Hello, welcome to Bulten's Q1 2021 presentation. My name is Kamilla Oresvärd, Senior Vice President, Corporate Communications. Presenting the report are Bulten President and CEO, Anders Nyström, and our new CFO, Anna Åkerblad. Anna, would you like to make a short presentation of yourself?
Yes. My name is Anna Åkerblad. I have worked as CFO for international manufacturing companies the last 15 years. Most recently, I worked for Absolent Group. Prior to that, I worked many years at Axel Christiernsson. I also have a background from auditing and consulting as manager at Deloitte. I'm excited to be part of the Bulten journey and get to know all the great people. I'm really looking forward to this.
Thank you, Anna. As usual, you will be able to ask questions after the presentation, both on the web as well as in the telephone conference. I will now hand over the word to Anders Nyström. Please go ahead, Anders.
Thank you, welcome everybody. This first quarter of 2021 has been a very good one for Bulten, in which we have demonstrated what Bulten looks like in a normalized market. It's important to know that the results delivered is the product of hard work by Bulten employees and the trust placed in us by the board and the shareholders. Before we start to go through the results and the numbers of quarter one, let me briefly present Bulten to those of you who aren't familiar with the company. Next slide, please, page four. As most of you know, Bulten is a supplier of fasteners, primarily to the automotive industry. We don't just supply the hardware. To many of our customers, we are a partner for product development support, innovation, procurement, and logistics. In other words, we're a full service provider of fasteners.
As you can see in this slide, Bulten has a broad customer base with light vehicle producers as the largest customer group. Bulten's three largest customers are Ford, Jaguar Land Rover, and Volvo Cars. When acquiring PSM during the first quarter of last year, we added a number of automotive customers, primarily tier 1 suppliers, but also customers outside of the auto industry. To be an approved supplier to this many customers is a strength. Customers value the way we cooperate with them and recognize us for our service. Most of the customers in Bulten's base have potential for further growth. Next slide, please. Our geographical footprint is definitely a unique advantage for Bulten. None of our competitors have this geographical coverage. Bulten's value chain is balanced between in-house and outsourced production, and we can thereby be flexible and cost efficient. Including PSM, we have about 1,600 employees.
We offer local production in Europe, U.S., China, Taiwan, and Russia, which is unique in our competitive set. Through the acquisition of PSM, we have an even more comprehensive geographical coverage than before. Next slide, please. Turn to page seven for a view of the global production statistics. While Bulten's share of non-automotive business is growing, a vast majority of our business still remains dependent on the vehicle market. Vehicle production in 2020 was, as everybody knows, heavily impacted by COVID-19. The 16% drop in vehicle production corresponds to a loss of about 14 million units globally versus 2019, which in turn had already dropped almost 6% versus 2018. 2020 was not a high year for light vehicle production. For heavy commercial vehicles, the movements were less dramatic with a 6.4% drop in units produced in 2020 versus 2019.
For 2021, LMCA predicts a bounce back of light vehicle production volumes with an increase north of 15%, and then a more normalized growth of approximately 6%-7% in 2022. Heavy commercial vehicles is predicted to increase in production rate about just below 4% in 2021 versus 2020, and then grow slightly in 2022 by just over 1%. It should be noted that the recovery in 2021 is uncertain, especially in quarter two and three. Vehicle production is highly challenged by the shortage of semiconductors, and we should expect fluctuations before the capacity situation is resolved and the supply chain balance is restored. We'll flip to page nine. As mentioned, quarter one was a very good one for Bulten.
The strong momentum we gained in quarter four of last year continued as the market came back to more of a normal, and our customer mix had a particularly good development. As mentioned in our last quarterly presentation, we utilized the downturn last year well and drove efficiencies in our value chain. This helped us to realize higher margins, and the leverage from record high volumes also resulted in record profits. We made improvements to our manufacturing footprint. Now in January, we held the grand opening of our new production facility in Taipei, Taiwan. We're also happy to have welcomed Anna Åkerblad as our new CFO and member of the group management. She took up her position in March, so this is her first quarterly presentation in her new role. By that, I'll actually leave the word to Anna to go through the financial numbers.
