Fuchs Petrolub Q1
2023 Results
Friday, 28th April 2023
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Fuchs Petrolub Q1 2023 Results |
Friday, 28th April 2023 |
Introduction
Lutz Ackermann
Head of Investor Relations, Fuchs Group
Welcome
Good afternoon, ladies and gentlemen. This is Lutz Ackermann speaking. On behalf of Fuchs Petrolub, I wish you a very warm welcome to today's conference call on the Q1 results. All the relevant documents have been uploaded this morning at 7.00, and you can find them on the IR section of our home page.
With me on the call today is Isabelle Adelt, CFO of Fuchs Petrolub. And Isabelle will walk you through the presentation in a second. As always, after the presentation, we will have the Q&A session, where you have the opportunity to ask questions.
Having said that, I would like to hand over to Isabelle. Isabelle, please go ahead.
Financial Results
Isabelle Adelt
CFO, Fuchs Group
Highlights Q1 2023
Successful start into the year
Thank you, Lutz, and a warm welcome from my side as well. Happy to walk you through the numbers of what we believe was a very successful start into the year 2023. We saw major improvement of all relevant KPIs we look at.
Sales year-on-year compared to quarter one 2022 is up 16%. That's sales – majorly sales price-driven increase, and once more reveals the successful implementation of price increases due to the raw material price increases we saw over the last 18 months. And now we can harvest the fruit of that.
Good signal as well as that our EBIT is up significantly as well. So, the price increases not only cover the raw material price increase, but at least partially the general inflation as well. We anticipated at end of Q4 that we saw the inflection point of the EBIT margin drop due to the very special situation last year with a war in Europe, the subsequent price increases in raw materials, and this now showed true.
EBIT margin in Q1 is up 11%, so up 1.2 percentage points compared to Q4. So, we see a sequential improvement here.
And another good news is our free cash flow is up significantly compared to quarter one of last year. We look at €52 million worth of free cash flow, which is majorly due to the lower net working capital build-up compared to what we saw last year.
So having said this, we are happy to confirm our outlook we've given to the capital markets last week five weeks results. However, the economic environment we are looking at is still uncertain, so assumptions we put into the outlook hasn't changed significantly since then.
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Fuchs Petrolub Q1 2023 Results |
Friday, 28th April 2023 |
We're still looking at a war in Europe. We're looking at increasing tangents between the US and China. We are still in an environment of interest increases of high inflation rates, so this is why we are happy that we say we've started successful into the year and confirm the outlook was given to you a couple of weeks ago.
Sales development
Looking into a little bit more detail behind those numbers. The number speaks for itself, €936 million worth of sales, highest ever quarter, a record quarter to Fuchs in terms of sales volume.
Volumes in terms of how many tonnes do we sell to our customers are stabling out. So, this is still reflecting the wait-and-see mentality we see in the market currently. There's a lot of uncertainty out there. So, if you look at the IFO Consumer Climate Index, we are still way below 100, which you want to somehow interpret is positive consumer sentiment. So as of today, we're looking at a number of 93%. And this is something we can obviously feel when we talk to our customers, to our partners as well.
There's a lot of uncertainty in the market. And this is something, obviously, that will still continue throughout this part of the rest of the year.
EBIT Development
Looking at our EBIT development. This makes us equally proud and happy as the development of the sales, 11% up year-on-year compared to quarter one, and to reflect on that, I think quarter one last year was still a relatively normal quarter since January, February were not yet impacted by the war in Russia and Ukraine. That only happened end of February. And we had a very good quarter, first quarter of '22 in China as well. So, putting that into this practice, this is a result we are very satisfied with.
Q1 2023 Group sales
To look into the details a little more. The sales growth we are looking at is purely organic. So, there are no acquisitions that account exists 17%. We managed to do out of our own efforts out of the excellent work of our sales force managed to put the price increases through and the management of our customers of our partners that volumes are stable.
Currency impact, obviously, is something we are expecting as kind of a headwind for this year. If you remember, last year's numbers, we had a lot of tailwinds from currency. Since the euro became weaker against almost all other currencies, especially the currencies relevant for us to the RMB and the US dollar. But this only happened majorly in quarters two and three of this year. This is why you still see relatively small numbers here, but we expect that number to increase throughout the remainder of the year and somehow we've seen a counter effect of what we saw in terms of currency development in 2022.
Q1 2023 KPI Summary
Looking at our P&L, I think this is a performance we can be satisfied with. So gross profit is up by 10% as well, which means, obviously, we didn't only increase our sales but our profit, and we have reached the inflection point. Showing same picture here, obviously, compared to quarter one last year, we still see margins slightly behind, but we saw the inflection point, a sequential improvement of margin development compared to the fourth quarter.
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Fuchs Petrolub Q1 2023 Results |
Friday, 28th April 2023 |
Functional costs is up as well. This is subject to the high inflation rates we saw in some shortages, especially in Europe when it came to energy supplies. So obviously, we do not only see the full-year impact of the price increases we've put into place last year, but the full- year impact of the cost as well.
