VBG Group: Financially well-prepared for demand shortfall – Introduce
Margin resilience under scrutiny when demand starts to dropWe estimate that VBG will see a 23% organic sales decline and a 44% EBITA decline in 2020 following COVID-19’s impact on VBG’s end-markets. Similar to what we expect for other industrial names, we expect Q2 to be the most challenging (-46% organically) before we start to see incremental improvements in Q3 (-32%) and onwards. However, even though Mobile Climate Control (MCC) was not part of VBG before 2016/2017, we note that all divisions have historically been fairly sensitive to sudden changes in demand. In 2009 when sales declined by 46% organically, VBG managed to keep adj.
EBITA just above break-even levels. In 2020, we forecast incremental margins similar to those in 2009/2008 despite seeing governmental support on the personnel side, causing margins to fall from 12. 5% in 2019 to 8.
7% in 2020e.