Thank you, Anders. On page nine, you can see our quarterly net sales development. As Anders mentioned, the upturn in the second half of 2020 continued in Q1 with a continuous strong demand for our products. Net sales for the group in the first quarter amounted to SEK 1,103 million, compared to SEK 821 million the same period last year, an increase of 34%. It's a new record level for Bulten in the first quarter. Net sales improvement is explained by strong growth, partly coming from the FSP contract signed in July, as well as positive market development. Next slide, please. On this page, you can see our financial summary of the first quarter. As mentioned previous, Bulten performed a record high net sales with improvement on both gross profit and strong leverage on EBIT level compared to same period 2020.
Overall, the numbers are strong, and the profitability development is mainly driven by volume, a positive outcome of efficiency initiatives, and increased capacity utilization. Earnings per share is calculated to SEK 3.21. The order book increased by 47% compared to the same period last year. However, last year was affected by the COVID situation, and today we have the uncertainty regarding the shortage of semiconductors. Next slide, please. Our earnings performance was affected by the improved volumes in the quarter. EBIT amounted to SEK 98 million in the quarter. Our EBIT margin for the first quarter amounted to 8.9%, an improvement compared to the comparable quarter last year of almost 4 percentage points. The EBIT improvement is coming from good customer mix and increased capacity utilization. When adjusting the EBIT margin for currency effects, the improvement for the first quarter this year compared to last year is even somewhat better.
Next slide, please. During the last year, a strong focus has been on cash management and our net working capital. The cash flow from operating activities before changes in working capital amounted to SEK 115 million in quarter one. Cash flow from the change in working capital amounted to minus SEK 22 million. Increased sales has led to increased working capital for the period. Cash flow from operating activities amounted to SEK 93 million. Cash flow from investing activities amounted to minus SEK 16 million in the quarter. Again, a much lower level than before, as we have, as you know, halted operational and property investments during this uncertain time. In total, the cash flow for the quarter was negative and amounted to minus SEK 59 million, with a cash position of SEK 185 million at the end of the quarter.
Cash flow from financing activities amounts to minus 136 million SEK, where the majority refers to repayment of loans. Our net debt, excluding lease liabilities, has reduced since the beginning of the year and amounted to 42 million SEK at the end of the quarter. Next slide, please. Our key indicators have improved in quarter one compared to the same quarter last year and also compared to the full year 2020. This is, of course, a satisfying trend, but also an effect that 2020 was greatly affected by the COVID-19 situation. We have an adjusted return on capital employed of 8.2%, excluding financial lease. Our net debt to EBITDA ratio, adjusted for lease liabilities, is at minus 0.1 at the end of the quarter. This, in combination with an equity ratio of 57% at the end of the quarter, shows that Bulten financials is on a very solid level.
Next slide, please. On this slide, you can see our financial targets as well as some of the guidelines regarding relevant key figures for Bulten. In terms of reaching our financial targets, we are now clearly moving in the right direction. On a quarterly basis, we are above our financial targets when it comes to growth and profitability. In the right-hand table, you can see some guidelines for some other key figures. Our guideline for average net working capital in relation to 12-month sales is about 20%-25%, depending on the growth pace. At the end of March, we had a level of 23%, which is in line with our guidelines. The guideline for capital expenditures as a percentage of 12-month sales are 2%-3% for maintenance of equipment and an additional up to 2% for capacity, depending on the market development.
At the end of March, we are at a level of 1.7%. As mentioned before, we have halted investments, which will have an effect on this key ratio going forward. The guideline for depreciation as a percentage of 12-month sales is 4%-5% considering IFRS 16. Without IFRS 16, it has been in a level of 2%-3%. At the end of March, we are in line with our guidelines. The guideline for our group weighted tax rate is 24%-28% as percentage of 12-month sales. At the end of March, the average tax rate was 30.1% and is recovering from the COVID situation last year. Back to you again, Anders.
Thank you, Anna. We turn to page 17, please. Some words about our focus for 2021, the rest of the year. As you've seen in this presentation, our quarter one had strong momentum. The underlying demand for our customers' products and for Bulten products is very healthy. Having said that, we're faced with a somewhat new set of uncertainties. Our customers' production is hampered by the shortage of microprocessors, and that will have an effect on our sales going forward. Steel prices are at the high level now and will most likely continue to rise in quarter two. We are, of course, closely monitoring all of these factors and maintain strict cost and cash flow control. We will continue to work on margin improvements, which we have successfully done recently. There are still synergies to be realized with PSM, and in-source initiatives are being executed as we speak.
