VBG Group

Third quarter 2024

• Consolidated sales decreased 11.6% to SEK 1,272.9 M (1,439.8).
• Organic growth amounted to –11.5% (24.9), adjusted for acquired sales and currency effects between the years.
• Consolidated operating profit (EBITA) totaled SEK 171.8 M (225.7), with an operating margin (EBITA) of 13.5% (15.7).
• Profit after financial items amounted to SEK 147.8 M (216.9).
• Earnings per share amounted to SEK 4.49 (6.35) before and after dilution.

Nine months 2024

• Consolidated sales increased 0.3% to SEK 4,302.3 M (4,289.9).
• Organic growth amounted to –1.8% (19.2), adjusted for currency effects between the years.
• Operating profit (EBITA) increased to SEK 648.2 M (640.5), with an operating margin (EBITA) of 15.1% (14.9).
• Profit after financial items increased to SEK 609.7 M (578.5).
• Earnings per share amounted to SEK 19.03 (17.56)

Comment from VBG Group’s President & CEO, Anders Erkén
The third quarter of 2024 was marked by flagging demand in VBG Group’s markets. Net sales for the quarter totaled SEK 1,272.9 M (1,439.8), down 11.6% compared with the year-earlier period. EBITA decreased SEK 171.8 M (225.7) and the EBITA margin fell 2.2 percentage points to 13.5% (15.7). Earnings per share decreased 29.3% and organic growth adjusted for currency fluctuations and acquired sales, decreased 11.5% compared with the third quarter of 2023.

After a few quarters where order bookings had gradually leveled off, in the third quarter of 2024 we saw a decrease in demand in the Group’s markets, primarily in North America. This impacted sales for all parts of the Group, but especially Mobile Thermal Solutions. Order bookings decreased in the third quarter and order bookings for the first nine months of 2024 were 3% below the same period in 2023. Despite flagging demand, however, the gross margin continued to strengthen, due largely to effective cost management and positive changes in the Group’s product mix. We implemented proactive capacity adjustments during the quarter, and going forward we will also continue to take measures to remain flexible and efficient.

Stable cash flow despite an unstable market
In a situation with decreased demand, geopolitical turbulence and macroeconomic challenges, being a well-balanced and stable industrial Group with good distribution, both geographically and in our products, is a strength. We saw proof of the strength in the Group during the quarter through a cash flow that remained positive, at high levels.

Strengthened gross margin despite decreased sales
Sales in Mobile Thermal Solutions decreased during the third quarter from the high levels we saw in 2023 and the first half of 2024. We saw the largest downturn in the Off-road segment in North America, where inventory adjustments in the distribution chain are now being carried out. Total sales for the division decreased 16% compared to the year-earlier period.

The operations in Bus Climate Control continued to post a positive profitability trend during the quarter despite sales volumes being lower in 2024 compared to 2023. Internal efficiency enhancement activities, price increases and increased sales of products for electric buses were driving forces in the improvement to profitability.

In July 2024, the Board of Directors decided to consolidate the three Mobile Thermal Solutions production facilities in Toronto into one new, shared, production facility. Significant gains in efficiency can be achieved by consolidating these three production facilities. This is a strategically important investment to both consolidate and further develop the already strong market position of the Mobile Climate Control brand in the Off-road segment.

Enhancements in cost efficiency
Sales in Truck & Trailer Equipment decreased 11% compared with the year-earlier period. As communicated in previous interim reports, demand in the European semi-trailer market is at historically low levels, which was a factor in the downturn in the division’s sales.

To balance the decline in sales, a number of efficiency enhancement measures have been implemented for the purpose of improving the cost efficiency of operations.

Aquired sales offset lower volumes
During the quarter, Ringfeder Power Transmission posted positive growth as a result of the acquisition of Rathi Transpower, which was finalized during the autumn of 2023. In all other respects, we saw the same trend as for VBG Group’s two other divisions: declining demand in the third quarter.

Sales for the division thus fell off during the quarter, and the main downward trend coming from the mining sector in Eastern Europe and Brazil. The decrease in sales offset by acquired sales.

Increased sustainability requirements
Our preparations for addressing new regulations and requirements in the sustainability reporting continued as planned during the quarter. We continued to implement extensive training initiatives in the Group and built up a Group-wide structure for the reporting of sustainability data.

The future
At present, we are seeing concern regarding the prevailing geopolitical turbulence, in particular the developments in the Middle East. Moreover, there are signs of a weak business cycle in China, the US and core markets in Europe such as Germany. In light of this, I expect market volatility and geopolitical unrest to continue.

That we still have continued to deliver a stable cash flow over the past quarter, despite a flagging market, shows that our processes work and that the breadth in the Group, both geographically and as regards our products, provides scope for action and the capacity to face new challenges in a continually changing business environment.

We will tackle future challenges through the strength of our brands, our skilled employees and our solid financial position, and also by identifying and taking necessary action to enhance efficiency. Our efficiency and our scope for action are also what will help us to be ready when the market turns around and demand increases again.

In conclusion, I would like to extend a warm and sincere thanks for good cooperation to all our dedicated and capable employees in VBG Group and to all of our important partners.