Morning, ladies and gentlemen. Welcome to the SAF-Holland SE conference call regarding the Q3 2021 financial results. At this time, all participants have been placed on a listen-only mode. The floor will be open to questions following the presentation. Let me now turn the floor over to your host, Petra Müller .
Yeah. Thank you, operator. Welcome everybody to our Q3 2021 results presentation today. My name is Petra Müller , and I'm heading the IR and comms department of SAF-Holland since November 1st. I'm very much looking forward to working with our analysts and the discussions with investors about SAF's equity story. Please note that this call is being recorded, and a replay will be available on our website at saf-holland.com later today. Your participation in the call implies your consent with this. Joining me today are our CEO, Alexander Geis, and our CFO, Inka Koljonen. Following the usual procedure, Alexander Geis will guide you through the financial highlights of the group and the regions, and Inka Koljonen will provide some more details of our financial performance. Alexander Geis will close the presentation with our current market outlook and our guidance.
After this introduction, we will be happy to answer your questions. Please note that management comments during this call will include forward-looking statements which involve risks and uncertainties. For the discussion of risk factors, I encourage you to review the safe harbor statement contained in our quarterly statement and this presentation, as well as our annual report. All documents relating to our Q3 2021 reporting are available on our website. Now, without further ado, over to Alexander Geis.
Good morning, everyone, and a warm welcome to our today's Q3 call. This is Alexander Geis, and together with my colleague, Inka Koljonen, our CFO, we will be showing you our Q3 2021 results. Given the difficult circumstances like heavy raw material increases, supply chain issues, and higher logistics costs, your SAF-Holland performed well and also invested wisely into our future setup. Our today's presentation consists of highlights, first nine months, 2021, our financial performance, and the outlook for the full year. Please, let's get started with the highlights. Next page, please. Group sales in the first nine months increased from EUR 709 million in 2020 to now EUR 925 million in the first nine months of 2021, which was driven by all three regions.
The increase of sales, a favorable product and customer mix, a solid aftermarket, and our cost discipline were the main drivers for an adjusted EBIT of 7.7% in 2021 versus 5.4% the year before. Due to ongoing supply chain tightness, our net working capital ratio reached 15.5%, and Inka will come back to that later on. Our operating free cash flow, which was affected by strong growth and the required net working capital build-up, came in with a positive EUR 9 million. Last but not least, our CapEx ratio reached 1.4% by end of September. The quarterly overview on the next page, please.
Starting with our sales, you can see in the upper left that the increase from EUR 709 million to EUR 925 million equaled a 30.5% year-over-year. Adjust it even higher at 33.9%. Q3 sales came in with EUR 317 million versus EUR 232 million the year before. Good sales despite the plant shutdowns in August. Speaking of adjusted EBIT, I can report a solid 0.7% for the first nine months, with an equal split in all three quarters of 2021. Q3 reached 7.7% versus a 6.4% the year before. Restructuring costs are on a very low level with only EUR 1.7 million in the first nine months of 2021 versus EUR 11.7 million the year before.
On the following three pages, you can see how the different regions performed, and starting now with EMEA. Here, sales increased by 34.7% to now EUR 545 million versus EUR 405 million the year before. Main drivers were a strong OE trailer business and a solid aftermarket. All our axle plants in Germany and Turkey are fully booked into 2022, and the teams are working on a further increase of capacity. Worthwhile here to mention that the ramp-up of our new axle production in Russia is on time, and we will be producing the first axles by end of Q1 2022. Thanks to good customer and product mix and a solid aftermarket, our adjusted EBIT reached 9.8% in 2021 versus 8.7% in 2020.
Q3 came in with 9.8% as well. Next page for Americas, please. Sales increased from EUR 250 million to now EUR 300 million in 2021, which is a 19.8% increase or FX adjusted even 27.1%. Q3 with EUR 105 million was as good as Q2, and mainly driven by higher trailer and aftermarket sales. Q3 truck business was impacted by order postponements due to chip shortages also in North America. Our adjusted EBIT for the Americas region reached 5.5% versus 3.5% the year before. In Q3, the team was able to reach a solid 5.4% despite all the cost inflations we also face in the Americas.