We continue to ramp up our activities in technology and innovation to stay determined to remain a leader in sustainable fastening solutions. We have important steps taken to that effect, not the least through the launch of BUFOe and our collaboration with TensionCam for sensorization of threaded joints following our minority stake acquisition last year. Our sales force are using our track record of successful new contract launches, as well as the greater customer exposure that comes from the combined customer base of Bulten and PSM to accelerate new business wins and generate additional organic growth. Next page, please. Page 18. I just want to conclude with this presentation to remind everyone of our Stronger 24 strategy, the roadmap for how we will go about reaching our targets presented exactly a year ago, just before the COVID-19 outbreak. It's divided into four building blocks.
To start with, we have a strong position with the uniqueness that has taken Bulten to what it is today. Our clear ambition three years from now is to have further advanced our position when it comes to quality and technology leadership. The second block is growth. We now have growth momentum, both organically through the contracts we've ramped up, and non-organically through the acquisition of PSM. Despite the past year's turbulence, we hold on to the aim for sales reaching SEK 5 billion in 2024, and I think you can see that we're ahead of that curve with our current sales pace. The same applies to our profitability efforts through the obvious synergies with PSM, improved exposure to customers in North America and China, accelerated initiatives to improve efficiencies in production and distribution, and through launching new technologies with a value add for customers.
We aim for an EBIT margin above 8%. We also have a strong financial position, something that we really want to emphasize. To summarize, the global downturn that we experienced last year has not eroded the validity of our strategy. Our position is strong. We stand by our targets, and we stay committed to all the building blocks in the strategy to get there. This concludes our presentation, and we're ready for Q&A.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask your question. If you find it answered before it's your turn to speak, you can dial zero two to cancel. Our first question comes from the line of Kenneth Toll of Carnegie. Please go ahead. Your line is open.
Yeah, thank you. A couple of questions here. You increased your production quite a lot in this quarter, and as I understand it was higher rates in Q1 even than in Q4. Are you starting to run into capacity issues in your own production?
Hi, Kenneth. Actually, no. If we look at the machine capacity and the technical capacity that's installed, we still have headroom to grow further. Of course, we're balancing with the manning in our workshops. If we would increase production more, then we will probably need to hire a few operators. In terms of the technical installed capacity, and if you're thinking of investments needed, the answer is that we still have headroom to grow further.
Sounds great. Let's take steel prices first. We have all seen steel prices come up quite a lot, and I fear that there will be more of a negative impact on your earnings already in the first quarter. Do you see that steel prices might have a more severe negative impact in the second quarter compared to the first quarter?
We will see more of that run through the books in quarter two and quarter three. That's right. We already had an effect in quarter one as well.
Still margins were very good. Yeah. How much worse do you think it could be? Could it be double the negative effect in the second and third quarter? Could be 3x as bad or?
Well, I don't want to guide you on that. You probably have a difficulty finding the baseline there for that calculation as well. All I can say is that we've had progressive increases in steel prices already from quarter four last year and what that's going to look like when we go into quarter three, we don't know that.
Okay. Also you talked a bit about your strong balance sheet and also that you stopped a lot of investments last year. Are you thinking about reinitiating those investments, like the new plant in Poland, for example?
We're of course considering that. I know this is sort of the question mark, when will we sort of restart that project again? My answer would be that as soon as we've made the decision to start breaking ground, in Poland, we'll let you know.
Okay. Also it was, well, about a year ago now, or even more, since you acquired PSM, and that seems to have been a very successful acquisition. Are you looking for more acquisitions now as well?
Well, it's a valid question. We will not go on a shopping spree, that's for sure. Given our strategic direction, we will look for possibilities to acquire companies that have a good fit into our strategy. We're open to that for sure.
If it happens and when it happens, you'll know about it.
Yeah, I guess so. Finally, you talked about taking market shares and so on. Are there any larger FSP contracts out that is discussed right now where you have a good chance of getting more business?
If you're thinking of the one that we won mid last year, I'd say that there is nothing out there of that magnitude. There's a number of smaller ones for sure that we're discussing with customers. We're always looking to win new business. We're very focused on organic growth right now, and whether it's FSP or not FSP, we're chasing the contracts that are out there.
