Interim report 1 January – 31 March 2020

First quarter 2020
•    Order intake rose 17% to SEK 5,401 million (4,610). For comparable units, it was an increase of 7%.
•    Net sales rose 14% to SEK 4,976 million (4,366). For comparable units the increase was 3%.
•    Operating profit before amortisation of intangible non-current assets attributable to acquisitions (EBITA) rose 15% to SEK 616 million (537), corresponding to an EBITA margin of 12.4% (12.3%).
•    Profit for the quarter rose 11% to SEK 388 million (350), and earnings per share were SEK 3.22 (2.90).
•    Cash flow from operating activities amounted to SEK 421 million (168).

 

CEO’s message

Strong growth and stable earnings, but a great deal of uncertainty going forward.

First quarter
Overall, demand during the first quarter was strong even though there were significant variations across product types, segments and markets. Order intake rose 17%, of which 7% was organic. Performance of the Flow Technology business area was particularly favourable, with a rise in the order intake for companies with customers in the medical technology, pharmaceutical, marine and process industry segments. Order intake exceeded invoicing by 9% and was SEK 5.4 billion. Demand was, on the whole, weaker for companies with customers in the automotive and engineering industries. 

Sales rose 14%, of which 3% was organic. Half of the eight business areas had organic growth, the strongest of which occurred in the Flow Technology and Benelux business areas. For the Benelux business area, the strong growth was primarily attributable to valves for power generation. The weakest performance was reported from companies in the Measurement & Sensor Technology and UK business areas, which resulted from the uncertain market situation and lower demand from customers in, for example, automotive industry.

Most of our companies reported higher profitability and four of our eight business areas reported an improved operating margin compared to the same quarter last year. The Group’s EBITA increased by 15% to SEK 616 million, corresponding to an EBITA margin of 12.4% (12.3%). The Flow Technology and DACH business areas reported the largest improvements in EBITA margin, which primarily resulted from higher sales.

During the first quarter, the overall impact of the covid-19 pandemic was limited. There was a significant increase in demand for a few of the companies in the medical technology segment. Besides that, the build-up of inventory at some of the industrial customers had a positive impact on companies in these segments. Many of our companies were negatively impacted by the countrywide lockdowns that occurred at the end of March, along with many major customers closing their production facilities, for example within the automotive and engineering industries. In conjunction with this, there was a radical decline in demand for some companies. In the UK, for example, there has essentially been no activity whatsoever in the construction and infrastructure segments since the lockdown began. During the quarter, there were also some disruptions in the supply chains and in own production for, primarily, companies in the Measurement & Sensor Technology business area. They were impacted by the lower production and delivery capacity in Asia associated with local lockdowns due to the covid-19 pandemic.

The Group’s financial position is strong and it improved even further after the end of the quarter when Indutrade extended short-term loans totalling SEK 800 million by more than three years. Furthermore, long-term credit facilities were increased by an additional SEK 750 million. After these changes, total long-term loans and credit facilities amount to just over SEK 7 billion. There was an improvement in working capital compared to last year, which contributed to a higher cash flow, amounting to SEK 421 million.
         
Acquisitions
The rate of acquisitions was high during the first quarter. In total, six acquisitions were made. Indutrade acquired the German company Stein Automation, which delivers customised automation solutions for production processes, VarioDrive, which offers solutions for motion control in the Netherlands, and Swedish AVA Monitoring, which manufactures fully automated measurement systems for vibration and noise. We also acquired Sverre Hellum & Sønn, which is a supplier of diamond tools for the Norwegian market, the Finnish company Jouka, which designs and manufacturers ball valves and integrated ball valve solutions with a high degree of customisation and Norwegian Nortronic, which offers energy-efficient and innovative lighting solutions. The total annual sales for all of these acquisitions amount to just over SEK 400 million.

Despite the uncertain market situation, we are continuing to pursue our acquisition discussions. The processes have, however, slowed down as a result. Our intention is to make additional acquisitions during the coming quarters and we have discussions underway with several interesting companies.

Outlook
There is significant variation in the market situation for our companies and a great deal of uncertainty exists concerning the outlook for the next few quarters. At the start of the second quarter, order intake and sales were significantly lower. Even though demand for many of our companies continues to develop positively, our assessment is that the overall organic growth during the next quarter will be negative.
All of our companies that are experiencing a decline in order intake are working with various types of cost reduction measures and many have even temporarily laid off employees. All of the production units are operating, except for one in Malaysia, and a few though, at lower capacity due to the local restrictions. 

A definite strength in such difficult times as these is our decentralised business model with entrepreneurial MDs who are given the authority to make independent, quick business decisions that are adapted to the prevailing challenges and opportunities. I am proud of how quickly our companies have acted to adapt their organisations, while maintaining focus on continuing to make deliveries and provide service to their customers.

Indutrade is well-prepared to meet the challenges that lie ahead and we will continue our efforts to generate long-term sustainable growth and profitability. 

Bo Annvik, President and CEO

This report will be commented upon as follows:
his report will be presented in a webcast on 27 April at 15.00 CEST via the following link: 

https://event.on24.com/wcc/r/2288167/B4F2C3885D87678E86A7277B45C5EE4F

To participate in the conference call and to ask questions, please call:
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The information in this report is such that Indutrade AB is obligated to make public in accordance with the EU Market Abuse Act and the Securities Market Act. The information was submitted for publication by the agency of the following contact persons at 12.30 CEST on 27 April 2020.