Hello, and welcome to the presentation of Bulten's Q2 results. Throughout the call, all participants will be on listen only mode. At the end of the presentation, there will be an opportunity to ask questions. If you have any questions, please press zero-one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero-two. Today, I am pleased to present CEO Anders Nyström and CFO Anna Åkerblad. Speakers, please begin.
Okay, thank you and welcome everyone. Let's turn to page three in the presentation, where you can see the agenda. It will be an overview of Bulten, the market development, second quarter, and what's in focus for the rest of the year. When we presented our quarter one, I said in the introductions that we're facing both old and new challenges ahead. In quarter two, all of those challenges have been very real, but also they have been dealt with. I will describe those in a bit more detail further on in the presentation. Next slide, please. Page four. As you know, Bulten is a supplier of fasteners. Our primary customer group is light vehicle OEMs, but customers categorized as automotive suppliers and customers outside the automotive industry are continuing to grow in share of our business.
We don't just supply the hardware. To many of our customers, we're a partner for product development support, innovation, procurement, and logistics. Bulten's three largest customers are still Ford, JLR, and Volvo Cars. To be an approved supplier to this many customers is a strength and clearly facilitates further growth. Next slide, please. Look at market development, and you can turn to slide six. In the month of April, semiconductor shortages were again a major issue across most of our customer range. For that reason, many customers basically took a two week extended Easter break, making April more of a half month than a full month. As you all know, China went into extensive lockdowns due to the new wave of COVID outbreaks, which caused much of the Chinese industry to come to a halt for weeks at a time.
We managed to keep our own facilities operational for most of this period, thanks to our very loyal workers who volunteered to set up camp in the plants and live there during the lockdowns, since if they left, they wouldn't be able to come back to work. However, customer demand was severely hampered also during this period. Inflationary costs increases also and it continues to be an issue during quarter two. We have been able to adjust pricing, but not only for raw materials, but also for freight, energy, et cetera, but only for part of it. Since costs are continuing to rise, this is an uphill battle until the situation gets more stable. Turn to page seven. For automotive volume statistics and outlook, Bulten looks to the independent forecast maker LMC.
In quarter two, according to LMC, light vehicle sales fell 0.8% compared to quarter two in 2021. To look at the future, I'd say we turn to page eight, where you can see the graphics of that. LMC's global vehicle production outlook for the full year is somewhat mixed. Light vehicle production volumes are forecasted to increase 5.7%, and this is somewhat lower than what was predicted a quarter ago. Heavy commercial vehicle production is predicted to drop 11%, which is down from -5% in the last quarter's outlook. For Bulten's automotive customer mix, this means an increase of 3.7%, but it's important to remember that the LMC global outlook is weighted across regions and OEMs, and that Bulten's customer mix may perform differently.
Right now, we see a much more favorable prediction from customer base, which is also reflected in the order intake, which is up 36% versus quarter two of 2021. To summarize the outlook, we're very positive about the second half of the year. Turn to page nine. As said before, we're getting compensated in sales prices to customers through the raw material clauses we have in our contracts. There is always a time lag, which means that we get a negative impact on our margins as long as prices are on the rise. Steel wire rod prices were again at record high levels in quarter two.
Indications point towards a trend shift, and if we turn to slide 10, here we can see that cold-rolled flat steel prices have plunged in Europe, which is normally an indication of what will happen next for the wire rod material. Next page, please. As is already well known, energy and labor costs are also sharply on the rise. Customer price adjustments are subject to negotiations, but always involve an after the fact data analysis, thus the same sort of lag in price adjustments as we face on the raw material side. Next page, please. We will look at the second quarter, and we can turn to page 13. The structural challenge we faced going into quarter two was the execution of the decision to withdraw from the Russian market and to divest of all the assets connected to Russia.
During the quarter, we did what we said we would do, and I'm very pleased that we have now de-risked Bulten's business in that we very rapidly and still in an orderly manner, divested our interest in Russia. The year-to-date business wins are also very encouraging and the highest number we've had in the first half year ever. I'm glad to say that it's also quality wins, good programs with good customers. Now over to Anna for the financial side of the quarter. Please go ahead, Anna.
Thank you, Anders. On page 14, you can see an overview of our quarterly sales the last two years, including 12 months rolling sales. We had continued strong sales in our second quarter, and we saw slightly higher sales to automotive suppliers and continued sales growth in other industries outside the automotive sector. Next slide, please. On page 15, it's satisfying to see that our effort to grow in industries outside automotive and with automotive suppliers have given results in increased sales. Other industries outside automotive is now contributing with approximately 10% of total sales compared to approximately 9% at year-end. Automotive suppliers are contributing with 15%, which is in line with year-end. Our main customer group is still OEM light vehicles with almost 65% of net sales. Next slide, please.
