STRATEGY

For several years, the SBS Group’s primary strategic focus was to ensure a sustainable, financial and commercial basis for the Group and its entities.

This has to a wide extent been fulfilled by the sale of the loss-making particulate filter business Notox in 2016, through credit agreements entered into with the SBS Group's bankers to ensure operations and by focusing on earnings as basis for reducing the Company’s net interest-bearing debt and re-establish the Company’s equity.

Management believes that the SBS Group is at an advanced stage of this process so that the Group to a higher degree could direct focus on development and future positioning of the Group’s entities. The two business areas, SBS Automotive and SBS Friction, operate in markets that deviate considerably in terms of conditions and dynamics. Therefore, it may also be necessary to differentiate the strategic development scenarios for the two divisions. 


BUSINESS DEVELOPMENT – SBS AUTOMOTIVE
The automotive aftermarket in Europe undergoes considerable changes these years. The consolidation of the free aftermarket is accelerating. Capital chains and international operators are making acquisitions in the industry and small wholesalers find conditions difficult.  Customer behaviour is also changing with internet sale of spare parts still on the increase. To this should be added the technological development. Vehicles have become digitalised and are expected to become self-driving in the long run. In the long term, the classic internal combustion engine will come under pressure and more clean technologies will be developed. 

In November 2018, the SBS Group management decided to launch a strategic review for purposes of clarifying whether SBS Automotive could profit from participating actively in the consolidation process on the market to be well placed for the changing business conditions. 

The analysis of the next steps in developing the division is still ongoing and is expected to be finalised prior to the publication of the interim financial statements for the first six months of 2019.


BUSINESS DEVELOPMENT – SBS FRICTION
The basic commercial conditions under which SBS Friction and SBS Automotive operate are different. SBS Friction is a manufacturing company with a strong brand and growth potential at the aftermarket, but also within the OEM segment, i.a. vehicle manufacturer and their sub-suppliers. Moreover, the Company operates in a far more stable niche market, where structural reorganisations are less notable and where SBS Friction is positioned as a far larger player within its business areas than its sister division.

The SBS Group management is convinced that SBS Friction’s strengths within development, production and sale in combination with the market’s structure and potential allow of developing the Company as an independent entity. The strategy plan is based thereon and lays down measures to promote growth on the aftermarket as well as the OEM market. 

DEBT REDUCTION AND RE-ESTABLISHMENT OF EQUITY
In addition to focusing on the divisions’ business development, the primary strategic focus is to ensure a long-term, sustainable and stable financial basis for the SBS Group. Net interest-bearing debt was reduced again this year (6%) and since 2012, is has been reduced by 40%. Interest-bearing debt still makes up a considerable part of the balance sheet, but compared with earnings (EBITDA recurring), the key figure decreased from 11.8 to 6.5 since 2012. Equity in the year improved by 9.5%, but it still takes a while until equity has been re-established.

Therefore, the Group will in 2019 focus in full on improving EBITDA to ensure debt reduction and re-establishment of equity to the extent and at the pace desired. This assumes a tight cost control and optimisation of operations taking into consideration, however, investments and measures to promote growth.


OPTIMISATION OF OPERATIONS 
The optimisation strategy is primarily directed at three areas:

Supply chain
SBS Group entities are continuously optimising the supply chain. This plays an important role in particular for the distribution entity SBS Automotive. Efforts are in particular directed at optimising the Company’s comprehensive sourcing platform, the internal inventory and logistics flow as well as improving supply concepts, i.a. based on digital trading solutions.

Automation and lean
In the production entity SBS Friction, optimisation is primarily based on continuous automations of the entity’s production lines in the form of new production technology and process innovation as well as intense use of lean in the working processes. It is a continuous development with successive improvements that is to ensure our competitive power taking into consideration our customers’ quality requirements.

Digitalisation and IT
Digitalisation is a central, strategic key action area. In Q4 2018, the SBS Group initiated the implementation of a new IT platform based on the newest system technology within the area. The new platform will be rolled out successively and is expected to be fully implemented in all entities by the end of Q4 2020. In this relation, both divisions are working with new digitalised tools for handling product data, trading systems and communication, etc.