• Net sales: MSEK 380 (430) - sales were down -12% y-o-y. After adjusting for impact of currency (-9%), sales in constant currency were down -3%.
• Operating income: Operating income was MSEK 104 (134); an operating margin of 27.4% (31.1). After adjustments of MSEK +5, the operating income before items affecting comparability was MSEK 99; an operating margin of 26.0%.
• Net income for the period: MSEK 88 (71); basic EPS of SEK 2.32 (1.87).
• Cash flow from operating activities: MSEK 121 (58); strong profit to cash conversion ratio.
• Dividend: A dividend of SEK 3.25 per share was paid in the fourth quarter. Based on the Group's earnings and strong financial position, the Board of Directors intend to propose a dividend of SEK 3.50 (3.25) per share for the financial year 2020 and to renew the current mandate for share buybacks.
• Acquisition: On 31 December 2020 the strategic acquisition of Allied Enterprises LLC was made for MSEK 95, paid from cash reserves. Allied is a manufacturer of transmission pumps which complements our existing product offering and can be adapted to be driven electronically.

• Net sales: MSEK 1,502 (2,012) - sales were down -25% y-o-y. After adjusting for impact of currency (-2%), sales in constant currency were down -23%.
• Operating income: Operating income was MSEK 276 (472); an operating margin of 18.4% (23.5). Excluding adjustments of MSEK -15, the operating income before items affecting comparability was MSEK 291; an operating margin of 19.4%.
• Net income for the period: MSEK 205 (321); basic EPS of SEK 5.43 (8.37).
• Cash flow from operating activities: MSEK 337 (386); cash generation affected by lower sales however reduced working capital investment has resulted in a strong profit to cash conversion ratio.
• Group's net debt: MSEK 86 (54); gearing ratio of 8% (5).

President and CEO, David Woolley, comments on the Q4 2020 Interim Report.
Market and sales development
Published market indices suggest production rates, blended to the Group's end-markets and regions were up by +6% year-on-year in the fourth quarter. This was the first quarter reporting year-on-year market growth since quarter two 2019, suggesting our key end-markets, Europe and North America have started to recover from the global pandemic. The full year published market indices suggest production rates, blended for the Group's end-markets and regions declined by -20% during 2020.

The reported sales for the fourth quarter were down year-on-year by −12% and −25% for the full year. Reported sales in this quarter continued to be affected by the strength of the Swedish Krona against most of the major currencies, and in particular the US Dollar. Group sales in constant currency were down year-on-year during the fourth quarter by −3% and for the full year −23%, and broadly in line with full year reported market indices.

Sales this quarter are MSEK 56 or +17% higher than the third quarter driven by the improving customer demand for both our engine and hydraulic products. Quarter-on-quarter sales of engine products improved by +22% and hydraulic products +10%, as the recovery in hydraulic products end-markets continues to lag that of engine products end markets.

Constant currency sales in Europe and Rest of World were down −6% whilst the Americas were −2% year-on-year for the fourth quarter and directionally in line with published market indices, which shows a sharper recovery in the Americas than that seen in Europe, albeit with the typical lag between published indices and reported sales. The sales picture is mixed by end-market application within each region as the recovery is not uniform and supply chains adjust to the increasing demand. India continues to be affected by the global pandemic with sales into all end-market applications weaker year-on-year, however encouragingly sales performance in the fourth quarter improved modestly on that reported in the third.

Global pandemic and rightsizing the business
Our programs to manage the cost of capacity with short-time working arrangements continued this quarter, but to a lesser extent. Concentric also converted the US government loan received under the pay check protection program to grant income during the fourth quarter amounting to MSEK 10.

Concentric Business Excellence - managing operating margins and cash

As demand for our products increases our Concentric Business Excellence program ensured we were able to meet the increase in customer demand whilst controlling the cost of capacity. This program and our employee's resilience and ability to adapt to an ever changing environment ensured the reported operating margin was 27.4% (31.1) for the fourth quarter and 18.4% (23.5) for the full year. The operating margin before items affecting comparability for the fourth quarter was 26.0% and 19.4% for the full year.

Cash flow from current operations was MSEK 121 with a strong cash conversion. Progress was made during the fourth quarter to reduce inventory levels and the task to optimise inventory turns will continue in quarter one 2021, assisted by increased demand from our customers. Cash and cash equivalents decreased during the quarter due to the acquisition of Allied Enterprises MSEK 95 and an ordinary dividend payment MSEK 123, which was approved by Concentric's shareholders during the Extraordinary General meeting held on 9 December 2020.

Overall an extremely pleasing financial performance this quarter, sales quarter-on-quarter +17%, strong operating margin percentage and profit to cash conversion ratio, in what remains a challenging operating environment. We also continue to report a strong balance sheet, even after the dividend payment and costs acquiring Allied Enterprises, the business has no external debt finance, cash and cash equivalents were MSEK 505 (531), which is sufficient to both finance the day to day operations and room for future acquisitions. The year-end gearing ratio was 8% (5) and -35% (-39) when excluding pension liabilities.

Allied Enterprises

Concentric have regularly communicated our intention to improve and expand our technological capability via acquisition and Allied Enterprises, which was acquired on 31 December 2020 for MUSD 11.7 on a cash free debt free basis, represents a key strategic step for Concentric.

The acquisition delivers Concentric a strengthened transmission pump capability which complements its product offering. The transmission products produced by Allied Enterprises sit between our existing product categories, engines and hydraulics in terms of pressure, providing the opportunity to gain an increased market share of the global transmission market. Importantly, this range of pumps can also be adapted to be driven electronically, and therefore accelerate our growth in the strategically important CO2 neutral Battery Electric Vehicle (BEV) and Hydrogen Fuel Cell (HFC) vehicle and machine markets.

This additional product breadth enhances the value Concentric can offer to its existing global customers and to Allied Enterprises customers and creates significant cross selling opportunities.

Outlook

The overall published market indices blended to Concentric's mix of end-market applications and locations suggests the market for the full year 2021 will be up +12%, as the world's economies continue to recover from the global pandemic. The European and North America markets forecast growth indices are similar to the overall blended growth rate whilst our emerging markets, China and India are expected to recover strongly next year.

Demand for engine products continues to improve quarter-on-quarter and the recovery in the end-market applications for hydraulics products has started during the fourth quarter, we expect this to continue during the first quarter 2021. The level of orders received in the fourth quarter 2020 indicates that sales in the first quarter 2021 will be significantly higher than sales in the fourth quarter 2020, after a seasonal adjustment for slightly more working days.

Our various facilities around the world have continued to operate normally through-out this quarter with new sanitising protocols proving to be effective against the spread of the virus within our factories. Whilst the global pandemic continues there remains an element of uncertainty in our outlook, however with various COVID-19 vaccines approved and the global roll-out program underway, that level of uncertainty will reduce over time.

Customers continue to drive towards CO2 neutrality and zero emissions and Concentric has the technology and innovation to support these developments with world class e-Pumps solutions. We reiterate our previous guidance; sales of e-Pumps could amount to 20% of Group sales by 2025.

The financial position of Concentric remains strong, both capital structure and liquidity and Concentric remains committed to meeting our customers' requirements.

For further information, please contact:
David Woolley (President and CEO) or Marcus Whitehouse (CFO) at

Tel: +44 121 445 6545 or E-mail: info@concentricab.com

The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on 9 February, 2021.