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SKÅNES FAGERHULT, Sweden, July 26, 2022 /PRNewswire/ —
SECOND QUARTER 2022
FIRST SIX MONTHS 2022
President and CEO, Martin Kunz, comments on the Q2 2022 Interim Report.
Concentric reports record sales in the second quarter fuelled by EMP acquisition and strong organic growth, countering a mixed market with inflationary pressure and supply chain disturbances.
Sales Performance
Reported sales were up 116% to MSEK 1,021, another record quarter for Concentric. Engineered Machine Products (EMP) sales accounted for 78% of the year-on-year sales growth, and a weak Swedish Krona means foreign exchange rates have increased reported sales by a further 13%. Sales in constant currency and excluding EMP were up 25% year-on-year for the second quarter, with the increase equally split between volume and selling price increases.
Macroeconomic factors continued to affect our supply chain both in terms of material availability and cost, influenced by the ongoing war in Ukraine and general inflationary pressures in most geographical regions. The material supply situation has improved but sales remain constrained either by material or labour, particularly in North America where the labour market is extremely tight.
A key strategic objective of our growth plan is to increase sales of electric products, both in absolute terms and as a percentage of group sales. Sales of electric products this quarter were MSEK 166 which equates to 16% of group sales, and we will continue to invest in e-Products to support our customers as they develop new low emissions vehicles & machines.
Market Development
The published market indices suggest our blended market, based on volume, was flat year-on-year. North America remains strong, Europe appears to be weakening and the emerging markets are mixed. The one constant across all geographies is the agricultural market is down, particularly in Europe and India. China’s truck market slowed further, impacted by the resurgence of Covid-19 and the shutdown of districts in the Shanghai region. The market indices can tend to lead or lag actual sales performance of tier one suppliers depending on the period in the economic cycle. We believe that to be the case this quarter, as our reported year-on-year sales growth surpassed the reported indices, and we do not suggest that our sales growth has been achieved by increasing our market share.
Operating margin and cash
We have experienced significant headwinds in this quarter affecting our operating margin stemming both from the disruption within our supply chain and increasing inflationary cost pressure across all purchases, whether material or services. We expect inflationary pressures and supply chain disturbances will continue for the remainder of 2022 and we will work proactively through our well-established business excellence program to maintain our strong margin. Despite these ongoing challenges we report an operating margin for the quarter of 16.1% (22.7).
We saw a significant improvement in cash conversion when compared to the previous two quarters, with the ratio increasing to 80%. Cash and cash equivalents at the end of the quarter were MSEK 345 (498) following the payment of the annual dividend in April 2022. This level of cash and cash equivalents is more than sufficient to meet our short- and medium-term operational needs.
Outlook
The outlook for the third quarter is that the orders received, and expected to be fulfilled during the third quarter, were broadly similar to the reported sales for the second quarter of 2022. We now expect the majority of the sales order backlog, predominantly relating to our North American businesses, will be supplied to our customers over the remainder of 2022 and the first half of 2023.
Inflationary pressures are predicted to continue for the foreseeable future requiring regular discussions with our customers to ensure supplier cost increases over time are passed along the value chain.
Our whole organisation is doing an impressive job managing the current supply chain challenges, however, with the resurgence of Covid-19 in China and their government’s approach to lock down regions affected by the virus, we expect further disruption within the supply chain during the latter half of 2022.
We are now operating in an inflationary environment and the regional central banks are taking steps to control inflation by increasing interest rates. These macroeconomic factors could have an impact on the demand for our products across geographic regions and end-market applications, however it remains too early to predict medium term market demand.
For further information, please contact:
Martin Kunz (President and CEO) or Marcus Whitehouse (CFO) at Tel: +44 121 445 6545 or E-mail: info@concentricab.com
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 26 July 2022.
This information was brought to you by Cision http://news.cision.com
https://news.cision.com/concentric-ab/r/concentric-interim-report-january—june-2022,c3605299
The following files are available for download:
Concentric_Q22022A_ENG |
SOURCE Concentric AB
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