I would like to mention that we, as the management team, decided to install a new, leaner and better fifth wheel assembly line in Mexico. We already started this middle of this year, and the first step is to assemble for our aftermarket latest in Q1 2022, which helps increasing our aftermarket sales and our overall gross profit in the region. APAC on the next page, please. Here, I'm happy to report that our homework pays off slowly. Sales increased by 48% from EUR 54 million in 2020 to now EUR 80 million in the first nine months of 2021, which was driven by increased OE sales and a growing aftermarket business. Our adjusted EBIT in APAC goes up from a negative 9.9% in 2020 to a now positive 2% in 2021.
To see that the adjusted EBIT in Q3 further increased slightly to 2.5%. Here I pause for a while and hand over to Inka. Thank you.
Thank you, Alex. A couple of comments on the investments on the CapEx. Year to date, we stand at 1.4% spending for CapEx in terms of our group sales versus 4 percent, which means that we have spent less money. A few comments on that one. First of all, CapEx is not a linear spending, and definitely in Q4, significant CapEx is still expected to come. Please be also aware that our sales is a little bit higher or significantly higher than we expected originally when we gave out the guidance. We may come out a little bit below the number. Talking about the content of the CapEx, Alex mentioned already a few highlights. Focus of investing activities for the first nine months were definitely efficiency enhancing measures.
We have invested into new machines for friction welding, specifically in the Bessenbach factory. The second focus area for CapEx has definitely been growth CapEx. We reported the establishment of a new plant in Russia, which is a market of huge importance for us. We reported also on the capacity expansion plans in the Turkish plant. As Alex mentioned, we have opened a new fifth wheel assembly line in Mexico, which will also strengthen our footprint in Americas. On the net working capital, the supply situation is unchanged to what we have been reporting in the previous quarters. This means that we are facing shortages in the supply chain and that the prices are still very, very high.
This means that we have had to keep our inventory levels high to secure delivery and market performance, but we are definitely working on reducing the levels towards year-end, and this will also happen. Then on the next page, you see basically the mathematical result of all of this, which is the cash conversion rate. I would say a KPI we've been reporting since a few quarters and where we also have internal focus on demonstrates the ability to convert EBITDA into cash. You see the huge investment into net working capital that we've done. The cash conversion rate in percentage of the EBITDA is still in the thirties, like in the first 2 quarters as well, but will improve also significantly towards year-end.
On the next page, I would say very positive development regarding our balance sheet structure and the deleveraging characteristics. Further significant deleveraging has been achieved. In the previous quarters, the driver was here the cash performance and the improved net debt situation. In the last 2 quarters, the main driver for this has been the improved EBITDA. As you know, we are using for this ratio the adjusted EBITDA of the last 12 months. Here, this has been the main driver for the improvement of the net debt EBITDA ratio meanwhile to 1.59, which is significantly better than our target range of 2-3 times. Representing and demonstrating a good balance sheet structure and financial headroom for further growth.
Yes, with that, I would hand back to Alex for some comments on the current outlook.
Thanks, Inka. Let's see on the next page how we see the markets for the remainder of 2020 or the whole year of 2021. Starting on the left side with Europe, very strong markets, very good markets. We see the truck for the whole year with a +15%. Trailer, a little bit higher at +20% to +25%. All the trailer manufacturers in Europe are booked until middle of next year, especially trailer manufacturers already until end of next year. This is a good many months ahead for us. North America, also quite strong. Truck, +20%, a little bit lower coming from the +24% where we stood in August. This is mainly due to the chip shortages and the postponements of the orders. Trailer, +25%.
Here's a friendly reminder that we have the strategy to focus on air disc brake with both air suspension and mechanical suspension, where we are a market leader, and a further increase of air disc brake shares to be expected in the future. In the middle, South America, which is mainly Brazil for us. Here, truck +45% and trailer +20%. With the acquisition of KLL, we are mainly focusing on truck and bus suspensions. We see a huge increase. Also here, we won a tender with Volkswagen for the e-Crafter, and we are here fully booked until middle of next year, which is a good thing. China, truck, -5%-10%, so a little bit of a weakening in the truck business. Trailer remains at -5%-10%.