Our earnings performance for the second quarter was affected by exchange rate effects related to finalizing the divestment of our Russian business with approximately -SEK 10 million. This has no cash effect. Adjusted EBIT amounted to SEK 51 million in the quarter, and customer price adjustments are starting to have effects, but there is still some delay in timing. There's also continued increased costs in energy and transport, which is only partly compensated for. Our adjusted EBIT margin for the second quarter amounted to 5%, which is down from the comparable quarter last year. Taking into consideration the currency effects, the adjusted EBIT margin amounts to 4.8%. Next slide, please. On page 17, you can see our financial summary of the second quarter.
As mentioned previously, Bulten delivered strong sales for the second quarter with an adjusted EBIT of SEK 51 million and EBIT margin of 5%. Adjusted earnings per share amounted to 1.32 SEK in the quarter and 5.22 SEK for rolling 12 months. Next slide, please. The cash flow from operating activities, including changing working capital, amounted to SEK -90 million in quarter two. Dividend was paid in the quarter with an amount of SEK 47 million. Cash flow from investing activities amounted to SEK -50 million in the quarter, a key figure affected by the start of the construction of the new facility in Poland in May last year. Cash flow from financing activities amounts to SEK 131 million.
The total cash flow for the quarter amounted to SEK 62 million with a cash position of SEK 233 million at the end of the quarter. Our net debt, excluding lease liabilities, amounted to SEK -446 million at the end of the quarter. Next slide, please. Our adjusted rolling twelve-month key indicators are affected by cost increases in raw material, energy, and transport. Last year's rolling twelve months included the two best quarters ever, which were Q4 in 2020 and Q1 in 2021. Our adjusted net debt and adjusted EBITDA ratio is at minus 1.4 at the end of the quarter, and our equity ratio at 47.3%. Next slide, please. On page 20, you can see our financial targets as well as some of the guidelines regarding relevant key figures for Bulten.
Comparing with last year, the growth in sales is above 10%, and adjusted margin for the quarter is in the 5% level. In the right-hand table, you can see some guidelines for some other key figures, and we are very much in line with our guidelines. The guideline for average net working capital in relation to twelve-month sales is about 20%-25%, depending on the growth pace. At the end of the quarter, we had a level of 23%, which is in line with our guidelines. The guideline for capital expenditures as percentage of twelve-month sales are 2%-3% for maintenance of equipment and additional up to 2% for capacity, depending on market development. At the end of the quarter, we are at a level of 6.8%.
As mentioned before, we started the construction of the new facility in Poland in May last year. Postponed capital expenditure due to the pandemic has also an impact on this figure when starting up again. The guideline for depreciation as 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 quarter two, we are in line with our guidelines. Now back to you, Anders.
Thank you, Anna. We'll turn to page 22. For some words about the focus for the rest of the year. The underlying demand for vehicles is still very strong. Our customers order books are very healthy, and for them it's all about being able to produce. The order intake shows that we have to be prepared for a rapid increase of sales on a number of customer accounts, but also maintain flexibility if new restrictions should occur. Pricing adjustments has been a big topic for us since the beginning of the year, and we're stepping up these efforts now. Our M&A strategy for North America still stands. Bulten is not and won't be a serial acquirer, but we do need to add to our capabilities in North America, and we continue to work to make that come true.
As pointed out earlier, we are at record new business win rates. Both our global reach and our sustainability offer continue to be instrumental for us to win with both new and existing customers. We turn to page 23, finally. Just to remind everyone of our strategy and our financial targets, which we stand by. To be a SEK 5 billion company delivering 8% EBIT and 15% ROCE in 2024 remain the targets. We are on track to deliver on these targets, and we have the building blocks in place to do so. This concludes the presentation, and we're ready for questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. The first question comes from Mats Liss at Kepler Cheuvreux. Please go ahead, your line is now open.
Yeah. Hi. Thank you. A couple of questions. First, looking at the order intake, it's quite impressive. I was just wondering if you can give some flavor regarding the mix, I mean, price, volume, and maybe in which segments you're growing the most.
Hi, Mats. Yeah, as you know, over time, the non-auto segment is the one that's actually growing the fastest. Right now, looking into the second half of 2022, it's really the passenger car OEMs that are recovering from the component shortages and basically building back the backlog that they have accumulated over time.
Okay, great. Could you say something about price mix there? I mean, price volume. Is there anything you can comment on?
Well, I'm not exactly sure what you mean with the mix price volume, but do you mean historically or do you mean future?
I guess the order figure as such, it's like volume contribute 10% or whatever, and then price the balance or if you could say something.
No, that will require a longer analysis if we would then sort of break it down into pricing, currency effect, volume, et cetera. There is no doubt, right. If you look at the volume predictions that LMC has for the third quarter, I think they were up 23% in volume globally. I think we actually do have a little bit more aggressive mix. There's a slight share of volume in there. Then there's of course pricing effects as well, if you compare to the same quarter last year, no doubt. If you want a number, sort of a neutral volume growth number, quarter three to quarter three, LMC gives you 23%.
Yeah. Yeah. Great. Thank you. I mean, you mentioned the second half will be very much stronger. Is there any difference there in the season? In fact, I guess the third quarter is normally a holiday quarter. Do you expect to, well, have to work harder this year, or is it more sort of a very strong fourth quarter we should expect, or could you say something about that?
