Bulten said it has lowered production levels while the Covid-19 pandemic has furloughed or temporarily closed customers in the automotive market. But the group said it is ready to increase production at short notice, depending on when vehicle production increases again.
Q1 has been tumultuous for the automotive market, with China’s production stopping in February, while March saw most of Bulten’s customers close production units in Europe and North America. Vehicle production is already recovering in China, while not yet at previous levels, Bulten noted.
Bulten had a strong start to Q1 which slowed thanks to the aforementioned pandemic. Net sales amounted to SEK 821 (810) million, up 1.4% on Q1 2019. Operating earnings (EBIT) totalled SEK 43 (58) million, equating to an operating margin of 5.2$ (7.1).
The quarter saw Bulten acquire PSM (for USD 24.5 (SEK 230) million on a cash-free and debt-free basis. The firm is to move into a shared building in Ohio, USA.
Executive VP & CFO Helena Wennerström announced her resignation after the reporting period.
Anders Nyström, President and CEO said: “The year started off strongly for Bulten and was in line with the high order intake at the end of 2019. Since then, the situation for Bulten and the global automotive industry has changed dramatically due to the effects of COVID-19. Already in February, car production stopped in China, and during March most of Bulten’s customers closed down their production units in Europe and North America. As a consequence, Bulten has had significantly lower production and sales than planned during the first quarter. The decline in the market was reflected in the order intake and net sales for the quarter, the effects being partly offset by the acquisition of PSM. Net sales increased by 1.4 percent and order intake decreased by 6.1 percent. The prevailing uncertain production situation in the automotive industry means that the development in the coming months remains difficult to predict. At the end of the quarter, however, vehicle production in China started to recover from the COVID-19 situation, but has still not reached previous levels.
"We have taken measures to adapt the company’s operations to the situation in each market. Different forms and degree of working time reductions and furloughs for around 1,200 employees are now in place at Bulten’s units in Europe and North America. Further measures have also been taken to reduce costs. Our focus is also on the capital structure and measures to improve cash flow, a restriction on investments is now in place and the SEK 250–300 million real estate investment in Poland has been postponed to a later date. The Board’s previous dividend proposal is withdrawn to the 2020 AGM.
"It is not possible to predict at this time how vehicle production will be affected during the year. The measures we have taken do, however, enable that the company is ready to increase production at short notice.
"On 20 February Bulten held a Capital Market Day presenting its Stronger 24 strategy and the acquisition of PSM. The strategy also includes new financial targets, with an ambition of reaching net sales of SEK 5 billion within five years, an operating margin of at least 8%, and a return on capital employed of at least 15%. While 2020 will be a challenge, we are sticking to our strategy and our ambitious goals. We hold a strong position on our market, and we will get through these times with a focus on health, growth, profitability and cash flow.”