SAF-HOLLAND Generates Record Earnings in 1Q

May 19, 2008
SAF-HOLLAND S.A. reported record earnings in the first quarter of 2008. The adjusted EBIT margin achieved the target corridor of 8 to 8.5 percent for 2008

SAF-HOLLAND S.A. reported record earnings in the first quarter of 2008. The adjusted EBIT margin achieved the target corridor of 8 to 8.5 percent for 2008 and the Group reconfirmed its sales and earnings forecast for financial year 2008.

"SAF-HOLLAND profited from its solid market position in Europe and high growth in the trailer business,” said Rudi Ludwig, CEO of SAF-HOLLAND S.A. “The agreement a new credit line also confirms the high level of trust banks place in the performance, market position, and strategic orientation of the Group."

SAF-HOLLAND increased Group sales in the first quarter of 2008 compared to the same period of the previous year by 3.1 percent. Adjusted for currency effects, sales even increased by 7.6 percent. This growth was again carried by the European business, which grew by 21.8 percent, thus contributing 69.8 percent to sales.

In the USA, the earnings declined by almost one quarter compared to the strong period of the previous year, exchange rate-adjusted by 13.0 percent. The share of US business in Group sales was therefore 30.2 percent. During the same period of the previous year, the Group was still recording very strong business development in the USA.

Higher sales were recorded, mainly as a result of pull-forward effects due to new emissions regulations, before sales started to decline as expected from the second quarter onward. This is due to the fact that in the first quarter of 2007, engines that still complied with the emissions regulations in effect in the year 2006 and were manufactured before the cut-off date could still be installed. Due to new, stricter emissions regulations, major customers stocked up on more tractor units than were actually needed. Moreover, the effects of the financial and real estate crisis were only starting to be felt at the end of the second quarter of 2007.

SAF-HOLLAND improved the profit for the period for the first quarter by 71.5 percent.

The European sales markets of SAF-HOLLAND continue to show positive development. The trailer manufacturers are recording a high volume of orders, even if somewhat behind the levels of the previous year. With a sales increase of 13.9 percent or an exchange rate-adjusted increase of 16.3 percent, the Trailer Systems Business Unit was once again the growth driver of SAF-HOLLAND.

In light of the great demand in this segment, the Group is continuously increasing its capacity for the manufacture of axles. During the first quarter, daily production capacity increased from 1,300 to 1,500 units. The capacity is being further increased to meet the demands of the trailer manufacturers. The gross margin of 13.1 percent was at almost the same level as the previous year.

The company expects the market environment to remain unchanged during the course of the year. The momentum for growth originates mainly from Europe. Order back-log in the Trailer Systems Business Unit, which focuses primarily on Europe, continues to be high. Framework contracts ensure a large portion of the growth. Business in North America is likely to remain weak due to the financial and real estate crisis.

"We are optimistic about the further course of the financial year 2008. The market trends continue to be positive in Europe and the worldwide growth regions in particular. Global trade flows and transport volumes continue to rise over the long term even though economic growth is somewhat subdued as a result of the financial crisis. Particularly in the current year, SAF-HOLLAND is profiting from the business combination of both companies: locations are being consolidated, activities aligned, and established products introduced in new markets," explains CEO Rudi Ludwig.