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Welcome to the Nederman Holding Q1 Presentation for 2023. [Operator Instructions] Now I will hand the conference over to CEO, Sven Kristensson; and CFO, Matthew Cusick. Please go ahead.
Thank you very much, and good morning, and welcome to this presentation of Nederman Group Q1 2023. We can start with concluding that we had a strong beginning of the year. We had good sales growth, and we also have good orders received and it was in excess of sales, and order backlog heading into quarter 2, remains strong as it was when we headed into this first quarter.
Our efforts to increase operational efficiency has continued, and we now see some result, and we have strengthened profitability and cash flow. And I'm happy to announce actually the first -- best first quarter in the history of Nederman when it comes to sales and profit. Having said that, there are still some challenges around the world. We could have had even better margins, but there is an inflationary pressure. And it's clear that we still have supply challenges, even if it's significant better than it was a year ago. There is, of course, a geopolitical uncertainty. But -- the order backlog is solid moving into Q2, but the outlook for second half of the year is more uncertain. We are not saying that it's going to be worse, but we're saying that we are more wary and uncertain than in most days. We have taken the decision to restructure the Chinese operation, and we have booked a nonrecurring cost of SEK 20 million. And what are we going to do, we are co-locating manufacturing and warehouse units that has been scattered. We are consolidating most of the business into our Suzhou area. We're reviewing the supply chain and also our sales resources. We will produce fixed cost. And hopefully, we create a pattern that we'll be able to focus on profitable business and a platform for long-term growth as well.
If I then go through the key financials for the first quarter of the year, incoming orders exceeded SEK 1.5 billion for the first time in Nederman's history. There was a clear currency boost in there. Currency-neutral growth was 6%. That was largely from acquisitions, also a little bit of currency and assistance there. Organic growth, negative 3%. But like I say, still, that's versus a very strong first quarter of 2022 and the best quarter in terms of order intake we have ever had.
Sales growth. We've seen sales, it was slightly below the level of sales in the fourth quarter of last year. 1.482 billion is still a 28% currency-neutral increase versus the same period last year, which we are very happy about. Of course, currency helped us there as well, but we had both organic and acquisition growth in the sales there. The rolling 4 quarters on sales, which is of some interest, we are now over the SEK 5.5 billion mark for the first time. Of course, with strong sales should come strong profitability. Adjusted EBITA that was SEK 173 million for the first quarter of the year, which is a margin of 11.7% versus SEK 116 million and 10.6% in Q1 last year. Profit after tax, SEK 127 million. Earnings per share, SEK 2.22 versus SEK 2.01, and remember, that, of course, is with -- after taking a SEK 20 million restructuring expense in China, as Sven explained. Rolling 4 quarters adjusted EBITA now over the SEK 600 million mark as well, which we are pleased with. Cash flow from operations, I've got a relatively nice job today in the -- most of the figures are heading in the right direction. Cash flow from operations was very strong, particularly in the terms of a first quarter of the year. which can typically be a little bit weaker. As you can see on the left chart on Slide 7, the first quarter of the year is typically the weakest when it comes to cash flow. That's usually due to larger down payments on projects being made in the fourth quarter of the year, work then commencing on those projects eating, into the cash advances. But given the strong order intake that we had in the first quarter this year, not least in process technology, where we've received further down payments, we've been able to maintain a good cash flow from operations. Inventory levels have stopped increasing. They're still on perhaps historically slightly high levels, but we shouldn't look at history. We are more interested in our ability to deliver at the moment. When it comes to net debt, obviously, with a good cash flow from operations, there's a reduction in net debt. It's still significant -- it's approximately SEK 300 million higher than it was at this point last year. Of course, we have bought RoboVent, MBE and the Ezi-Duct business, which is now Nordfab Australia, in the period since March 2022. Assuming that the dividend is approved by the AGM later today, there will be obviously a slight increase in debt after the -- just after the end of April, of course. If we talk about operational performance now in the divisions, and Sven, let's start with Extraction & Filtration Technology.
Yes. Extraction & Filtration technology is the largest division focusing on welding, wood, general dust, composite manufacturing, et cetera. When it comes to orders and sales, we had a strong and solid base business that -- and we have also seen a significant increase in the aftermarket. It's been a focus area for some time, and we continue to develop that further, especially with our digital tools.