I think generally the second half would be positive in terms of volumes. It's always more challenging if you have a sharp increase in sales right after the vacation period. You're right, normally quarter three is a big, clogged by various summer vacation shutdowns. You know, the comparison quarter is of course impacted by that as well. You know, I don't know how to illustrate that more clearly to you, but it's you know, for being in quarter three, it's very high.
Yeah. Thank you. You also mentioned that steel prices have sort of peaked maybe and come down quite a bit in some areas. It seems that could it affect your ability to pass on price increases? Well, if it's already there, or is it sort of contract based situation and you. It's a normal way. I mean, you probably have some positive impact at the first, and then it sort of when the new contracts kick in, you'll get off the new steel price level again. Yeah. Maybe that.
Yeah. We're normally on quarterly contracts on steel and we normally adjust, you know, either quarterly or biannually with our customers. Like we've talked about before. You're right. If there is a leveling out of the steel pricing, our customer price adjustments will catch up with that and improve our situation. I did mention in the report that we see a softening of or at least sort of a leveling off on the steel prices and maybe even a decline. Whether that's gonna last into quarter four or not, we don't know because, you know, as everybody knows, energy is a big factor in steel pricing as well. Energy is going up.
It's extremely difficult to predict what will happen throughout the second half of the year. Right now, it seems like it's taking a bit of a pause when it comes to the increases. You know, we haven't seen all of it yet.
Okay, great. Thank you. Finally, just about the tax line that you have, quite high tax charge in this second quarter, and still you indicated that it was sort of temporary to some extent, at least that was my interpretation. Should we expect you to be more in line with the guide than already next year? Or is it sort of things that are moving parts there that's difficult to comment on?
Yeah. We are expecting that it will go down next year in line with the guidelines.
Okay, great. Thanks a lot.
Thank you, Mats.
The next question comes from Kenneth Toll at Carnegie. Please go ahead. Your line is now open.
Yeah, thank you. Let's continue a little bit on what Mats discussed in his last question here with steel prices and your own price increases. Is there a risk that if steel prices start to go down here a little bit, that customers try to negotiate lower price increases from your side? I mean, you have these sort of indexed prices in most cases. Do you see a risk that they will start pressuring prices?
Hi, Kenneth. Not really. I mean, we follow the same mechanisms, whether the steel price goes up or down. It's mathematics. The idea of those compensation clauses is that the raw material effect itself will be neutral over a cycle. No, I'm not really worried about that.
You also mentioned price increases for transportation, payrolls, and energy and so on. I guess there you don't have much index. It's more of a negotiation to get compensation for such costs. Is that correct?
That's correct. Yeah.
Okay, good. Yeah, all else equal, the balance between your own price increases and sort of at least steel price increases should look much better in the third quarter than in previous quarters if steel prices sort of flatten out or go down.
That's a logical assumption, yeah.
Great. Then you mentioned also, looking at your target for 2024, you're targeting sales of SEK 5 billion. You might be a bit behind that now. You then also mentioned that you're really interested in finding an acquisition in North America. What would an acquisition in North America add from a strategic point of view? Why can't you acquire something in Europe or Asia, for example?
Right. It's a matter of scale. We are in North America, and we are serving a smaller number of customers in North America. You know, in order to really be competitive in the market and be profitable in the market, we need to reach a certain scale. By scale, we mean both more vertical integration, which we're looking for in an M&A target, as well as scale leverage on the raw material purchasing side, which is significant because, you know, today we're not getting competitive raw material prices, and that's such a big portion of our cost that
Mm.
Definitely that will help us. We're not excluding acquisitions somewhere else, but our primary target is North America because, you know, we see the need for it.
With the customer base that you already have in North America today, if you had more production capacity, do you think that you can expand business with your existing customers?
It wouldn't be surprising.
Also, you say that in Europe, you have Ford as a big customer, for example, and I think you have some business in North America. If you were to acquire a company and get more production capacity, do you think you can expand your business with Ford, for example, in their North American business?
Possibly. You know, we're primarily targeting to also help our expansion into the non-auto segments.
Mm.
through an acquisition. We're primarily looking for companies that will give us also a diversification of our customer base.
Mm.
the customer sectors.
Okay. Good. That would then imply that it could be the smaller partners than what you're supplying to the automotive industry today.
It could be either/or. It could be smaller, bigger or the same. It's, you know.
Okay.
The dimension is not the primary criteria, I would say.
Okay. Yeah. Sounds interesting. Great. Finally, when I looked at the numbers and then compared to my estimates, you had a higher sales. I was positively surprised by the sales growth in the second quarter, but margins were a little bit lower, and they were a bit lower than last year. You would say that it's mainly those cost increases for steel, logistics, payroll, energy that explain the lower margins year-over-year?
Yes.
Okay. Good. Great. Yeah. I think I got it all. Thank you.
Thank you, Kenneth Toll.
Thank you. There are no further questions at this time. I hand it over back to the speakers.
Thank you very much for listening in to our quarterly report and hope to see you soon again.
Thank you, everyone, and I wish you a nice summer.
Thank you. Bye.