Healthy growth, increased profit and strong cash flow. Measures implemented to address anticipated lower demand in the second quarter.
First quarter of 2020
|Operating profit (EBITA)||126||119||5||390||384|
|Profit after tax||86||84||3||255||253|
|Earnings per share, SEK||2.31||2.23||4||6.83||6.75|
The first quarter of 2020 started well but came to be increasingly dominated by the coronavirus and its effects on customers, suppliers and Bufab’s operations.
China and Southeast Asia were already affected in January by the restrictions implemented after the Chinese New Year. Our subsidiaries in Asia had to rapidly prepare action programmes to enable them to conduct operations safely and efficiently despite the epidemic. This experience was very valuable when the virus subsequently spread to Europe and North America.
At an early stage, we established three main priorities: health and safety, quality and deliveries to customers, and financial stability. We quickly reorganised work in all of our subsidiaries so that it could be conducted safely and with a minimal risk of spreading of the virus. We also had to handle large fluctuations in our customers’ manufacturing and delivery plans. Our suppliers, first in China, then southern Europe and thereafter all of Europe and North America, were affected by reduced capacity or complete closure of their operations. We are very satisfied that we have kept our customers supplied without disruption or quality defects throughout this period.
Toward the end of the quarter, demand returned in China and Southeast Asia. At the same time, it became clear that many customers in Europe and North America had to close operation or reduce capacity. At the beginning of April, demand declined by 30 percent. Accordingly, during the same period of time, we were forced to implement comprehensive furloughing and some workforce reduction in 30 subsidiaries. The objective is to reduce the working hours to the same extent as demand during the second quarter.
Accordingly, in the first weeks of April, we reduced staffing by 30 percent of normal levels, which generated significant cost savings. If demand declines further, we will take additional measures.
During the first quarter, we reorganised the business into four operating segments instead of the previous two. The segments have been impacted in different ways by the crisis. In segment East, demand was weaker at the beginning of the quarter in China, but stronger at the end of the quarter. Segments West and North, on the other hand, had a rather strong start, but experienced a sharp slowdown toward the end of the quarter. This was particularly noticeable in certain industries, such as automotive and furniture/kitchen, as well as in countries with particularly strong restrictions, as for example France and Austria. Finally, segment UK/North America had a strong start of the quarter. At the end of March and beginning of April, when the US, the UK and Mexico introduced strict lockdown measures, it naturally affected us, too.
However, the overall impact on demand was moderate during the quarter. In fact, both sales and earnings for the first quarter of 2020 were Bufab’s strongest ever.
On the other hand, the conditions for the second quarter of 2020 are challenging. We can expect a strong fall in sales in April and it is impossible to say how long a recovery will take. On the one hand, many customers are indicating an intention to resume their operations relatively soon, while on the other hand, the pandemic’s development is impossible to predict. Accordingly, we have taken robust measures to reduce costs and to ensure the ability to also manage a prolonged period of low demand. At the same time, it is important to be able to quickly return to full capacity. Bufab’s action programme therefore prioritises speed and retained flexibility.
I want to take this opportunity to thank the entire team at Bufab, who have shown flexibility, teamwork and strong customer focus throughout this period. Thanks to our strong team, I am confident looking ahead to the remainder of 2020.
President and CEO
A conference call will be held on 21 April 2020 at 9:00 a.m. CET. Jörgen Rosengren, President and CEO, and Marcus Andersson, 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: Standard Intl. +44 (0) 2071 928000, UK 08445718892, Sweden 0850692180 or the US +1 (631) 510 7495. Conference code: 9170997.
Please dial in 5–10 minutes ahead in order to complete the short registration process.
+46 370 69 69 00
+46 370 69 69 66
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 21 April 2020 at 7:30 a.m. CET.
Bufab AB (publ) Box 2266 SE-331 02 Värnamo, Corp. Reg. No. 556685-6240
Tel: +46 370 69 69 00 Fax +46 370 69 69 10