Interim report 1 January-31 March 2014

1 JANUARY – 31 MARCH 2014

• Order intake rose 7% to SEK 2,349 million (2,198). For comparable units, order intake decreased by 1%.
• Net sales rose 10% to SEK 2,250 million (2,051). The increase for comparable units was 1%.
• Operating profit before amortisation of intangible non-current assets attributable to acquisitions (EBITA) rose 17% to SEK 224 million (191), corresponding to an EBITA margin of 10.0% (9.3%).
• Profit after tax rose 18% to SEK 126 million (107).
• Earnings per share were SEK 3.15 (2.68).
• Cash flow from operating activities amounted to SEK 90 million (31). During the last 12-month period, cash flow per share was SEK 22.95 (11.93).

CEO’s message
The cautious optimism we saw after the fourth quarter of 2013 remains. The trend of market segments and countries beginning to show growth during the second half of 2013 continued into the first quarter of 2014. However, order intake in the energy segment was considerably lower than in the same period in 2013, and the Finnish market had continued weak performance. As a result, despite favourable development in most markets, organic growth at the Group level did not materialise.

Other companies and markets experienced positive development in order intake. For Switzerland, which had very strong growth in 2013, order intake has improved further into 2014. It is gratifying to note that all of the acquisitions made during the last 12 months have made a contribution to the Group’s earnings improvement. The acquisitions have been spread across a number of countries, including Ireland, the UK, the Netherlands, Switzerland and Sweden. The acquisitions have strengthened product areas in which we are already established, while we also took a step into a new one – the construction sector in the UK with Verplas, which we acquired in November 2013. This is an example of a customer segment that will remain intact and not be affected by the relocation of industries abroad. 

Another similar example is the company Svenska Geotech AB, which we acquired during the first quarter of this year. Its customers work with civil engineering projects in the Nordic countries. We will continue to acquire companies with customers in the manufacturing industry, but as before we will weigh in the risk of the companies’ customers relocating to low-cost countries. 

First quarter
Order intake during the quarter exceeded net sales by 4% and was 7% higher than in the corresponding period in 2013. Three of the five business areas had higher order intake for comparable units than the corresponding period a year ago. The business areas that had lower order intake during the quarter were Engineering & Equipment, which is active in the Finnish market, and Special Products, which relies heavily on the energy sector.

In the Nordic countries, development was weak particularly in Finland, where Engineering & Equipment has most of its business, while Denmark and Norway were stable. Sweden experienced positive development, with growth in most segments. Outside the Nordic countries, our operations in Switzerland, the UK and Ireland continue to show strong growth. Benelux and Germany are also experiencing positive development.

Net sales during the past quarter grew 10%. Excluding completed acquisitions and translation effects, the sales increase would have been 1%.

Flow Technology had higher order intake during the period that was in line with the latter part of 2013. The increase is spread over most segments in the business area. Earnings for the period improved slightly despite lower sales than the same period a year ago.

Order intake for Fluids & Mechanical Solutions grew organically by 13%, in line with the preceding quarter. Higher sales contributed to a slight earnings improvement.

Industrial Components continues its strong performance. Order intake grew 12% during the quarter. Growth was both organic and acquisition-driven. Most companies showed growth, particularly in the med-tech, mechanical components and chemical products for the engineering industry segments. In short, we are seeing a positive trend in Sweden’s engineering industry. The earnings improvement for the quarter was 23%, owing to larger volumes for comparable units and favourable performance for newly acquired businesses.

Special Products had lower order intake for comparable units than the corresponding period a year ago. This is attributable entirely to the energy segment. Order intake, which is project-steered, was very favourable a year ago. Despite the low level of order intake, the order backlog is level with the same period a year ago. Most other businesses in the business area posted higher order intake. Invoicing rose by 24% and earnings by 29%, with a large share of growth derived from acquisitions. 

Margins
The Group’s gross margin remains stable at 34.0% (33.8%), which is level with the full year 2013. Over time, the Group has maintained a very stable gross margin.

The EBITA margin was 10.0% for the quarter (9.3%), which is in line with the Group’s target of a minimum 10% EBITA margin over a business cycle. 

Acquisitions
Two acquisitions were carried out during the quarter: AP Tobler AG in Switzerland, which specialises in surface treatment of equipment for the pharmaceutical industry, and Svenska Geotech AB in Sweden, which supplies products for the civil engineering industry.

Outlook
New market anxiety has arisen recently from the Ukraine crisis. How it plays out remains to be seen. Thus far the positive market trend seems to be continuing despite the crisis. Fundamentally the conditions exist for a continuation of this trend.

Johnny Alvarsson, President and CEO

The report will be commented upon as follows:

• through a conference call/webcast today at 3 p.m. at the following link:
  http://event.onlineseminarsolutions.com/r.htm?e=779174&s=1&k=15836E6B58E3633721E7A169B8901ED9 Partciplants call SE +46 8 505 564 78, UK +44 203 1940 550 or US + 1 8552 692 606.
• Via a videotaped version at the following link:
  http://www.indutrade.se