- Net sales: MSEK 473 (342) - reported sales were up +38% year-on-year. After adjusting for the impact of currency (-14%) and Allied Enterprises (+7%), sales in constant currency year-on-year were up +45%.
- Operating income: MSEK 107 (28), generating an operating margin of 22.7% (8.3), operating margin before items affecting comparability was 22.7% (14.2).
- Net income for the period: MSEK 85 (17); basic EPS of SEK 2.25 (0.44).
- Cash flow from operating activities: MSEK 76 (87); cash generation has been affected by increases in working capital to support increased sales.
- Net sales: MSEK 905 (798) - reported sales were up +13% year-on-year. After adjusting for the impact of currency (-13%) and Allied Enterprises (+6%), sales in constant currency were up +20%.
- Operating income: Operating income was MSEK 202 (115), generating an operating margin of 22.3% (14.5), operating margin before items affecting comparability was 22.3% (17.0).
- Net income for the period: MSEK 157 (77); basic EPS of SEK 4.15 (2.04).
- Cash flow from operating activities: MSEK 148 (168); cash generation has been affected by increases in working capital to support increased sales.
- Group's net debt: MSEK -22 (-67); gearing ratio of -2% (-6). A reduction in pension liabilities compared to December 2020 continues to drive the negative net debt.
President and CEO, David Woolley, comments on the Q2 2021 Interim Report.
Market and sales development
Group sales in constant currency and excluding our recent acquisition were up +45% year-on-year for the second quarter and +20% for the first six months of the year. Reported sales continue to be affected by the strength of the Swedish Krona against most of the major currencies, in particular the US Dollar, therefore reported sales for the second quarter and the first six months of the year were up year-on-year +38% and +13% respectively.
Published market indices blended to Concentric's mix of end-market applications and locations suggests all geographical markets continue to recover from the global pandemic with Europe and rest of world performing stronger than the Americas. Market indices suggest market growth of 79% for the first half of 2021, which was higher than the growth in Concentric's sales. However, it should be noted that the comparative 2020 period was heavily impacted by the pandemic. In the first half of 2020 market indices suggested a decline of -45% which compared to a decline of only -30% in Concentric's sales, contributing to the indices larger rebound in 2021. There also appears to be some volatility in the published market indices data, far greater than would normally be expected.
Our reported sales this quarter are MSEK 41 or +10% higher than the first quarter 2021 and demand from our end market applications has remained strong throughout the second quarter. A strong sales performance, despite the general struggles in the industry supply chain to meet this new level of demand, has resulted in a further increase in our sales order backlog. We have continued to manage our customers near term product demands, and we expect to catch back the order backlog during the second half of the year.
Concentric Business Excellence - managing operating margins and cash
As demand for our products continues to increase, our Concentric Business Excellence program ensured we were able to meet the increase in customer demand whilst controlling the cost of capacity. This program and our employee's resilience and ability to adapt to an ever-changing environment ensured the operating margin before items affecting comparability was 22.7% (14.2) for the second quarter and 22.3% (17.0%) for the first six months of the year.
Operating cash flow for the period was MSEK 76 (87) which is a strong level of cash conversion, from operating income. As sales grow, so does our working capital investment, during the second quarter there was a MSEK 14 increase quarter-on-quarter of working capital, driven by an increase in inventory. Cash and cash equivalents also decreased to MSEK 498 (631) after paying dividend of MSEK 133 during the second quarter.
Q2 press releases - a story of progress
e-Pumps in the truck sector, both for coolant and electrohydraulic steering;
a development contract awarded for e-Pumps on a fuel cell application;
the first e-Separator nomination for Alfdex, our joint venture with Alfa Laval; and
two important contracts in China to supply sophisticated hydraulic fan motors and Alfdex crankcase gas separators to meet China VI legislation.
These new business nominations continue to demonstrate our ability to win strategically important e-Pump business in the electrification sector. The total contract value over a five year period of all the published electrification customer nominations now totals MSEK 900.
Market indices suggest that production volumes blended to Concentric's end markets and regions will be up +16% year-on-year for 2021, up +7% on the previous forecast and demand from our customers for both our engine and hydraulic products continues to improve quarter-on-quarter.
The availability of critical raw materials will continue to influence our sales during the second half of the year as our industry supply chain stabilises to meet the new market demand. The ongoing shortage of raw materials and components is having an inflationary effect, both from the metal indices and general supplier economic price increases, which will need to be passed on to our customers during the second half of the year.
The orders received, and expected to be fulfilled during the third quarter of 2021, were significantly ahead of the sales levels of the second quarter in 2021. We also expect the majority of the sales order backlog, predominantly relating to our North American businesses, will be supplied to our customers during the second half of the year.
Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.
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 21 July, 2021.