Industry News

Bufab Group has reported healthy growth in both the fourth quarter and the full year with net sales for 2019 rising to SEK 4.348 billion (2018: SEK 3.786 billion), corresponding to a margin of 8.8% (2018: 9.7%). However, the slowdown that was apparent already at the beginning of the autumn intensified during the fourth quarter.

Jörgen Rosengren, president and CEO at Bufab, explains: “We party attribute this to our customers’ unusually long production stoppages at the end of the year, and to destocking. As a result, Bufab experienced negative organic growth of 5% in both of its operating segments for the quarter, despite slightly higher market shares. Our focus in 2020, therefore, is to secure further new business, thereby offsetting a potentially weaker market.”

Bufab’s gross margin was considerably weaker, both sequentially and year-on-year. This was mainly due to lower gross margins in acquired companies, but also to a poorer business mix in segment International and low capacity utilisation in our manufacturing companies. On the other hand, price increases and purchasing savings made a positive contribution to the margin. The company intends to achieve further purchasing savings in 2020, which will be facilitated by the demand situation.

Upon the first indications of weaker demand in mid-2019, Bufab launched a Group-wide programme for increased efficiency, which was supported by investment in digitalisation. The programme aims to realise savings of approximately SEK 40 million on a full-year basis, with full effect from the fourth quarter of 2020. The programme began to contribute to the result in the fourth quarter of 2019.

Bufab also completed a key strategic acquisition in North America during the quarter. “After searching for a long time for a good platform for continued expansion with our global customers there, we acquired American Bolt & Screw,” mentions Jörgen Rosengren. “In 2019, the company had sales of about SEK 500 million with healthy profitability and it has an organisation, business model and culture that are very close to Bufab’s. We have already begun working with the business opportunities brought by this acquisition. Acquisition costs of SEK 9 million were charged to the quarter.”

Overall, the operating profit for the fourth quarter, adjusted for acquisition costs, was unchanged compared with the corresponding quarter in 2018. Accordingly, Bufab has conducted a thorough review of the organisation and action plans throughout the group. The priorities for 2020 are, firstly, to intensify sales and marketing, and secondly, to achieve considerable earnings and margin improvements through purchasing savings, strict cost control and efficiency enhancement, in addition to healthy contributions from our acquisitions.

“In the first quarter of 2020, we will implement a reorganisation, by which today’s two operating segments will be replaced by four segments (North, West, East and UK/North America), which in turn will be organised in ten business units,” mentions Jörgen Rosengren. “The purpose is to benefit further from Bufab’s large international reach and global expertise, as well as to increase focus on operational improvements in each subsidiary.

He continues: “Bufab is an entrepreneurial company. We respond quickly and forcefully to weak results. But we also aim to continue Bufab’s positive development over the long-term. Despite the weak quarterly result, full-year 2019 was the fourth consecutive year with all-time high sales and operating profit. We also noted our best cash flow ever – twice as high as in 2018. We are continuing our systematic efforts to strengthen customer relations and increase market shares, to build the world’s best supplier base, to develop a globally leading ‘best practice’, and to continue digitalising our processes. The sustainability throughout our value chain took a clear step forward during the year. Also, two strategic acquisitions contributed to favourable growth and significantly strengthened our customer offering and global reach.”