Interim report second quarter and first half-year 2016

Second quarter 2016 – Indutrade’s growth continues

•  Order intake rose 13% to SEK 3,422 million (3,026). The increase for comparable units was 8%.
•  Net sales rose 10% to SEK 3,317 million (3,025). The increase for comparable units was 5%.
•  Operating profit before amortisation of intangible non-current assets attributable to acquisitions (EBITA) rose 12% to SEK 405 million (362), corresponding to an EBITA margin of 12.2% (12.0%).
•  Net profit rose 13% to SEK 259 million (229), corresponding to earnings per share of SEK 2.16 (1.91).

CEO's message

The uncertainty that has overshadowed the market in recent years did not decrease during the second quarter. Many countries continue to experience weak or no growth, and the Brexit vote in the UK has given rise to even more questions about the future.

The combination of political instability and large fluctuations in currency rates and commodity prices is presenting our company presidents with major challenges. What does this entail for our customers? Will the trend continue as forecast? Added to this, many of the projects that customers have planned are being pushed back due to the general level of uncertainty.

One advantage that our company presidents have is that their organisations are relatively small, and they can independently make quick business decisions and adapt to their customers’ needs. We have continued to become accustomed to varied growth in different segments and sharp swings in the market. In previous years there were countries with strong growth that served as locomotives for our own growth, but performance in several of these growth markets has clearly slowed during the past year, and no one knows when growth will return. Despite this difficult economic climate, Indutrade continues to grow.

Second quarter

Order intake increased by 13%, of which 8% was organic, and sales rose 10%, of which 5% was organic.

In the second quarter as well, this favourable organic growth can be credited to strong performance by companies in Sweden, Denmark, Benelux and Ireland.

In Sweden investments grew in the pulp and paper industry, which benefited Indutrade. Commercial vehicles are another segment that has performed well. Major investments in the pharmaceutical industry in Ireland continue to generate good business opportunities for our companies.

The previous strong growth in the UK has slowed, partly owing to the negative impact of the decline in the oil and gas sector and partly as an effect of increased uncertainty, associated with Brexit. Sterling has weakened after the referendum, but on the other hand this may benefit export companies over time.

Indutrade’s operations in Finland performed better than expected during the quarter, which can be credited to the performance of individual companies and not to higher growth in the country as a whole.

Indutrade is achieving its target of at least 10% growth over an economic cycle as a result of both organic and acquired growth. In the current market climate, a considerable share of growth will continue to be achieved through acquisitions until we can gain a boost from an upswing in industrial production.

Acquisitions

Our acquisition prospects remain favourable, and during the year to date we have carried out nine acquisitions, including two after the end of the quarter, with another one scheduled for possession to take place in August. Indutrade continues to grow above all outside of Sweden.

A total of three acquisitions have been made in Denmark during the year. The two most recent are Klokkerholm, which manufactures spare parts for the automotive industry aftermarket, and Crysberg, which makes irrigation control systems. Both of these companies complement previous acquisitions made by the Group.

In the UK we have carried out three acquisitions, where the most recent – Vacuum Engineering – gives the Group a stronger position in the area of leak detection.

In Sweden one acquisition has been made – KA Olsson – which strengthens our position in chemical products. In addition, acquisitions have been made in the Netherlands and Norway during the year.

Outlook

I do not expect any major change in the demand situation in the near future. The market will continue to be unstable, and our challenge is to capture market shares in a market with low growth.

The Indutrade model, which we have worked with for decades, entails a decentralised way of working for our small, flexible and local companies. They can act swiftly and adapt to prevailing demand. We have a good diversification of risk, with many small companies in many countries that work in a range of niches and segments.

Our prospects to generate profitable growth therefore remain favourable.

Johnny Alvarsson, President and CEO