Major driver behind this was by far the personnel cost increase. So not additional people we hired by the highest salaries to take us for the inflation rate and then higher freight, higher energy costs that went into this.
CapEx above prior year level might be a little misleading. We still stand by the €80 million total CapEx volume for this year. But what we see here is a more equal distribution throughout the year. So, this is already titled for in our free cash flow. So, a little bit more – well, a lower impact expected throughout the remainder of the year.
Networking capital developed nicely as well. We see a small increase compared to what we would have expected, which is driven by the high receivables. You can imagine high sales volumes like that come with a high amount of receivables, but the growth is under proportionate, which means that 25% working capital in terms of sales we saw at the end of last year decreased to 24% to the end of quarter one, and this is a trend we like, and a trend we want to continue throughout the remainder of the year.
This, in total, means we managed to increase our free cash flow from €13 million quarter one last year to €52 million, and this is a number we are extremely happy with.
Europe, Middle East, Africa
Heading deep dive into the regions. I think general message is that we saw good development in all of the regions. But I think special contribution this time came from EMEA. We saw high sales price growth – sorry, high sales growth numbers of 15%. Usually, EMEA is a relatively mature region for us. So, we expect to see higher growth rates in the other regions.
In the first quarter, EMEA performed particularly well. The major reason for this was that we saw great development in almost all countries. You can see that here, Germany, Great Britain, South Africa, but as well countries as Sweden or Poland. First, negative currency impact has been recorded already, but obviously, at a lower scale than what we would expect in most of the other regions. Major driver behind that, obviously, is that a lot of our EMEA business is in euros.
Our EBIT is at €50 million. So that means EMEA accounts for almost half of the Group. And equity results on prior year levels, so the contribution we see there, which is a very good result as well, given that most of our equity companies or some of them are countries with very high inflation rates with high penetration. So, this is something that was managed quite well by the local management teams as well to deliver the same result as last year. And that's a turbulent environment.
Asia-Pacific
Looking at the Asia-Pacific region. This is a result we are happy with as well. I'd like to put that into perspective for you a little. Sales is up compared to prior year, which is the result to volume recoveries, the volume growth in a lot of the operations[?] as well as the price increases with such into play showing their full-year effect.
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Fuchs Petrolub Q1 2023 Results |
Friday, 28th April 2023 |
But compared to last year, we still see a little shortfall in China. Q1 2022 in China was a very strong quarter, whereas quarter one for this year was still influenced by the ripple effect of the COVID lockdowns that were released in December. So, we saw very high infection rates in January, going well into February the ripple effect of the Chinese New Year. So, we see the economy in China overall recovering a little slower than we had hoped for at the beginning of the year.
Quarter one, we still had some impacts. Quarter two, we see that it slowly starts to pick up, but we believe that it will take well into the second half of the year until China will be back to a more normal level of economic activity again. And what we hear from our colleagues in China is that it really takes some time until the stimulus packages that were issued by the Chinese government really show their full effect.
Taking the China development out of the equation, all other countries we have from that region. So mainly Australia, India, Southeast Asia showed positive contributions. So, the small decline, we see an EBIT of €1 million, is caused by the shortfall in China compared to the quarter one 2022, which was a very strong quarter in China. All other regions – all other sub-regions contributed positively with especially nice developments in Australia and in India.
North and South America
Last but not least, our Americas region, very good improvement as well to sales grew by 28% compared to the prior year. Obviously, right now, still with a little tailwind from the dollar development. That is something we expect to turn around in the course of the year, but we saw a very nice development all over the region. So high volumes in North America, so US, in Mexico, but in South America as well.
But still the automotive market in the US, which will be the major growth driver obviously of this region is a little behind expectations. So initially beginning of the year, we expected the market to go back to 15.5 million sold cars in 2023. This will most likely not happen. So, we expect to grow but potentially not to the extent we have hoped for at the beginning of the year.
Net liquidity
Now looking at what does this do with our liquidity, how does this contribute to the cash flow. Already stated, we saw €52 million in the first quarter, which for us is a very strong quarter as the first quarter. So high earnings after tax and an under proportionate growth in networking capital, but the other changes we're seeing here is majorly caused by VAT impact, resulted in €32 million free cash flow before acquisitions. So, we are well on our way to deliver on the outlook we've given of around about €250 million for the entire year.
Share buybacks are continuing as expected. The small acquisition payment you see here is the last payment we did for Elite. This is a pure cash flow effect. It was already digested in our P&L last year with cash outputs only beginning of this year. So that means the first quarter enabled us to reduce the negative net liquidity and we expect to turn this back into positive throughout the remainder of the year.
Net operating working capital (NOWC)
Taking a quick look at how our working capital developed, because I know this has been a discussion a lot of us have had last year. We put a lot of effort into analysing and actively
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Fuchs Petrolub SE published this content on 01 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2023 09:03:10 UTC.
