Thule Group reported sales in the Americas declined 8.8 percent in currency-neutral terms in the third quarter, due primarily to recent retail bankruptcies and cautious ordering by bicycle dealers still working through their 2015 and 2016 bikes.
A decline in sales of Bags for Electronic Devices also continued.
“Despite a decline in sales of 4 percent through September, Thule retains its market shares, but the market did not recover in the way the company expected during the third quarter,” said Thule Group President and CEO Magnus Welander. “These are factors that we believe will also impact the fourth quarter.”
Thule Group reported sales increased to SEK1.37 billion ($161 million) during the third quarter, or 1.7 percent currency-neutral (c-n), after excluding the acquisition of GMG.
Operating income increased 17.1 percent to SEK243 million, or 17.8 percent of revenue, compared with 15.5 percent a year earlier. Underlying EBIT was SEK246 million($28 million) and, adjusted for exchange rate fluctuations, underlying EBIT rose 6.9 percent and the margin improved 0.9 percentage points.
Net income grew to SEK162 million from SEK148 million ($19 million) and cash flow from operating activities reached SEK436 million ($51 million), up from SEK412 million.
“During the third quarter, our stable trend of improved profitability continued with an underlying EBIT growth of 6.9 percent after currency adjustment,” Welander said. “For the first nine months of the year, the underlying EBIT was SEK901 million, an increase of 10.3 percent after currency adjustment, meaning that on a rolling 12-month basis we achieved an underlying EBIT margin of 17.2 percent (16 percent for the full-year 2015).”
Organic sales growth for the first three quarters was 5.2 percent (after currency adjustment), which is above Thule’s annual financial target of 5 percent. Operating cash flow also remains very strong.
Fast growth In Europe & Rest Of World
“We are very pleased with how well our initiatives in Region Europe & ROW (rest of world) drove growth during the quarter,” Welander continued. “With a sales growth of 9 percent in the quarter, we achieved an increase of 11.1 percent after currency adjustment for the nine-month period.
“We continued to capture market shares in Sport & Cargo Carriers through successful product launches. Furthermore, we continued to grow rapidly in Other Outdoor & Bags, driven in particular by strong sales in Active with Kids. Our sport strollers, multi-functional bike trailers and child bike seats continue to capture market shares in this, for us, newer category. The positive trend in RV Products also continued and we are capturing market shares in a category that is also displaying strong market growth.”
Margin Improvements In Work Gear
“After a very strong start to the year, we experienced a somewhat weaker market in the US during the third quarter and sales declined SEK7 million and profitability SEK1 million (after currency adjustment) compared to previous year,” he continued.
For the first three quarters, sales were in line with the preceding year, while underlying EBIT during the same period grew SEK15 million (38.2 percent after currency adjustment). Improved production efficiency and focus on a more profitable product mix mean that the margin for the year is at 16.9 percent (12.3 percent for the same period in 2015).
Rapid Integration Of Acquired GMG
In early July, Thule acquired GMG B.V., a leading manufacturer of child bike seats in the Benelux region, where its products are sold under the Yepp brand. At the trade fairs in September, Thule launched a new generation of child bike seats under the Thule Yepp brand, and the GMG entity is already a fully integrated part of Thule Group.
Supply Chain Initiatives
Welander also provided updates on major projects undertaken to ensure the company can hit its growth targets, including the transfer of the assembly of the new child bike seats in-house.
“Since we also see generally strong growth in the new categories, we have decided to bring forward the opening of a further assembly plant in Poland,” said Welander. “The new plant will be operational already during the first quarter of 2018.”
In the Americas region, Thule has commenced the second stage of a major distribution project as a result of the relocation to a new distribution center for the eastern United States. The center will be fully operational at the end of the first quarter of 2017.
During recent trade shows, Thule has seen particularly strong interest in its new Thule Chariot multi-functional bike trailers and the new Thule Motion XT roof box, which will be launched next spring.
“The product launches and our operational projects are key reasons why I am looking forward to an exciting period,” said Welander.