Bufab Group: Interim report January – June 2023
Strong operating profit and improved cash flow in the second quarter
Second quarter of 2023
- Net sales increased by 2 percent to SEK 2,280 million (2,241). Organic growth was -5 percent and order intake was in line with net sales
- Operating profit (EBITA) increased by 37 percent to SEK 319 million (233) and the operating margin was 14.0 percent (10.4). Adjusted for remeasured additional purchase considerations amounting to SEK 12 million (-80), operating profit (EBITA) decreased by -2 percent to SEK 307 million (313), corresponding to an operating margin of 13.5 percent (14.0)
- Earnings per share increased by 54 percent to SEK 5.41 (3.51)
- Operating cash flow amounted to SEK 488 million (-23), corresponding to a cash conversion ratio of 147 percent (-1).
January – June 2023
- Net sales increased by 10 percent to SEK 4,666 million (4,235). Organic growth was -4 percent and order intake was somewhat lower than net sales
- Operating profit (EBITA) increased by 35 percent to SEK 642 million (476) and the operating margin was 13.8 percent (11.2). Adjusted for remeasured additional purchase considerations amounting to SEK 10 million (-95), operating profit (EBITA) increased by 11 percent to SEK 632 million (572), corresponding to an operating margin of 13.5 percent (13.5)
- Earnings per share increased by 38 percent to SEK 10.74 (7.76)
- Operating cash flow amounted to SEK 824 million (-45), corresponding to a cash conversion ratio of 123 percent (-9).
The Group in brief
| Quarter 2 | Δ | Jan-Jun | Δ | 12-months rolling | Full year | |||
| SEK million | 2023 | 2022 | % | 2023 | 2022 | % | 2022/23 | 2022 |
| Order intake | 2,263 | 2,249 | 1 | 4,584 | 4,290 | 7 | 8,747 | 8,453 |
| Net sales | 2,280 | 2,241 | 2 | 4,666 | 4,235 | 10 | 8,862 | 8,431 |
| Gross profit | 649 | 645 | 1 | 1,324 | 1,205 | 10 | 2,508 | 2,389 |
| % | 28.5 | 28.8 | 28.4 | 28.5 | 28.3 | 28.3 | ||
| Operating expenses | -331 | -411 | -20 | -682 | -729 | -6 | -1,352 | -1,399 |
| % | -14.5 | -18.3 | -14.6 | -17.2 | -15.3 | -16.6 | ||
| Operating profit (EBITA) | 319 | 233 | 37 | 642 | 476 | 35 | 1,156 | 990 |
| % | 14.0 | 10.4 | 13.8 | 11.2 | 13.0 | 11.7 | ||
| Operating profit | 301 | 223 | 35 | 607 | 455 | 33 | 1,082 | 930 |
| % | 13.2 | 9.9 | 13.0 | 10.7 | 12.2 | 11.0 | ||
| Profit after tax | 205 | 132 | 55 | 406 | 298 | 36 | 717 | 609 |
| Earnings per share, SEK | 5.41 | 3.51 | 54 | 10.74 | 7.76 | 38 | 19.21 | 16.23 |
CEO`s Overview
Bufab had a continued favourable development during the second quarter and reported a very strong operating profit and cash flow development.
Sales growth was 2 percent driven by currency effects. Organic growth was -5 percent, mainly on account of a weaker demand from sectors that experienced a tailwind during the pandemic, such as the furniture, kitchen, outdoor recreation and health sectors, especially in Segment East and UK/North America, and strong comparative figures. Sectors that performed strongly during the quarter were energy, automotive, industry and defence. Segment West reported a good development during the quarter, supported by high demand and increased market shares. The order intake for the Group was in line with net sales.
The gross margin decreased somewhat, mainly due to the business mix. The share of operating expenses decreased during the quarter, but when adjusted for remeasured additional purchase considerations, which primarily impacted the second quarter 2022 negatively, the share of operating expenses was in line with last year. We have continued good cost control, despite high inflationary pressure.
Overall, operating profit (EBITA) rose by 37 percent and the operating margin was a strong 14.0 percent (10.4). Adjusted for the above mentioned items affecting comparability, operating profit declined by -2 percent and the operating margin amounted to 13.5 percent (14.0). Segment UK/North America made a particularly good contribution to the operating profit during the quarter, where we noted a strong results development in American Bolt & Screw (ABS) despite a weaker market. Also TI Midwood (TIMCO) reported a strong result in the quarter.
Our focused work to strengthen the cash flow is continuing to yield results. Operating cash flow improved significantly year on year due to the strong results and a reduction in working capital. We anticipate continued strong cash flow during the year and our goal is to steadily reduce our key ratio Net debt/EBITDA, which in the quarter amounted to 2.9 (3.7)
We are seeing good results from the integration of the most recent acquisitions and the merger of subsidiaries in the Netherlands and Denmark. We are also continuing to integrate sustainability throughout our operations – an increasingly important area for us and our customers. We are seeing that more and more customers are placing higher demands on suppliers, and as an industry leader in sustainability, we foresee new and substantial business opportunities.
A highlight during the quarter was when we received with the prestigious “Quality Award” by Schneider Electric. Bufab was selected from among more than 13,000 other suppliers in Europe for our excellent quality results over the past two years, which we are extremely proud of.
There is still a great deal of uncertainty in the market and we are noting a slowdown in certain industrial segments. However, we have a large and well-diversified customer base and article portfolio, with a good spread of risk among various industries and markets. Our short-term priorities that we established in the third quarter of 2022 stand firm: to capture market share, maintain a good margin and improve the cash flow. These, combined with a gradual broadening of our offering and increased customer relevance, provide a favourable outlook for a continued long-term, sustainable, and profitable growth journey.
I look forward to welcoming Pär Ihrskog as new CFO of Bufab. Pär will take up his position in mid-August.
Finally, I want to thank all of our customers around the world for the trust they show in us and to extend a big thank you to our more than 1,800 “solutionists” worldwide, and wish you all a pleasant and restful summer.
Erik Lundén
President and CEO
Conference call
A conference call will be held on 13 July 2023 at 10:00 a.m. CEST. Erik Lundén, President and CEO, and Frederick Neely, acting CFO, will present the results. The conference call will be held in English.
To participate in the conference, use any of the following dial-in numbers: (UK) +44 (0) 33 0551 0211, (Sweden) +46 (0) 8 5051 0086, (USA) +1 786 496 5601. Conference code: 2445981#.
Please dial in 5-10 minutes ahead in order to complete the short registration process.
CONTACT
Erik Lundén
President & CEO
+46 370 69 69 00
erik.lunden@bufab.com
Frederick Neely
Acting CFO
+46 370 69 69 00
frederick.neely@bufab.com
This information is such that Bufab AB (publ) is obliged to disclose in accordance with the EU’s Market Abuse Regulation. The information was submitted for publication by the aforementioned contacts on 13 July 2023 at 7:30 a.m. CEST
About Bufab
Bufab AB (publ), Corporate Registration Number 556685–6240, is a trading company that offers its customers a full-service solution as Supply Chain Partner for sourcing, quality control and logistics for C-Parts. Bufab’s Global Parts ProductivityTM customer offering aims to improve productivity in the customers’ value chain for C-Parts.
Bufab was founded in 1977 in Småland, Sweden, and is an international company with operations in 28 countries. The head office is located in Värnamo, Sweden, and Bufab has about 1,850 employees. Bufab’s net sales for the past 12 months amounted to SEK 8.9 billion and the operating margin was 12.2 percent. The Bufab share is listed on Nasdaq Stockholm, under the ticker “BUFAB”. Please visit www.bufab.com for more information.
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