • Fifth level
• Increased sales volumes
9.0%
7.0% • Realisation of benefits from cost
5.0% reduction program
3.0%
• Ongoing cost management
1.0%
-1.0%
-3.0%
Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11
54 21 July 2011
June 2011
Development per segment
- Americas
Amounts in SEK m Q2-11 Q2-10 Change
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Net sales
Operating income 1)
305
32
272
23
12%
9
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Operating margin, % 1) 10.6 8.5 2.1
Return on capital employed, % 1,2) 24.2 6.1 18.1
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1) The operating income and margin is stated before one-off advisor fees associated with the de-merger.
• Second level
2) The quarterly ROCE has been calculated on a rolling 12 month basis.
• Third level
• Second quarter sales increased 33% compared to 2010 in constant currencies
• Fourth level
• Fifth all end
• Increase applies to level sectors
• Sales in the second quarter were up 8.5% on first quarter 2011 in constant currencies
• Operating income SEK amounted to 32 m (23)
• Operating margin of 10.6 % (8.5%)
• Operating income continued to improve, due to increased sales volumes, pass through of
material escalators and a lower cost base.
65 21 July 2011
June 2011
Development per segment
- Europe & ROW
Amounts in SEK m Q2-11 Q2-10 Change
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Net sales
Operating income/loss 1)
254
40
221
-6
15%
46
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Operating margin, % 1) 15.7 -2.7 18.4
Return on capital employed, % 1,2) 20.2 -8.5 28.7
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1) The operating income and margin is stated before one-off advisor fees associated with the de-merger.
• Second level
2) The quarterly ROCE has been calculated on a rolling 12 month basis.
• Third level
• Second quarter sales increased 26% compared to 2010 in constant currencies
• Fourth level
• Fifth quarter reduced by 3.6% compared to the first quarter 2011 in constant
• Sales in the second level
currencies, as a result of less working days in the calendar at the Birmingham plant
• Operating income amounted to SEK 40 m (-6)
• Operating margin of 15.7% (-2.5%)
• Operating income continued to improve as a result of increasing sales, pass through of
material escalators and a lower cost base
76 21 July 2011
June 2011
Actual 2011
Balance sheet
Amounts in SEK m Q2-11 Q2-10 COMMENTS
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Working Capital 42 -38 • SEK 57 m of non-operating working capital
balances with Haldex AB were settled as part
of the refinancing arrangement.
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Intangible assets 864 1,077 • Largely relates to Concentric PLC acquisition
accounting – reduction primarily due to FX
Click to edit Master text styles retranslation and amortisation in the period.
• Second level
Capital Employed 1,153 1,405
• Third level
Total Assets • Fourth level 1,716 2,080 • Reduction in intangibles (see above) and
• Fifth level utilisation of excess cash on refinancing.
Net Debt 269 404 • Strong cash flow in period.
Equity 756 759
Gearing ratio 36% 53%
87 21 July 2011
June 2011
Actual 2011
Cash flows
Amounts in SEK m Q2-11 Q2-10 COMMENTS
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EBITDA 94 60 • Increase derived from strong
operating performance
De-merger costs -16 - • One-off advisor fees and duplicate
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corporate costs
Working capital change -14 -8 • Pressure from increased sales activity
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• Second level
Capital expenditure -12 -12
• Third level
• Fourth
Operating cash flow level 52 40
• Fifth level
Net interest & taxes paid -28 -14 • Higher taxes due to improved trading
Cash inflow before financing 24 26
98 21 July 2011
June 2011
Outlook
• Latest market indices suggest year on year growth of 15% in constant
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currencies
• Orders received during the second quarter 2011 indicate that sales activity
levels during the second quarter will be sustained in the third quarter of
Click 2011. Therefore, we believe we styles
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full year 2011
Further US heavy truck sales growth as industry capacity restrictions are
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• easing level
Second
• Third level
• Demand remains stable and we see no signs of weakening
• Fourth level
• Fifth focus
• We will continue to level on cost and working capital control, material
availability and cost, and we will continue to pass on all material increases
through escalator agreements
• The relative strength of the SEK against the USD, EUR and GBP will continue
to have an significant impact on the reported results
9
10 21 July 2011
June 2011
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• Second level
• Third level
• Fourth level
• Fifth level
11 June 2011