We have seen some hesitancy among customers placing large orders because that large project, the greenfield, et cetera -- And they are still coming, but there are sort of longer lead times and internal discussion, it seems, from the customer side. We have a good backlog heading into the year, and that gave us the strong sales this Q1. The [ drop ] in margins was slightly dampened by more solutions in the sales mix and also a larger portion of -- RoboVent large orders that was executed. We booked 4 major orders and 3 of them came from RoboVent in U.S., and it's like, in RoboVent's case, always large welding application. And we had a flue gas separation in Belgium as well. We have continued to book orders in, call it, growth industries, for us, food, green energy, defense, where we have a growing interest for our products and continuous development. Otherwise, the key activities during the quarter is the rollout of Nederman SAVE that we have now introduced in EMEA. It's a digital solution with software and hardware to reduce energy dues in our filtration systems. One installation reduced our energy dues by over 60%, but that is also where something -- that -- if I start very slow. But even in good systems, we can reduce it with -- in excess of 20%. There will be an upcoming launch in Americas as well. We also launched Nederman ProQuote. We have been talking over the last few years on different digital tools, our digitalization journey where we talk about the offer. SAVE is an example of that. We talked about our tools to be more efficient internally and also externally. And we now launched the new tool, ProQuote. It's a digital tool for product configuration and generating system optimization and quotes for that. It's like we mentioned -- and will mention the Q3 where we 1.5 year ago won the innovation and digital to Innovation -- Digital Tool Innovation Award at the American wood fan. If we talk about other things in the region, we had a very varied development. We had strong sales in EMEA with some Benelux sort of good contribution. Again, order intake was slightly negative because there was a lack of major orders. In Americas, [ especially ] Mexico and Brazil, strong growth, while organic growth in Canada and U.S. was a bit more ups and downs. RoboVent contributed with strong orders and sales figures, and APAC situation remains challenging with [ sort of ] the aftermath of all these massive lockdowns. We can see that the financial stability among a number of Chinese companies, including our customers, are not so great. Moving on to Process Technology. They had a very strong development during the quarter. They had good sales in all segments. They had this fantastic backlog going into this year, and they have executed on that [ firmer ]. But what was even more interesting, we have also had very strong orders received in the Q1. So we have a strong backlog also going into Q2. What happened was that the textile segment had a slowdown, but that for the division was offset by very strong performance in others. It's a very profitable quarter, and it's on our target for the PT division. So textile fiber, we can say that sales increased sharply, and that was driven by the high backlog we developed during last year. The orders received, as mentioned, went slowly backwards, but we still have a strong situation. There is a dampening of the demand for new textile equipment. There is a low capacity utilization in spinning mills. So we've seen that. On the other hand, we have focused on developing the adjacent nonwoven segment, and here, we have gone from very, very low orders a few years ago to developing a market position. Especially with our presence in Asia, we are now seeing that, that part of the division is growing. Going into foundry and smelters, there is an increasing demand for aluminum recycling solutions. And here, we have strong offers. We do have a strong presence in EMEA, and we are also working to grow the [ Americans ]. And we've seen some result. We have seen a growth in the smelter segment for EV component, industrial application, aerospace sector. And we've booked 1 big order. We are not allowed to disclose the name of a customer, but it's a known electrical vehicle manufacturer. China operations remain a major challenge, especially in some parts of it. So we are fulfilling the restructuring program to improve the situation. Customized Solution, which is strong performance [ with ] several large orders booked. And we have also with successful -- very successful project execution, contributed to improved profitability. If we look at the key activities, patent application has been submitted for a new high-performance fan and air conditioning system for lower energy consumption and giving much better performance than conventional solutions. This is mainly for the [indiscernible] and the textile segment. And as mentioned, we are taking care of the restructuring program together with the EFT division.
The financials for Process Technology. As Sven mentioned, it looks -- they've had their most profitable quarter in their history actually. So SEK 512 million in sales is extremely strong and a 39% organic currency-neutral growth versus the first quarter of last year. Of course, some of this was expected. What is quite pleasing is that the order intake was on -- was actually even higher. And therefore, they are entering the second quarter of the year with the backlog as high as -- very slightly higher than it was at the start of the year. That's seen on the chart on the top right there. Adjusted EBITA margin of 8.3% is SEK 42 million, so extremely strong there.
Monitoring & Control Technologies, Sven?
Yes, Monitoring & Control development in the quarter. We saw an increase in demand during the first quarter, and we received highly good order intake. We also had higher sales volumes we managed to deliver. There has been challenge with the component supply. That has been easing up a little bit during the quarter, but it still remains -- and it's still volatile and it's still high prices.
