President and CEO, AQ Group
AQ Group backar på negativ organisk tillväxt
AQ Group, en underleverantör till fordonsindustrin, handlas ned på börsen efter en rapport där försäljningen backat rejält. Svag marknad för lastbilar och en sviktande tysk ekonomi är ett par förklaringar, säger vd James Ahrgren i en rapportintervju med EFN:s Gabriel Mellqvist.
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About James Ahrgren
James Ahrgren, President and CEO of AQ Group, commented on the company's performance in the third quarter of 2024, during which organic sales declined by 11%. Ahrgren described the period as "no klang och jubel" (no fanfare), attributing the downturn to weak demand from major vehicle manufacturers, including those producing trucks, buses, and agricultural machinery, as well as a struggling German economy. He noted that some factories serving the automotive sector were performing worse than others, but said the company has been able to maintain margins by keeping fixed costs low. Ahrgren also discussed acquisition opportunities, stating that he sees "less competition" and a "very large supply" of potential targets, including companies facing liquidity issues or seeking succession sales. He said AQ Group prefers to make acquisitions during weaker economic periods and has already completed several small purchases in 2024, with hopes to do more in the future.
Transcript (14 segments)
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Gabriel0:13
AQ Group, which is a subcontractor to the automotive industry, has reported declining sales. Organically, it decreased by 11% in the quarter, not surprising given the economic climate. We have James Ahrgren with us, and we're glad to have him to summarize the quarter. James, no celebration, perhaps? What is your summary?
J
James Ahrgren0:34
No, it's okay, but it's no celebration, as you describe it. We work hard to grow organically and sell new products. It sometimes takes longer to get the products into the factories so that it makes a difference for our topline. But we are working a bit against the wind; it's quite tough out there when customers' volumes go down. It's several of the large vehicle manufacturers. And vehicles can be many things: yellow machines, trucks, buses, agricultural machinery, and everything. So when those volumes decline, we have some difficulty compensating for that. Then we had a battery storage project of about 100 million in the previous quarter... same year, or same quarter last year, which drags down the organic by about 5%. But we are proud that we manage to maintain the margin. We are quick to adjust our volumes, or the capacity in our factories, by reducing the number of employees. That's roughly how I would summarize it.
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Gabriel1:40
Okay. It goes fast in the order book... and then you have to act fast too, it sounds like. Can you give me even more color on the headwind, before we go into what you are doing to tackle it? Can you say which part of the automotive industry, of all the machines you describe, is having the toughest time? We know cars are struggling, is it noticeable in heavier machinery?
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James Ahrgren2:03
We have almost nothing in cars, so it's heavier machinery we deliver to. I would say that yellow machines, what is commonly called 'Construction Equipment', we think is weak in Europe, right now and especially in the third quarter. Trucks are also weaker, buses as well. Then we see that Germany is weak. So those of our factories that deliver a lot to Germany are not having a great time right now. That's what one can say generally. Then we try to win new business to compensate; we have some segments that are growing well, Power Grids is growing nicely, the defense industry is growing nicely, our marine side is growing well. But it doesn't fully compensate for the lost volume we have.
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Gabriel2:58
Can they do that? Can you redirect the sales work and try to grow, or are they relatively small markets in the near future?
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James Ahrgren3:08
No, our Power Grids segment... What we work towards in what we call electrification is still a little over 20% of our turnover. It's clear that it's good when it grows. But it grows perhaps at different rates, and at the same time we had a large Power Grids customer that had huge problems during the summer. They changed their ERP system and had difficulty placing orders; they are perhaps behind in their plans as well. That's the kind of thing that can affect, but it's only over a quarter, it doesn't play a huge role. But we have... One can say this: Those of our factories that work with the automotive industry generally do not work with Power Grids customers. So we have some factories that are doing very well and some factories that are doing a bit worse in the quarter, but overall we are good at adjusting our costs because we don't have high fixed costs. We are frugal by tradition. Therefore we can maintain the margin, despite everything.
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Gabriel4:11
One last economic outlook, if I may: Sequentially it looks worse than if you compare year-on-year, if I read correctly. Do you have any reflection on that? Does it mean we are still sloping downwards and can you give me a nuance? Is it different across the different months of the quarter? Has it flattened out in some way? Or has something happened between the months that is worth knowing?
J
James Ahrgren4:33
I think that generally speaking, July is always a really bad month for us. Many of our customers close their factories and we also close our factories. And then you do it to varying degrees, depending on how volumes look. So it was an unusually bad July. But also September and October were worse than the previous year. I think... it's hard to say. Has it bottomed out or not? But I don't really think I see that it has bottomed out. So we will have to work hard to compensate for the volume that is going down in certain segments.
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Gabriel5:13
How do you do that? How do you work hard? I think you are recipients of orders and are somewhat at the mercy of the economic powers. But please nuance that picture.
J
James Ahrgren5:24
No, we are still quite small; we have a turnover of almost 9 billion on a rolling twelve, a bit less. We still have a lot of volume to take. So you can both... With a truck customer, for example, you can gain market share. We see that many competitors have some liquidity problems. We have a fantastic balance sheet. Then we can perhaps take some volume from them, i.e., win items from companies that have problems, that may be in restructuring or bankruptcy. So that also creates opportunities when volumes go down and when interest rates are a bit higher. But above all, it's about being actively out selling new things. We are still only scratching the surface of what we can sell from our factories, so it's more about motivating our sales teams to be out and realize those customer meetings into orders that actually give something in the factories. But it's classic sales, simply.
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Gabriel6:23
From sales to purchases, finally. You write that you have a history of buying things, i.e., factories and facilities, in tough times. Is that on the agenda today?
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James Ahrgren6:35
Absolutely. We see that there is... I think I see that there is less competition and there is a very large supply of various opportunities available: Both companies that are bankrupt due to liquidity, I would say, but also that there are many companies out there that want to be bought out due to a generational shift or similar, and that the competition for those cases is less than it usually is or has been in recent years. So we see that there are many opportunities out there. And we like to buy when it is a bit weaker, rather than when it peaks. We have already made a number of acquisitions this year, but they have been quite small, so we hope we can do a bit more going forward, as I write in my CEO letter.
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Gabriel7:24
They sound exciting, I look forward to talking more about it when it happens. Very nice talking to you. Thank you very much and good luck in the tough economic climate.
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James Ahrgren7:34
Thanks, Gabriel. Take care, bye.