CEO report

Highly robust growth yielding best year ever

2018 was marked by extremely robust growth for our divisions and also by a very high level of business activity in the Group’s geographical markets. We reported outstanding organic growth of SEK 0.5 billion for the year and an increase in operating profit of just over SEK 65 M, which makes 2018 VBG Group’s best year ever. This was also reflected in earnings per share, which grew to a record level of SEK 10.92.

However, this growth has put heavy pressure on the company’s internal processes, while major product and marketing initiatives are also taking place in several areas. Despite this, the divisions successfully maintained their favorable margins during the year and I view this ability to adapt to new conditions as highly reassuring moving forward.
For the full-year 2018, the Group reported no structural growth, but organic growth of 13%. Even if the continuing strong market climate has helped, the higher growth rate was largely due to the divisions successfully gaining market shares and expanding their offerings. During the year, the largest growth was noted for Edscha Trailer Systems and Mobile Climate Control.

We ended 2018 in a financial position that remains strong. We have been able to reduce our indebtedness as we followed up a strong 2017 with an even stronger 2018. The Group’s net debt in relation to EBITDA is now 1.30, compared with 1.73 last year. I can therefore confirm that we have restored our finances very quickly after the acquisition of Mobile Climate Control.

I view the division's ability to adapt to new conditions as highly reassuring moving forward.

VBG Truck Equipment – new levels and profitable initiatives

With a very strong final quarter, VBG Truck Equipment achieved new levels in terms of both sales and profit for the full-year. It is worth mentioning that we can now clearly see that the division’s investment in digitalizing the marketing of Onspot has borne fruit, as the number of Onspot units sold in Europe increased sharply in 2018, compared with last year. The drawbar couplings initiative in China is still at an early stage and I anticipate relatively swift growth, which will also require investments.

Edscha Trailer Systems – strong organic growth

Edscha Trailer Systems has also reported a very strong 2018. Organic growth was just over 16% for the year and the division noted a considerable improvement in both margin and profit. During the fourth and even third quarter of the year, the division reported slightly lower sales than in the first two quarters, which is entirely in line with Edscha Trailer Systems’ normal seasonal variations. During the year, the new management, which was appointed at the end of 2017, successfully delivered in a business environment characterized by high demand while keeping costs low. I view this as confirmation that the management has a good grasp of the business.

Mobile Climate Control – expanding capacity

With organic growth of just over 18% for the year, Mobile Climate Control reported an all-time high in terms of both sales and profit. The remarkably strong growth has, however, placed heavy pressure of the division’s internal processes and this has caused some additional costs during the year. As a result, the EBITA margin was just over 10%, which is roughly the same moderate level as 2017. Intensive work is, however, ongoing at the division to expand capacity to meet demand from customers and when a balance has been achieved between demand and delivery capacity, I can see substantial potential for profitability improvements.

Ringfeder Power Transmission – decisiveness produces results

Ringfeder Power Transmission reported more cautious growth during the year, compared with the Group’s other divisions. However, the fourth quarter confirms the stability shown in the division’s reports earlier in 2018 and I am delighted to report record figures in absolute terms, both for sales and profit during the year. Restructuring has been in progress for just over two years and these efforts are now producing results, and division management has demonstrated both resilience and decisiveness in this work.