Earnings Release • Nov 7, 2019
Earnings Release
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Forward-Looking Statements and Non-IFRS Measures
This presentation contains certain "forward-looking statements". These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this presentation include statements addressing our future financial condition and operating results. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; and the possible effects on us of changes in tax laws, tax treaties and other legislation. More detailed information about these and other factors is set forth in the 2018 Kongsberg Automotive Annual Report and the Kongsberg Automotive Quarterly Reports.
Where we have used non-IFRS financial measures, reconciliations to the most comparable IFRS measure are provided, along with a disclosure on the usefulness of the non-IFRS measure, in this presentation.
Ongoing positive development in challenging market conditions
| Sales | ▪ In a challenging market environment, we again grew our revenues: ▪ YoY revenue growth of 7.8% from MEUR 259 to MEUR 279 including positive FX effects of MEUR 4. ▪ Excluding FX effects, our growth rate was 6% compared to a decline in the passenger car and truck markets of -3% and -4%, respectively. ▪ We were awarded new business totaling MEUR 65 on an annualized basis, corresponding to MEUR 299 in expected lifetime revenues. |
|---|---|
| Performance | ▪ The adjusted EBIT margin was flat YoY, growing in line with revenue by MEUR 0.8 to MEUR 13.9. This includes unfavorable FX effects of MEUR 0.3. ▪ As has been the case in the previous quarters, the fall through from additional volume was partly offset by macro factors. ▪ EBIT for the quarter amounted to MEUR 11.9 versus MEUR 6.2 in Q3 2018. This improvement is mainly driven by the reduction in restructuring costs complemented by the positive business development. |
| Cash Flow | ▪ Free cash flow was MEUR -8 in Q3 2019. ▪ Our total liquidity reserve at the end of the quarter amounted to MEUR 64.5 of which MEUR 23.4 as unrestricted cash on hand. |
| Gearing | ▪ Excluding IFRS 16 effects, our LTM adjusted gearing ratio (NIBD/Adj. EBITDA) was 2.4X, which is 0.3X higher than in Q3 2018. Including IFRS 16 effects, our adjusted gearing ratio was 3.0X. |
Revenue and adjusted EBIT figures have improved substantially over the last years
Revenues including HRAR EBIT adjusted for restructuring - see details in the quarterly report.
Ongoing YoY growth driven by positive performance & lower restructuring costs
Solid future growth potential despite weaker momentum due to market development
New business wins LTM (per annum revenues) MEUR
New business wins LTM (lifetime revenues*) MEUR
*Lifetime revenue assumptions are based on IHS and LMC production estimates at the time of the booking.
New business wins secure future growth development in all segments
*Lifetime revenue assumptions are based on IHS and LMC production estimates at the time of the booking.
High number of new business wins over the last 2+ years ensure long term growth
*Lifetime revenue assumptions are based on IHS and LMC production estimates at the time of the booking.
Declining passenger car and truck markets in all major regions
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19
Source: IHS Light Vehicle Production Base, Q3 2019
Production Volumes:
| Europe | -0.5% | YoY | or | -22kunits |
|---|---|---|---|---|
| North America | +2.0% | YoY | or | +83k units |
| South America | -0.8% | YoY | or | -7kunits |
| China | -7.0% | YoY | or | -433kunits |
| APAC w/o China | -18.0% | YoY | or | -124kunits |
| RoW | -22.1% | YoY | or | -135kunits |
Production Volumes:
| Europe | +0.5% | YoY or |
+1k units |
|---|---|---|---|
| North America | -3.1% | YoY or |
-5k units |
| South America | +21.2% | YoY or |
+5k units |
| China | +1.1% | YoY or |
+3k units |
| APAC w/o China | -20.6% | YoY or |
-36k units |
| RoW | Unchanged |
Adjusted EBIT* MEUR and percent
Interior Powertrain & Chassis Specialty Products
The overall YoY increase was driven by Interior Comfort Systems (ICS) with a growth rate in the mid teens as volumes of new programs in Europe and North America ramped up.
The overall segment growth was, however, partially offset by lower sales in LDC (Light Duty Cables).
The Interior segment consists of two business units; Interior Comfort Systems (ICS) and Light Duty Cables (LDC). In ICS, revenues grew by 18% and adj. EBIT grew by 47% YoY. In LDC, revenues declined by 5% and adj. EBIT sharply decreased by 120% YoY. The LDC performance was mainly driven by the impact of the Mexican labor increase, and to a certain extent by volume decreases.
Operations New Business Wins
The segment continues to drive operational improvements in all its plants. Reduction in force will be made in plants with volume declines.
Following very strong Q3 2018 booking levels, Q3 2019 new business wins were lower.
ICS was awarded a contract to supply Seat Heat Systems to a premium US OEM customer worth MEUR 10 in annualized revenues or MEUR 69 in expected lifetime revenues.
LDC won a contract to supply Actuation Cables to a European premium OEM customer.
The new product launch challenges of the first half of the year were successfully resolved.
Our Chinese operations benefitted from successful product launches and high loads.
Lifetime revenues
Within the quarter, P&C was awarded business with a US based OEM worth MEUR 8 in annualized revenues or MEUR 38 in expected lifetime revenues.
Overall adj. EBIT levels remained relatively stable in the segment with adj. EBIT of around MEUR 12.
The slight decline was mainly a result of unfavorable product mix changes.
Operations New Business Wins
Couplings started insourcing activities for some outsourced manufacturing activities, in order to compensate for the market decline.
Lifetime revenues
Most of the segment's new business wins was Couplings products to a major Tier1 CAM.
Annualized revenues
Q3 2018 Q3 2019
Interior and Powertrain & Chassis segments driving revenue growth
* Variances excluding FX translation effects
Adjusted EBIT MEUR 13.9, MEUR 0.8 higher than Q3 2018.
Net Profit was MEUR 2.3 above Q3 2018 mainly driven by lower restructuring costs.
Restructuring costs were reduced by MEUR 6.9 following the completion of the production transfer projects from Germany, the UK, the US and Norway.
The Q3 2019 restructuring costs (MEUR 1.9) were related to corporate systems transition costs.
IFRS 16 adoption resulted in MEUR 1.2 additional interest expenses.
Financing related interest expenses were inline with increased level of the bond interest rate fixed at 5.0%, RCF borrowing interest and RCF commitment fees.
Included MEUR 1.0 of unrealized currency losses in Q3 2019 vs. MEUR 0.4 gain in Q3 2018.
Overall NWC increase by MEUR 1.9 Cash out related to restructuring activities amounted to MEUR -2.1 for Q3 2019.
Investments mainly to support current and future business growth.
Interest bearing debt related interest payments: MEUR 7.0
IFRS 16 interest payments: MEUR 1.2
*Free Cash Flow = Cash flow from operating activities ± cash flow from investments ± cash flow from financing excluding net draw down / repayment of debt
1) Excluding IFRS 16 repayments of lease liabilities
2) Not excluding IFRS 16 repayments of lease liabilities
The currency loss of MEUR -1.0 consisted of unrealized FX losses.
Main elements were the IFRS16 interest cost of MEUR -1.2 and accrued interest expense for the bond of MEUR -4.0.
Q2 2019 Q4 2018 Q1 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q1 2019 Q2 2017 Q3 2019
Incl. IFRS 16 effect
* Excluding restructuring costs; ** Capital employed at quarter end
Adjusted ROCE* (%, LTM)
Equity Ratio (%) Capital Employed (MEUR)**
Incl. IFRS 16 effect
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