CEO report

Our best quarter ever

VBG Group’s markets remain, as a whole, strong and earnings for the first quarter of the year have exceeded even my own expectations. Historically, this quarter is usually the Group’s best, but the business structure we have in place after the acquisition of Mobile Climate Control has enabled us to report more uniform sales and profit throughout the year, as this division normally has its highest sales in the second and third quarters. However, this year Mobile Climate Control reported strong sales and profitability from the very outset of the year, meaning we can report our best quarter ever, with both record sales and operating profit. We therefore almost exceeded the SEK 1 billion mark in sales already in the first quarter.

One important event for VBG Group during the quarter was the acquisition by VBG Truck Equipment of BPW’s drawbar assemblies business for commercial vehicles. This was a minor acquisition financially, but very important from a strategic perspective. Over the past number of years, VBG Truck Equipment has endeavoured to adjust its business model to the European market to correspond to the model we are already successfully using in the Nordic region. The business model is based on offering systems solutions to customers rather than individual products. The acquisition gives us access to products that make the division’s system offering complete and further reinforces our position in the European market. However, I do not expect to see a noticeable financial impact until the end of 2019 or early next year, given that VBG Truck Equipment will gradually take over the operations over the course of the year and its immediate focus is on product and knowledge transfer.

VBG Truck Equipment — achieves milestone in Brazil

During the quarter, VBG Truck Equipment reported higher sales and largely unchanged margins compared with the year-earlier period. The venture in Brazil is still at an early stage, but the division has completed its first customer deliveries during the quarter, which is highly positive. When Ringfeder Power Transmission acquired the Brazilian company Henfel in 2015, we viewed our move into the Brazilian market as a long-term strategic investment for the entire VBG Group and the fact that VBG Truck Equipment is now delivering products to this market is a milestone.

Edscha Trailer Systems — margins remain healthy

Compared with last year’s first quarter, Edscha Trailer Systems has reported a decrease in sales. This is partly because the division has not had any deliveries to customers in the railway segment during the quarter, and weaker demand from the division’s two main trailer customers. The division has, on the other hand, noted excellent and profitable sales to its other customers, which has contributed to favourable margins. I am pleased to observe that Edscha Trailer Systems is continuing to demonstrate stability.

We almost exceeded the SEK 1 billion mark in sales already in the first quarter.

Mobile Climate Control — good work improves profitability

Mobile Climate Control’s North American market remains strong, in both the buses and off-road vehicle segments. This has contributed to sustained high growth and in the past six months, the division’s operations worked intensely to expand capacity to meet rising demand from customers. We can already see the results of this hard work, in the form of a clear improvement in profitability.

It is worth mentioning that the division’s operations in India, that were established in September last year, have performed positively. From relatively small sales volumes in the early months to a growing number of orders and customers during this and previous quarters.

Ringfeder Power Transmission — stability and profitability

Ringfeder Power Transmission reported favourable sales during the quarter and a slightly improvement in profitability. We can now see that the division has a much more stable delivery process following the restructuring that has taken place in recent years. In addition to greater customer satisfaction, this has reduced costs in the division’s supply chain.

VBG Group — agreements that offer the potential for growth

The three-year financing agreement we signed in conjunction with the acquisition of Mobile Climate Control will expire at the end of the current year. Negotiations about a new long-term agreement are in progress and are expected to be completed during the second quarter of 2019. The new agreement will offer us the right conditions to create both organic and structural growth.