Bufab: Year-end report 2023 - FASTENER EUROPE MAGAZINE
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Bufab: Year-end report 2023

Improved margin and strengthened cash flow conclude the year

Fourth quarter of 2023

·      Net sales declined by -6 percent to SEK 1,943 million (2,074). Organic growth was -9 percent and order intake was somewhat higher than net sales
·      Adjusted operating profit (EBITA) was SEK 229 million (239), corresponding to an operating margin of 11.8 percent (11.5)
·      Operating profit (EBITA) was SEK 181 million (242) and the operating margin was 9.3 percent (11.7)
·      Earnings per share decreased by 48 percent to SEK 1.87 (3.58)
·      Operating cash flow amounted to SEK 359 million (138), corresponding to a cash conversion ratio of 188 percent (54)
·      The key figure net debt/EBITDA, adjusted improved to 2.6 (3.2)

Full-year 2023

·      Net sales increased by 3 percent to SEK 8,680 million (8,431). Organic growth was -6 percent and order intake was somewhat lower than net sales
·      Adjusted operating profit (EBITA) was SEK 1,121 million (1,084), corresponding to an operating margin of 12.9 percent (12.9)
·      Operating profit (EBITA) increased by 5 percent to SEK 1,043 million (990) and the operating margin was 12.0 percent (11.7).
·      Earnings per share decreased by 7 percent to SEK 15.17 (16.23).
·      Operating cash flow amounted to SEK 1,602 million (99), corresponding to a cash conversion ratio of 146 percent (10)
·      The Board of Directors proposes a dividend of SEK 5.00 (4.75) per share 

CEO’s overview

A record year for Bufab concluded with continued favourable development in the fourth quarter, with improved margins and strengthened cash flow.

For the full-year of 2023, Bufab delivered its highest sales and operating profit to date. During the year, we worked purposefully on the implementation of our new strategy, with higher value creation for our customers, an improved customer and product mix, and more efficient management of our working capital yielding results. We also delivered our highest operating margin and strongest cash flow ever, demonstrating our resilience even in a more challenging market.

Strong performance despite lower demand in the quarter

In the fourth quarter, we reported a strong result despite lower demand year on year. Sales growth amounted to -6 percent in the quarter and organic growth to -9 percent. A downturn in demand was primarily noted by Segment East and UK/North America, driven by sectors that experienced tailwinds during the pandemic, but now have lower demand than in the previous year. Our assessment is also that the weak organic growth in the quarter was partly the result of customers decreasing inventory ahead of year-end. Sectors that reported favourable demand were energy, automotive and defence. Order intake was slightly lower year on year but was still at a high level.

Efforts to strengthen our gross margin continued to bear fruit in the quarter due to a better customer and product mix.

Adjusted for the remeasurement of additional purchase considerations in the quarter of -48 (+3), the operating margin (EBITA adjusted) was 11.8 percent (11.5), which we are satisfied with given the lower demand in the quarter.

While Segment North in particular contributed to operating profit in the quarter, UK/North America also had a positive impact, with several of the segment’s companies delivering a strong performance. Results in Segment West were in line with the previous year, while Segment East noted a weaker development.

Cash flow significantly improved year on year due to a strong improvement in working capital, and for the full-year 2023, we delivered our strongest cash flow on record. Our objective is to gradually reduce the net debt/EBITDA ratio, which improved during the quarter to 2.6 (3.2). Our strengthened financial position provides scope for acquisitions moving forward, and recently we have noted an increase in M&A activity.

New strategy and raised profitability target

During the Capital Markets Day in December, we presented Bufab’s updated strategy, which focuses on profitable growth by creating even more value for current and new customers.

In line with our new, more ambitious plans for Bufab, we announced that our profitability target is raised from 12 to 14 percent considering our strong offering, which is becoming increasingly relevant and generating greater value for our customers. We will also initiate a strategic review of Bufab’s manufacturing companies, Bufab Lann AB and Hallborn Metall AB, given that we expect our trading business to be our core operation moving forward.

An area we will continue to focus on as part of our new strategy is leading the development of sustainability in our industry. In 2024, we will continue to develop our customer offerings in the field of sustainability and continue to integrate sustainability throughout our operations, with the goal of reaching net zero by 2050.

Well positioned for 2024

In recent times, the market outlook has become more uncertain, and we live in a time of great geopolitical uncertainty. The recent unrest in the Middle East with minor disruptions in the supply chain has so far had no significant impact on our customers. Our strong position with a broad supplier base and alternative transport routes means that we can handle these challenges well.

We have a well-diversified customer base and article portfolio, with a good spread of risk among various sectors and markets, and a strategy that is well-adapted for the future.

In 2024, we will continue to execute our strategy where our short-term priorities stand firm: to capture market share, gradually improve our margin and deliver a stronger cash flow. Bufab is a more robust company today than it was at the start of 2023, and our offering to customers is becoming increasingly relevant.

Finally, I want to thank all our customers around the world for the trust they have shown in us during the year and extend a big thank you to our 1,800 “solutionists” worldwide for their outstanding work in 2023.