It's slowing down, and it started in June, July. This is mainly due to the pre-buy the first half of 2021, but also the cost inflation is huge in China, so customers are waiting for investments. Here we are, as SAF-Holland, only focusing on premium air disc brake, including air suspensions. On the right side, I just came back from a business trip in India last week, very bullish market. There are huge infrastructure projects going on in the years to come. Truck now with a +150%, everybody is sold out, and they increase capacity. Trailer, where we are, is a +100%, so doubling. We are also booked out in our production lines in, we are located in Pune. Also happy to report that we see a bullish 2022 ahead of us.
On the next page, please allow me to summarize our guidance for the full year. First of all, let me say again that the massive raw material inflations, supply chain issues, increasing logistics and energy costs put a huge burden also on us as your SAF-Holland. Nevertheless, we are confident to achieve our full year targets with sales of EUR 1.1 billion-EUR 1.2 billion, an adjusted EBIT margin of around 7.5%, and a CapEx ratio of also around 2.5% of sales. Next page, please. We are benefiting from the upswing in Europe, North America, Brazil, and India based on our leading market positions. The economies of scale safeguard a strong operating performance. We do strategic investments in growing markets like Russia, Turkey, and Mexico.
A further deleveraging can be expected, and the overall cost pressure is included in our full year guidance. Dear all, we are working hard on the future of your SAF-Holland. Thanks for the trust in us, and now we are open for questions you might have.
The first question comes from Nicolai Kempf from Deutsche Bank.
Yeah, good morning. It's Nicolai Kempf here from Deutsche Bank. Thank you for taking my question. My first one would be on the guidance.
Especially on its top line. I think this implies the last quarter could be the lowest one in terms of revenues for the entire year. You also stated you're booked all for many regions and demand remains very supportive. I know that last quarter's seasonality was about a weak one, but is there another factor that you're considering, maybe some lockdowns in COVID or some other related measures that would imply that you're a bit more cautious on the last quarter?
Yeah, regarding the top line Q4, I mean, as you know, traditionally in December, we have a little bit lower sales. Factory shutdown. But in fact, there's no harsh decline from Q3 to Q4, I would say. We're talking really about the normal decline which we've had in the previous years as well, I would say. I would say the nine months top line sales is a quite representative number on a linear basis for the full year, if you take out the usual December factory shutdown.
Okay, understood. Can you just repeat how many months or quarters you're actually sold out over in Europe and North America?
Well, Nicolai, good morning. This is Alexander speaking. Well, it depends a little bit on the business of course and the regions. Let's start with EMEA. Basically, if we could increase our capacity from now until tomorrow by another 50%, we would be even sold out. It's very bullish. People are investing. Low interest rates also help that the people are willing to buy new equipment. The main business we do in Europe or in EMEA, trailer business, as you might know. There's a big portion. The biggest portion is trailer, which is axles and suspensions. We are nearly booked out until middle of next year.
We have some slots available of course, but the orders we are receiving and the orders on hand we do have means first half year looks pretty good. For the truck business, we also face a little bit postponements from the truck manufacturers in Europe. You know that we have also a significant market share in fifth wheels here in Europe. When you go over to the Americas, which is mainly North America, so basically we have a better split between truck business and trailer business, like 50/50 in OE. Here we can see that the trailer manufacturers are also booked out until the middle of 2022. The truck manufacturers you might know even better that have a lot of orders on hand.
There are a lot of parked trailers, trucks off site where chips are missing, so they're just waiting for chips to arrive, and then they can finish build the trucks and sell it to their customers. Also here, the first quarter is nearly fully booked and orders are going into the second quarter of next year. Does that help?
Yeah, understood. Thank you very much. Congratulations on a good performance.
Thank you.
The next question comes from Jorge Gonzalez from Hauck & Aufhäuser.
Good morning. Thank you for taking my question. I would like to know if you can give us some detail on the mix of volume price of the strong increase of the revenue. Can you give us some flavor on how much was the price increase in the period, please?
Jorge, good morning. Well, this is a really tricky question which we do not really want to answer because we do not display our material cost increases, nor do we display our price increases on the sales side. I can tell you it was heavy. You know, I'm already working for some years here in that industry and with the company, and I've never seen such an inflation like we have seen here especially in the second half of 2021. We see a strong headwind, especially in Q4, because this is the peak of the all-time high cost crisis. Steel, scrap steel, flat steel was very high in Q2, Q3, where all the suppliers and also us needed to fix the supplies for the last quarter.
