Focus on earnings and business development
SBS Automotive is the SBS Group’s largest business area. The division's business foundation includes sourcing, completion, inventory management, branding and distribution of spare parts. The product range includes wear parts, primarily within the categories brakes, steering gear, suspension, transmission and clutches.
SBS Automotive comprises sales and distribution platforms in Germany, France and Denmark as well as logistics and packaging operation for brake discs and brake callipers in Poland in cooperation with an external party. In addition, SBS Automotive is represented on the Russian market having a sales office in Moscow.
SBS Automotive sells its products on the free spare parts market for passenger cars and delivery vans. The main part of the volume is sold using our own brand, NK, which is marketed throughout Europe. The NK brand is positioned below the market’s premium brands, but is a strong alternative to them in respect of quality, assortment and supply. The remaining part of sales is primarily made as private labels within brake discs, brake callipers and brake shoes.
Geographically, SBS Automotive sells its products all over Europe and in neighbouring regions. Germany is the largest market. In addition, the Nordic countries, France and Russia are important markets.
The customer portfolio comprises a broad spectrum of distributors on the free spare parts market, including large international operators, national importers, capital chains, purchasing groups and independent, local wholesalers.
These years, the European automotive market is undergoing considerable structural and technological changes. The car fleet and mileage are on the increase stimulating demand for wear parts. At the same time, the free repair market is challenged by the car industry, which seeks to gain market shares on the repair and service market through better and more hard-wearing original spare parts, leasing concepts on private vehicles and digitalisation of cars’ service data. To this should be added the technological mega trends within drive engineering and self-driving cars, which in the long run will change the spare parts market.
Seen in isolation, the free aftermarket is also changing. Consolidation within the industry has accelerated in recent years, where private equity funds and major industry players make acquisitions.
This contributes to rationalisation in the chain of distribution with fewer and larger units. To this should be added changes to buying behaviour patterns with increasing internet trade. This trend continued at the same pace in 2018.
SBS Automotive reported revenue of DKK 557 million in 2018 against DKK 605 million in 2017. The decrease is attributable to an uneven development in the individual market and customer segments where a number of export markets and accounts, including several of the largest customers, noted growth, whereas others noted a decline.
Despite a decrease in revenue, EBITDA recurring rose from DKK 41 million in 2017 to DKK 46 million in 2018. For the third year in a row, EBITDA increased, and in this period by 11%. The improved results of operation relate to continued optimisation of the Company’s supply chain and cost reductions.
In 2018, SBS Automotive has given high priority to sales-strategic measures that are to ensure renewed revenue growth on profitable terms. Primary focus areas in that connection were the implementation of new partnership concepts and product groups as well as market expansions.
The Company is in particular focussing on reversing the trend on the German market, which has undergone considerable structural changes. Based on the changed customer structure and behaviour, SBS Automotive adjusted its sales strategy and concluded an increasing number of partnership agreements that are to ensure a sound foundation for the NK programme - also in the large distributors’ product portfolios. As part of this process, a generational change has been made in the German organisation, which is to contribute to strengthening the market efforts given the changed market conditions.
A new high-quality steering gear programme, NK PRO, was added to the Company’s product range. The new programme is aimed at markets where road conditions make additional demands on the products’ strength and wearing properties. Furthermore, a new programme was launched for specialised discs that complement the already broad product range offered to the market and a new niche programme within cables. At the Automechanika fair in Frankfurt in September, SBS Automotive furthermore revealed a completely new programme for engine support parts that was launched at the beginning of 2019.
Efforts to penetrate new geographical areas also played an important role in SBS Automotive's business development activities in 2018. At the end of 2017, a new cooperation agreement was made with a well-established, country-wide distributor on the sale of the NK programme on the British market. In 2018, a similar agreement was concluded with an Italian distributor chain with approx. 40 regional members. The agreement aims at bringing the NK programme to all Italian provinces by cooperating with only one partner. The cooperation was published in November 2018 and from the turn of the year 2018/2019, the concept was rolled out to the members of the distributor group.
Also, SBS Automotive increased its sales efforts on markets in the outskirts of Europe. New cooperative relations were established in Turkey and the Middle East, where SBS Automotive participated in a large regional fair in Dubai in June.
In addition to the measures taken in relation to the NK programme, SBS Automotive strengthened its position within the supply of brake parts in private label in 2018. The Company has established a business model in Stettin, which makes the Company attractive as supplier of brake discs and brake callipers in the customers’ own trademarks. In 2018, the Company thus obtained approval as supplier to a leading European distributor on the OES and aftermarkets.
Following the changes in the customer structure, the requirements to the Company's supply chain are also changing. The number of day-to-day supplies typically requested by small distributors is decreasing, whereas the number of large orders with a delivery time of 2-5 days that fulfils the large distributors’ needs is increasing - a trend that has requested adjustments to our order handling.
SBS Automotive has in particular been focusing on streamlining the entire value chain from sourcing to delivery - aiming at reducing complexity, costs and working capital. Consequently, the Company has optimised supplier agreements, made process improvements, minimised errors and costs and adjusted and streamlined the interaction between the Company’s logistics platforms.
STRATEGIC FOUNDATION AND DEVELOPMENT
As the free automotive aftermarket has undergone considerable changes in recent years, SBS Group management decided in November 2018 to initiate a strategic review of SBS Automotive in order to identify strategic opportunities for the continued development of the business area. The review included an analysis that was to clarify whether it would be advantageous to the division to actively participate in the consolidation or whether it would make more sense to concentrate on organic growth based on the improvements of the operational platform, earnings and market approach that the division had presented in recent years. The analysis is expected to be completed within the first six months of 2019.
SBS Automotive offers a wide range of wear parts for the European automotive aftermarket. The products are sold under the brand name NK or as private labels.
Mechanical brake parts
Hydraulic brake parts
Steering parts and wheel bearing kits
Suspension and transmission parts
Starters and alternators