Industry News

Bufab Group has reported healthy growth in the first quarter of 2020 with order intake amounting to SEK 1.321 billion (2019: SEK 1.084 billion) and net sales rising 21% to SEK 1.316 billion (2019: SEK 1.091 billion).

Organic growth was -5 percent, partly driven by the market turbulence that has arisen in the wake of the corona pandemic. Accordingly, the underlying demand was lower, but the market share was unchanged compared with the first quarter of 2019. The gross margin was lower in the quarter compared with the preceding year.

The decrease was mainly attributable to segment North through the acquisition of HT BENDIX A/S, as well as a poorer business mix in segment West relative to the comparison quarter. The share of operating expenses was 17.2% (2019: 16.9%). This key figure was negatively affected by low organic growth, but positively by a lower share of operating expenses in acquired companies, as well as contributions from the Group-wide efficiency programme that was initiated in the third quarter and has now been further intensified.

Operating profit rose to SEK 126 million (2019: SEK 119 million), equal to an operating margin of 9.5% (2019: 10.9%). Compared with the preceding year, exchange rate fluctuations impacted operating profit negatively by SEK -6 million, volumes negatively by SEK -16 million, the price/cost/mix/other positively by SEK 5 million and acquisitions positively by SEK 24 million.

The impacts of Covid-19
Jörgen Rosengren, president and CEO at Bufab, commented: “The first quarter of 2020 started well but came to be increasingly dominated by the coronavirus and its effects on customers, suppliers and Bufab’s operations. China and Southeast Asia were already affected in January by the restrictions implemented after the Chinese New Year. Our subsidiaries in Asia had to rapidly prepare action programmes to enable them to conduct operations safely and efficiently despite the epidemic. This experience was very valuable when the virus subsequently spread to Europe and North America.”

“At an early stage, we established three main priorities: health and safety, quality and deliveries to customers, and financial stability. We quickly reorganised work in all of our subsidiaries so that it could be conducted safely and with a minimal risk of spreading of the virus. We also had to handle large fluctuations in our customers’ manufacturing and delivery plans.”

“Our suppliers, first in China, then southern Europe and thereafter all of Europe and North America, were affected by reduced capacity or complete closure of their operations. We are very satisfied that we have kept our customers supplied without disruption or quality defects throughout this period. Toward the end of the quarter, demand returned in China and Southeast Asia. At the same time, it became clear that many customers in Europe and North America had to close operation or reduce capacity.”

Jörgen Rosengren added: “At the beginning of April, demand declined by 30 percent. Accordingly, during the same period of time, we were forced to implement comprehensive furloughing and some workforce reduction in 30 subsidiaries. The objective is to reduce the working hours to the same extent as demand during the second quarter. Accordingly, in the first weeks of April, we reduced staffing by 30 percent of normal levels, which generated significant cost savings. If demand declines further, we will take additional measures.”

“During the first quarter, we reorganised the business into four operating segments instead of the previous two. The segments have been impacted in different ways by the crisis. In segment East, demand was weaker at the beginning of the quarter in China, but stronger at the end of the quarter. Segments West and North, on the other hand, had a rather strong start, but experienced a sharp slowdown toward the end of the quarter. This was particularly noticeable in certain industries, such as automotive and furniture/kitchen, as well as in countries with particularly strong restrictions, as for example France and Austria. Finally, segment UK/North America had a strong start of the quarter. At the end of March and beginning of April, when the US, the UK, and Mexico, introduced strict lockdown measures, it naturally affected us, too. However, the overall impact on demand was moderate during the quarter. In fact, both sales and earnings for the first quarter of 2020 were Bufab’s strongest ever.”

“However, the conditions for the second quarter of 2020 are challenging. We can expect a strong fall in sales in April and it is impossible to say how long a recovery will take. On the one hand, many customers are indicating an intention to resume their operations relatively soon, while on the other hand, the pandemic’s development is impossible to predict. Accordingly, we have taken robust measures to reduce costs and to ensure the ability to also manage a prolonged period of low demand. At the same time, it is important to be able to quickly return to full capacity. Bufab’s action programme therefore prioritises speed and retained flexibility.”