Haldex said its Q1 2019 sales rose 7% year on year to SEK1,339m but decreased 1% adjusted for currency movements.
Operating income was SEK97m (vs SEK86m in Q1 2018) for an operating margin of 7.2% (6.9%).
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Operating margin excluding investments in new technology (scalable brake system) was 7.5%. The target is 10% for the core business by 2022.
Net income after tax was SEK68m (SEK58m) while earnings per share were SEK1.54 (SEK1.30).
"Market conditions weakened slightly in the first quarter," the company said in a statement.
"Currency-adjusted net sales decreased marginally but increased in absolute terms. The positive performance of disc brake sales continued while brake adjuster sales decreased due to a slowdown in Chinese demand.
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By GlobalData"Operating income improved due to increased aftermarket sales, stabilised raw material prices and improved cost controls, and also because the joint venture in China is now recognised as a part of operating activities."
Ake Bengtsson, president and CEO, said: "The year started off with mixed signals from our geographic regions. North America remains a strong market with healthy demand from vehicle manufacturers. We've had a rough winter that caused losses in production and shipping days, which impacted aftermarket in the US negatively. Nevertheless, net sales are up for the region as a whole. Europe's sales have been stable in Q1, although the forecast for new production of trailers, which is a key customer group for us, is negative.
"China is responsible for the major decline of the quarter. Legislation was enacted last year requiring automatic brake adjusters in newly produced heavy vehicles. As a result, our net sales in China almost doubled in Q1. The comparative figures are thus high, but China is currently a rough market with declining volumes and heavy price pressure.
"The legislation is not followed and the penetration of trailers is as low as 30%. However, we estimate that the safety requirements will lead to an increase in demand for Haldex products in the long term."
Outlook
The market in North America is expected to continue to grow in 2019. However, the North American market can fluctuate rapidly, and it is difficult to estimate whether the growth will last the entire year.
Europe is judged to slightly decrease compared with 2018. China has a weaker market in 2019. Haldex can partly withstand a downturn given that automatic adjusters are currently required by law on heavy vehicles. India is expected to have a weak year with lower production levels, and Brazil is expected to experience carefully optimistic market growth, although from low levels.
Outlook for 2019 has not changed. Sales will increase in North America, which will be offset by unchanged or lower sales in other regions. As a whole, sales in 2019 are expected to be in line with 2018. Haldex thinks the operating margin in 2019, including increased investments in new technology, will be in line with or higher than the operating margin excluding one-off items in 2018.
