Bulten forced to adjust inventory as lower production rate hits Q2

Declining demand in the light vehicle market, particularly at the end of Q2, has impacted Bulten’s quarter financials, with the group adjusting its inventory levels.

While Bulten’s full Q2 report isn’t due until next week, the group has highlighted that earnings are expected to be affected by approximately SEK 45 million, as Bulten balances inventory levels.

The decline in the light vehicle market, which started in H2 2018, has persisted into Q2 2019 and the market situation has been reflected in Bulten’s volumes.

While decreased demand has tied up less capital for Bulten, it has also meant production capacity has not been used to the full, resulting in “under-absorption in the operations”. Meanwhile the firm has won significant contracts that will kick in in the future.

“We are not satisfied with the development during the quarter, but the production adjustment has been necessary in the current market situation,” said Anders Nyström, President and CEO of Bulten. “At present, demand is still somewhat weaker than in the previous year and the ramp-up of the new contracted volumes has been more prolonged. Given these conditions, the production rate will continue to be lower at the beginning of the third quarter, but not to the same extent as during the second quarter.

“As previously announced, Bulten has received contracts at an annual value of just over half a billion SEK at full production rate in 2021 and we have a continued strong position. During the first six months, we have also taken several smaller contracts, with a total annual value that amounts to SEK 20 million.”

In the UK, the new car market was down for a fourth consecutive month, by almost 5%, according to SMMT figures. Globally, car sales were broadly flat in 2018, due in no small part to a slump in demand in China.