SAF-HOLLAND S.A. turned the earnings corner in the third quarter, returning to positive adjusted earnings (EBIT). The company benefited from a highly successful restructuring of its operating business with a comprehensive cost-reduction program, as well as a stabilization of sales and first signs of a return to growth in the company’s end markets.
“SAF-HOLLAND is benefiting from the group-wide restructuring of the operating business,” said Dr. Reiner Beutel, CEO of SAF-HOLLAND. “We are now leaner and stronger. As a global supplier of quality systems and components for the commercial vehicle industry, we are thus perfectly positioned to participate in a major way in the expected upturn in the commercial vehicle market. We are already seeing the first signs of a recovery after an unprecedented downturn in the global commercial vehicle market."
The company has also made important progress with its banking syndicate on restructuring and extending existing financing facilities. Further to the recently announced standstill agreement extension to November 25, the company expects to announce agreement with its banking syndicate in the near term. The objective of the new financing agreement is to put the company on a solid financial footing in the long-term and to create sufficient financial flexibility to allow the company to complete its operational restructuring and follow its planned growth path.
Parallel to the earnings trend reversal, sales stabilized in comparison to previous quarters. Sales in the third quarter amounted to $153.2 million, which reflects a slight upturn compared to the second quarter. The adjusted EBIT climbed to $3.7 million compared to a loss of $1.2 million in the second quarter. Adjusted EBITDA more than doubled compared to the previous quarter.
Importantly, there has been a stabilization of sales and some signs of a return to growth are now visible in the global commercial vehicle market. In the first nine months of the year, the Group achieved sales in the amount of $470 million (previous year: $960 million). In particular, the Powered Vehicle Systems and Aftermarket Business Units, both of which exceeded their performance from 2008, cushioned the considerable decline of the Trailer Systems Business Unit.
The stable gross margin of 16.8% (previous year: 16.9%) is proof of the success of the restructuring measures with extensive savings in personnel and non-personnel expenses.
In the third quarter, sales in the Trailer Systems Business Unit stabilized at the level of the second quarter. While the month of August was, as expected, quiet in Europe, the trailer business was able to make up for lost ground in September. A slight increase was also seen in August in North America. Another positive factor was the production of the company’s own axle systems in the USA, which got underway in February. The number of orders for axle systems with disc brakes, which were first presented in America at the Mid-American Trucking Show at the beginning of the year, is still exceeding expectations.
The Powered Vehicle Systems Business Unit benefited from a slight upturn in the market in the USA, while business in Europe saw increasing stabilization. Year to date sales grew by 20.9% to $108.4 million (previous year: $89.7 million) and were $35.8 million in the third quarter compared to $32.9 million in the second quarter. The sales increase over the previous year resulted primarily from the acquisition of the former Georg Fischer Verkehrstechnik GmbH and a major order in North America. Thanks to a good product mix and substantial improvements in efficiency, the gross margin increased significantly to 22.1% (previous year: 12.6%). The increased share of 23.1% of Group sales (previous year: 9.3%) shows the increasing importance of the Business Unit for the group. Leading market research institutes expect demand in the USA to increase further at the end of the year with fleet purchases in anticipation of new emissions regulations taking effect from 2010.
The Aftermarket Business Unit continues to deliver a highly profitable performance for the group. Expansion of SAF-HOLLAND’s international distribution and service network in Europe through a new agreement with Scania workshops and an extended product range as a result of the acquisition of the former Georg Fischer Verkehrstechnik GmbH were contributing factors for this increase. The Business Unit generated sales of $167.8 million (previous year: $200 million) in the first nine months of 2009. The third quarter showed a moderate upswing with $56.4 million compared to $54.5 million in the second quarter. The gross margin increased to 37.6% (previous year: 35.7%).