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.
______________________________
Gillar du videon? Prenumerera på EFN på YouTube: https://www.youtube.com/efnekonomikan...
Besök gärna http://www.efn.se för mer av vårt innehåll.
X: https://x.com/efntv
Facebook: / efnekonomikanalen
Instagram: / efnekonomikanalen
Linkedin: / efn
Tiktok: / efn_ekonomikan...
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)
H
Host0:51
AK Group, which is among other things a subcontractor to the automotive industry, has reported declining sales, organically down 11% in the quarter. Not so strange perhaps given the economic climate we have. We have James Ahrgren with us, and we are very happy to have him. To summarize the quarter, James, no fanfare and celebration performance perhaps. What is your summary?
J
James Ahrgren1:13
No, it's quite okay, but no, it's not a fanfare and celebration that describes it. But we are working hard to grow organically and sell new products. It takes a bit longer sometimes to get the products into the factories so that it makes a difference for our top line. But we are working somewhat against the wind, quite tough out there when customers' volumes are declining. And it is several of the large vehicle manufacturers – and vehicles can be many things: yellow machines, and trucks, and buses, and agricultural machinery, everything possible. So when those volumes decline, we have a bit of difficulty compensating for that. Then we had a battery storage project the same year or same quarter last year that pulls down the organic growth by about 5%. But we are proud that we manage to maintain the margin. We are quick to adjust our volumes or our capacity in our factories by reducing the number of employees. Yes, roughly that's how I would sum it up. Quite okay, I guess. It goes fast in the dictionary, and then you have to act fast too, it sounds like.
H
Host2:21
Can you give me even more color on the headwind before we go into what you are doing to tackle it? Which part? Can you say something about which part of the automotive industry, of all these machines you describe, is the toughest? You know that cars have it very tough, but is it also noticeable in heavier machinery?
J
James Ahrgren2:40
Well, we have almost nothing against cars, so it is primarily heavier machinery we deliver to. So I would say yellow machines, what you usually call construction equipment, we think is weak in Europe right now, especially in the third quarter. Also trucks weaker, buses also weaker. Then we see Germany is weak, so the factories that deliver a lot to Germany, it's not so fun right now. No, so that's what one can say generally. Then we try to win new business to compensate for this, so we have some segments that are growing quite well. Power grids are growing well, defense industry is growing well, our marine segment is growing well, and so on. But it doesn't fully compensate for the lost volume we have.
H
Host3:44
Can they do that? Can you reweight the sales efforts and try to grow, or are these relatively small markets in the near future?
J
James Ahrgren3:47
No, I think our power grid segment is about – or rather, we work in what we call electrification, which is still a bit over 20% of our revenue. So it's clear that it's good when it grows, but it grows perhaps at different rates. And at the same time, we have a large power grid customer that had big problems during the summer; they changed their ERP systems and had difficulty placing orders, so they are probably a bit behind in their plans. That kind of thing can affect, but that's just over a quarter, so it doesn't play a huge role. But the factories that work with the automotive industry generally do not work with these power grid customers. So we have some factories that are doing very well, 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. So we can maintain the margin after all.
H
Host4:52
A final quick question: if I look sequentially, it looks worse than if you compare year-on-year, at least if I read correctly. Do you have any reflection on that? Does that mean you are still heading downward? And can you give me some nuance: are the different months in the quarter different? Has it leveled off in some way, or has something happened between the months that is worth knowing?
J
James Ahrgren5:13
Yes, but I think like this generally: July is always a really bad month for us. We have many customers who close their factories, and we also close our factories. And then you do that 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. So I think it's hard to say whether it has bottomed out or not. I don't think I see that it has really bottomed out. So we will have to work hard to compensate for the volume that is declining in some segments.
H
Host5:52
How do you do that? How do you work hard? I imagine that you are recipients of orders and are a bit at the mercy of economic forces, but please nuance that picture.
J
James Ahrgren6:00
Yes, no, but we are still quite small. We are about nine billion on a rolling 12 months, a bit less. We still have a lot of volume to capture. So you can both – for example, with a truck customer, you can take market share. We see that many competitors might have some liquidity problems. We have a fantastic balance sheet, so we can perhaps take some volume from them. We can win articles from companies that have problems, that are in restructuring or bankruptcy. So that also gives opportunities when volumes go down and when interest rates are a bit higher. I think that 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 and being out there and also turning customer meetings into orders that actually give something in the factories. But it's classic sales, simply put, from sales to purchase.
H
Host7:04
Finally, you write that you have a history of buying things, factories and facilities, in tough times. Is that on the agenda on the map today?
J
James Ahrgren7:14
Absolutely. So we see that there is – I think I see that there is less competition, and there is a very large supply of various opportunities. Both companies that are bankrupt due to liquidity, but also many companies out there that want to be acquired, generational shifts or similar. And the competition for these cases is less than it used to be or has been in recent years. So we see that there are very many opportunities out there, and we like to buy when it is a bit weaker rather than at peaks. So we have already made a number of acquisitions this year, but they have been quite small. So we hope to do a bit more going forward, as I write in my CEO letter.
H
Host8:02
That sounds exciting. Look forward to talking more about it when it happens. James, very nice to talk to you as always. Big thanks and good luck in the tough economic climate.
J
James Ahrgren8:11
Thanks, Gabriel. Take care. Bye.