This is a big burden, as I mentioned already twice now in my presentation, but this goes on for the whole industry.
Please allow me a follow-up. Your backlog for next year is then including a full price increase, I understand, for the pass on the costs that you are commenting for the fourth quarter.
Well, with the majority of our customers, we have so-called contracts with clauses, steel inflation clauses. This goes mainly for the North American sales. Basically already the increase since Q1, Q2, and now especially in Q3 and Q4 will be paid back in the first half year of 2022. So whatever we see as a price increase coming from raw materials we will get back in Q1 and Q2 next year. On the trailer side it's a little bit different. There we also have contracts, but they also have a time delay. Of course, we as a company, we as a group, we are not capable of swallowing any price increases.
The majority of the price increases, and we are in talks. We were in talks with a lot of customers already, and we needed, unfortunately, to increase the prices, which put a burden on both our customers, of course, but the whole industry. We are still in negotiations with a small portion of customers when contracts are coming up next year. Yes. Of course, we are trying to pass on as much as possible to our customers, and they, of course, have to pass it on to their customers, which are the ultimate buyers of trucks and trailers in our industry.
Okay. I understand. Thank you very much.
Next question comes from Harald Eggeling from ODDO BHF.
Yes, good morning. Thank you. I have two questions, please. First one would be if you could elaborate a bit on the market or product strategy in China, how it's going on, please. Also, with respect to the sales generation. The second one is basically on your Turkish plan. I think the lira is pretty much in favor of you for the time being, and I'm not sure if I missed if you said something, how big the capacity expansion will be, please. Thank you.
Okay. Good morning, Harald. I would like to take the China question. Of course, you know that we do not report single sales or profitability on a single entity, which we have now. We did a lot of plant consolidations over the last couple of years, and now we are purely focusing on air disc brake axles with air suspension. There are new laws in place since the beginning of 2019 and beginning of 2020. We are focusing purely on the segment of dangerous goods trailers, so to say, tankers, silos, and here we are getting more sales in, and we finally have the right products in air suspension, air disc brake. This is the main focus. The other focus, of course, we have a heritage of landing leg production.
This is what we are continuing there. We have a dedicated assembly line and production line for landing legs. This is for both the domestic Chinese market, but also for the export to other regions of the world.
Okay, thank you.
At the moment, there are no further questions, so I'll repeat. If you want to state a question, please press nine and star on your telephone keypad. One question comes in from Hugo Maas from Jefferies.
Yes, hello. One question for my side is regarding development expected for your margin in 2022. Given the fact you announced that you try to pass on price increase to your customers at the moment, but I'm not really sure to be successful or not. I'm just wondering if for the moment you were confident in order to maintain a decent level of margin for 2022, given the environment in escalation in raw material that we have at the moment, please. Thank you.
Yeah. I mean, it's really too early to give any guidance for the margin for next year. You know we will do that when we report our full year results. Nevertheless, our midterm margin guidance of 8%, which has been communicated about a year ago is valid. Please be aware of one topic. Yes, for the nine months we are at 7.7%, and at the same time, we are still guiding towards approximately 7.5% for full year. This implies that in Q4 we will have margin headwinds. I would kindly encourage you not to just, you know, continue with the current margin for Q4. We will see the peak of the material price hit in Q4. This is not being conservative at the moment.
We have preliminary October figures which also show this. You know, we are in the same boat like all other players in the industry, and we will see the material price hit also in Q4. Of course, expecting to ease up in the course of next year. You know, here also we don't know more than any others. We were expecting and everybody was expecting the shortages to ease up already end of this year. It's not happened yet. Let's see, and I think that this should happen then, you know, towards the first half year of 2022. We will provide then more information and clarity in due time.
Perfect. Thank you.
There are no further questions right now, so I'll pass back to Petra Müller .
Thank you everybody for joining our today's call, and we are happy to talk to you again when we release our annual report next year. Have a nice day and stay safe and healthy. Bye.
Thank you.