I guess one great opportunity to get in to become a supplier is when a core model changes, you can change supplier. Are there a lot of sort of model changes being prepared right now that could trigger a change in suppliers? I am thinking a little bit about last year, it was a very difficult year for the automotive industry, maybe some projects have been postponed and so on. Do you see that their planned projects are coming back or is it too early for getting awarded a contract for sort of new car models and so on this year?
No, there's a multitude of opportunities out there, and as you know, the whole industry is facing a technology shift, which results in sourcing of new platforms and new programs for sure. There's a lot of activity, for sure.
Okay, great. Thanks a lot.
Thank you. Our next question comes from the line of Mats Liss of Kepler Cheuvreux. Please go ahead, your line is open.
Yeah. Hi, thank you. Congrats on a strong quarter. Just coming back there first to Kenneth's question about steel prices. I guess you have this raw material clauses in your contracts and pass on those steel price increases gradually. Could you just indicate the delay there potentially? Potential delay in that as well?
Yeah. Hi, Mats. Yes, you're right. We do have a high degree of material clause coverages in our contracts. As you probably know, there's always a time lag between material prices actually taking effect for us and actual compensation coming in from the customer base. It's a variety of update frequencies in those contracts. I'd say, on an average, that's three to four months. Yeah, on average.
Good. I guess you will be compensated by and large at the end of the year, sort of. It's a standard progress that you sort of handle these contracts, I guess.
To a high degree, we will.
Yeah. Okay. Thank you. The semiconductor. I guess you have experienced some sort of production stops indication from the customers. Is that sort of balanced to some extent by customers sort of trying to build some extra inventory just to be prepared when this shortage sort of leaves, so to say?
Well, I think all customers that are now, all OEMs that are now sort of losing production because of semiconductors are paying a lot of attention to their inventory to make sure that once the capacity on semiconductors is catching up, that they won't have any other shortages or any other disturbances in the value chain. I think there are a lot of lessons learned from this, and we're certainly determined that we're ready to supply our customers once they start to catch back. If that's the answer to your question?
I guess it helps somewhat from your position. That's my interpretation anyway. Okay. Well, the full service contract there are opportunities out there, but I missed the slide you used to have when you make the presentations about the remaining part of the full service contract that you're sort of ramping up. Could you sort of indicate how much left you have there in the year to come?
Well, I think we mentioned that in the last report as well, the Q4, that, well, the contracts that we've won, the big contracts that we've won are basically ramped up. They're now sort of following the generic market fluctuations rather than being in a ramp-up phase. There are, of course, a few small programs that we still had to ramp up. There are a couple that are postponed in time that we still need to SOP. From 10,000 ft, you could say that our volume fluctuations are going to be in line with the market fluctuations from now. We don't have a major program to start up in 2021.
Okay, great. You also mentioned about the electrification trend and the sort of positive theme that was sort of supported more than your, well, not negative. Electrification is sort of helping you at the moment in the car industry, the use of fasteners. Is it also an increased content per car, or is it more like the ramp-up of production of electric cars that you sort of indicate?
Yeah. As you know, the first wave of electrification is hybridization, where we actually multiply the number of powertrains in the vehicle. Having one ICE and one electrical powertrain in the vehicle is fantastic for fastener suppliers. As that migrates into more of pure electric vehicles, that sort of goes back more towards a normal fastener count again. We can all expect that to happen. However, at what rate? Many have speculated in sort of what the migration rate's going to be into pure electrics. We're certainly ready for it and we're bidding for a number of electrical vehicle programs, and we're doing quite well on EVs, I have to say, at the moment.
Okay. You don't disclose every contract that you receive there. It's more the larger ones.
No.
That you announce, sort of. Yeah.
That's correct. We don't disclose every contract, and we're still winning business which we're not disclosing.
Okay. Finally, just as, well, Kenneth touched upon that also regarding the capacity utilization. Last year you received this huge full service contract. Are you able to take on another one of that size, or do you need to sort of expand capacity? I mean this EUR 107 million contract that you received last year.
We can still absorb more in-house production. We can.
Okay. Good. All right. Thank you very much.
Thank you.
Thank you. Okay, there seems to be no further questions on the phones. I'll hand back to our speakers for the closing comments.
All right. Thank you. Yeah, thanks everyone for listening in. If not before, I'll speak to you in a quarter's time.