Interim report 1 January-30 June 2014

1 JANUARY–30 JUNE 2014

• Order intake rose 7% to SEK 4,832 million (4,525). For comparable units, order intake decreased by 1%.
• Net sales rose 8% to SEK 4,680 million (4,331). For comparable units the change was marginal.
• Operating profit before amortisation of intangible non-current assets (EBITA) rose 11% to SEK 506 million (455), corresponding to an EBITA margin of 10.8% (10.5%).
• Profit after tax rose 14% to SEK 300 million (264).
• Earnings per share were SEK 7.50 (6.58).
• Cash flow from operating activities amounted to SEK 316 million (294). During the last 12-month period, cash flow per share was SEK 22.03 (17.38).

SECOND QUARTER 2014

• Order intake rose 7% to SEK 2,484 million (2,327). For comparable units the change was marginal.
• Net sales rose 7% to SEK 2,430 million (2,280). For comparable units the change was marginal.
• Operating profit before amortisation of intangible non-current assets (EBITA) rose 7% to SEK 282 million (264), corresponding to an EBITA margin of 11.6% (11.6%).
• Profit after tax rose 11% to SEK 174 million (157).
• Earnings per share were SEK 4.35 (3.90).
• Cash flow from operating activities amounted to SEK 226 million (263).

CEO´s MESSAGE

While the cautious optimism that existed after the first quarter remains, we have not yet seen any clear trend in the form of a general upswing in demand. The business climate improved somewhat during the second quarter compared with the preceding quarter and corresponding quarter a year ago, but is still characterised by great uncertainty. In addition, order intake for the Group’s companies continues to show considerable variation between months, segments and geographies.

Acquisitions are central to the Indutrade Group’s development, and the pace of acquisition increased during the quarter through four completed acquisitions and a total of six since the start of the year. Combined annual sales for the units acquired thus far during the year amount to approximately SEK 350 million.

We see that Indutrade’s business model and our company culture fit well in the UK and Ireland, and have therefore consciously increased our acquisition activity there. During the first part of the year we completed four acquisitions in this region. Our goal is to continue growing in these countries, both through additional acquisitions as well as organically, and we consider it realistic to reach sales of minimum SEK 1 billion within a few years.

Second quarter

Order intake during the quarter exceeded net sales by 2% and was 7% higher than in the corresponding period in 2013. All of the business areas reported order intake in excess of net sales during the quarter, and three of the five business areas had higher order intake for comparable units than the corresponding period a year ago.

In the Nordic countries, development was slightly positive in Sweden and essentially unchanged in Norway and Denmark, while demand in Finland was at a continued low level. Outside the Nordic countries, development was positive particularly in the UK and Ireland, and to some degree in Germany and Benelux.

Net sales during the past quarter grew 7%. For comparable units the change was marginal.

Engineering & Equipment, with operations primarily in Finland, continues to be negatively affected by the low level of domestic industrial activity, and order intake decreased by 8% during the quarter.

Flow Technology noted higher order intake also during the second quarter, which was distributed across most segments in the business area. Earnings for the quarter were hurt by somewhat lower gross margins combined with a slight rise in the business area’s overheads.

Fluids & Mechanical Solutions experienced positive development during the quarter for most of the business unit’s operations, except for the filters segment, which noted a slight decline. Higher net sales combined with continued good cost control resulted in improved profitability for the quarter.

Industrial Components continues to perform very strongly. Order intake grew 16% during the quarter, and growth was both organic and acquisition-driven. Most companies showed growth, particularly in the med-tech, mechanical components and industrial chemical products segments. Earnings improved by 30%, with a good EBITA margin.

Special Products’ total order intake rose 7% despite negative organic growth, owing to a decrease in project-based orders in Switzerland during the quarter. It is gratifying to note that order intake for the energy segment recovered following a couple of weak quarters. Most other businesses noted a slight improvement in order intake at the same time that recently acquired units continued to develop according to plan. The earnings increase during the quarter came mostly from completed acquisitions. This was counteracted by a poorer mix, i.e., sales with high margins have been replaced by volumes from businesses with lower margins, resulting in a lower EBITA margin for the quarter.

Margins

The Group’s gross margin remains stable at 34% (34%). The EBITA margin was 11.6% for the quarter (11.6%), which is higher than the Group’s target of a minimum 10% EBITA margin over a business cycle. 

Acquisitions

Four acquisitions were carried out in the UK during the quarter: CRP Ltd, which specialises in corrosion-resistant piping, valves and expansion bellows; Micro Spring and Presswork Ltd, which manufactures industrial springs and stampings; Birmingham Specialities Ltd, a specialist manufacturer of industrial components; and ALH Systems Ltd, a specialist in encapsulants, sealants and adhesives.

Outlook

The trend we have seen during the first half of the year will likely continue during the coming autumn, i.e., some growth in a number of segments and in certain geographical areas. Our ambition is, according to Indutrade’s business model, to continue acquiring companies during the autumn.

Johnny Alvarsson, President and CEO