Concentric

FIRST QUARTER 2023

• Net sales: MSEK 1,127 (934) - record sales for the quarter, up +21% year-on-year. After adjusting for the impact of currency +10%, sales on a like for like basis, in constant currency year-on-year were up +11%.
• Operating income: Operating income was MSEK 181 (166) generating an Operating margin of 16.1% (17.8).
• Net income for the period: MSEK 121 (130); basic EPS of SEK 3.18 (3.43).
• Cash flow from operating activities: Cash flow from operating activities was MSEK 89 (89).
• Group's net debt: MSEK 865 (1,016); gearing ratio of 39% (59). Cash and cash equivalents up MSEK 184 following strong operating cash generation.

President and CEO, Martin Kunz, comments on the Q1 2023 Interim Report.

Great start to the year, record sales performance whilst maintaining our strong margins.

Financial Performance

The first quarter's results show a strong start to the year delivering another record sales quarter whilst maintaining strong operating margins. Net sales for this quarter were up +21% to MSEK 1,127 (934) with constant currency sales growth and foreign exchange rates increasing sales by +11% and +10% respectively. The Operating income for the first quarter was MSEK 181 (166) achieving an operating margin of 16.1% (17.8).

The global market for our engine products remained at a sustained high, whilst reported market indices suggest the market was broadly flat year-on-year. Net sales of our Engines division were actually up +24% to MSEK 752 (608) with an Operating margin of 16.6% (17.9). Foreign exchange rates increased sales by +10% whilst underlying sales were up +14%. Over the last year we have made consistent improvements and investments in our production facilities which combined with the supply chain stabilising further this quarter has enabled us to reduce our past due sales order backlog. Operating margins were broadly similar quarter-on-quarter despite a reduction in the net income from Alfdex.

Net sales of our Hydraulics division for the quarter were up +15% to MSEK 375 (326), with sales in constant currency increasing by +5% and foreign exchange rates increasing sales by a further +10%. The published market indices suggest demand for hydraulic products year-on-year reduced by 7%, however, reported net sales of Hydraulic products this quarter also benefitted from a reduction in our past due sales order backlog. The Operating margin for the quarter was 15.0% (17.7) and was impacted by higher operational costs, predominantly in our North American operations.

The cash flow from operating activities was MSEK 89 (89) with a profit to cash conversion ratio of 61% (62) for the quarter and inventory levels remained flat quarter on quarter at MSEK 538.

Sales and Market Development

Sales into our North American end-markets remained strong this quarter growing +11% year-on-year, due to strong demand for engine products in the truck and construction equipment sectors. Sales in Europe also grew +13% with sales growth balanced between engine and hydraulic products. The sectors in Europe which delivered the strongest sales growth this quarter were the truck and agricultural equipment. Whilst sales remained buoyant in our important North America and European markets, sales in India were a little weaker, as demand from our off-highway customers dipped. However, encouragingly for Alfdex the China truck market improved modestly, as too the demand for their oil mist separator technology required to meet China VI engine emission legislation.

Sales of electric products this quarter were MSEK 193, equating to 17% of group sales for the quarter. Customer activity and interest in our electric product range remains high, particularly for our high voltage fans launched during 2022. Following the successful integration of EMP last year we are now starting to see the commercial benefits of the acquisition, both through sales growth and margin expansion. To continue on the great progress we have made so far we are making a significant investment in our EMP Escanaba facility increasing our manufacturing capacity to meet customer demand for our e-Products.

Outlook

The outlook for the year remains uncertain with continuing speculation of a slight downturn to impact our markets, both of our larger markets, namely North America and Europe later this year. However, we have greater certainty regarding the near-term demand from our customers through a combination of fulfilling both past due and current sales orders. Therefore, we currently estimate sales in the second quarter of 2023 to be similar to the sales performance achieved during the first ­quarter of 2023. The global supply chain continues to stabilise and we expect to see a modest reduction in our inventory levels during the coming quarters.

With continuing uncertainty in the global macroeconomic situation, we will monitor closely our sales order intake during the coming quarters and ensure our business remains adept and flexible to adapt to demand changes in our end-markets and deliver strong financial returns.

For further information, please contact:
Martin Kunz (President and CEO) or Marcus Whitehouse (CFO) at

Tel: +44 121 445 6545 or E-mail: info@concentricab.com

The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on 3 May 2023.