We came back to better profitability again, and the backlog is very strong for us going into Q2. EMEA, good growth in both order intake and sales. We've seen higher activity both Gasmet and NEO Monitors, and our increased activities in the U.K. where we have invested in new sales organization and added sales organization. The acquired MBE in Switzerland contributed to the growth. It's a small acquisition, but it gives us the capability of reaching the customer base and controlling our sales in Switzerland directly. In Asia Pacific, orders and sales increased, and there was definitely higher activity both Gasmet and NEO. We had several larger orders secured for Gasmet, and we also introduced the Gasmet into the Philippines here. There are growth challenges in China. Even though some of it have returned, but there are pressures, as we have mentioned before, from government that they should buy -- especially for government controlled or officially controlled customers that they should first hand go for Chinese solutions. We saw some orders coming back because there is no one that can supply the quality that we do. So we'll see. But again, volatile market. Americas, NEO Monitors, Gasmet, Auburn FilterSense, all had a positive Q1. We saw a significant increase in sales compared to last year. And we also see that the Gasmet portable unit has seen new activity and there's an increased interest in our products. It has to do with industrial hygiene, stack testing, environmental research, where our unique portable -- and it actually is portable compared to what some competitors call is -- what we call draggable potentially. Auburn FilterSense increased the sales, and it was normal core product. Other key activities in the quarter is the launch of the GT6000 Mobilis. It's a new portable, user-friendly emission analyser, and it simplifies the mobile emission measurement. And we have seen very positive reactions and already now have booked orders for that new product. We also on 18th of March launched the Gasmet Insight, which is using the platform for IoT. And that developed -- will be developed during the year, and we can see that from installing this in new installation, we can do a lot of the service -- or different overhauls. We can do that from a distance and remote, which is a new interesting world.
When it comes to financials in Monitoring & Control Technology, order intake was extremely strong in the quarter, SEK 190 million, is at 26% currency-neutral growth, 22% organically, so a little bit coming from MBE as well there. Sales, SEK 170 million, was significantly higher than what we must conceive was a rather weak Q1 last year that -- which -- We remember, we had challenges in our own production with COVID outbreaks and not least problems with sourcing of critical components in production. So obviously, a sales increase was expected, SEK 171 million is quite satisfying, particularly backed up by the order intake that we see there.
Adjusted EBITA moving up towards the 20% mark. Again, not quite there, 19.3%, SEK 33 million in EBITA in quarter 1. On to Duct & Filter technology.
Duct & Filter technology for the first quarter. The development in the quarter was good. Sales and orders received was higher both compared to Q1 last year and also compared to last quarter. Nordfab Australia made a clear contribution to growth now. We have -- if you remember, we acquired a company. We have now restructured it, and we have a real vehicle to grow the Duct & Filter -- duct business in Australia.
The higher volumes also improved production efficiency and gave increased profitability. If you look at the Nordfab side of it, we continue to grow order. We improved manufacturing performance in U.S. The new warehouse building in Thomasville is now complete. It's not just a warehouse, but it gives us the ability to restructure the flow, and it will facilitate the Nordfab Now concept that will start during the year, where do -- we can have next-day deliveries. There is, of course, challenges during this Q2 where we are moving into a new factory. We are installing new equipment -- manufacturing equipment. So they have a lot of challenges in Q2, but it's also good, and we see very positive for the future. There will be also a new warehouse management system installed during this Q2, and that will facilitate the warehouse automatization that we are planning for later on. The EMEA declined a little bit. We had fewer large orders. But again, we had a strong development in U.K. and that is positive. The base business is growing very satisfactory. There was a weaker start in our Thai operation. Reduced export sales was a challenge for the period. Nordfab Australia, double orders received versus Q4 2022. And the Australian profitability impacted negative by bottlenecks, new [ ERP ] system implemented. Q1 should improve operational control. And that has been an important part of making Ezi-Duct, well, the real company, an efficient company. The market is there and we know what to do. In Menardi, stable trend in both orders and sales. We established a new rep office in California, and we have already seen growing order intake from that region. After sales operations in Europe continue its stable performance. Key activities, a continued rollout of the QFV digital design and order system in Europe. We have QFV marketing campaigns conducted in the U.S. and the new design of Nordfab Quick-Fit clip was launched in EMEA, which gives better quality and shorter delivery times. We are celebrating 50 respectively, 110th anniversary, and there are some celebrations going on. We are renewing and updating older manufacturing equipment, and we have already seen that, that has reduced downtime, increased efficiency and therefore, also profitability.
Exactly. Profitability is up to 19.6% EBITA margin in quarter 1 for Duct & Filter Technology. Sales, 9.5% currency-neutral growth at SEK 212 million. Incoming orders also currency-neutral growth, 6.4%. Slightly negative organically at 3.4% minus, but the overall currency-neutral growth anyway, nearly 10% growth in SEK 1,042 million in adjusted EBITA for the first quarter for Duct & Filter technology.
So if we can just move on to the outlook spend before we open up for questions.
Yes. The outlook. Orders received in the first quarter were strong, even if organic growth declined somewhat. The order backlog heading into Q2 is strong, and that bodes well for the coming quarter. We can see a continuous inflationary pressure, and it has an impact on margins. We are doing our best to counter that during the time here.
Supply chain situation has definitely improved. Freight rate has gone down. It's easier to get the supply, et cetera. But it's not fully resolved, and it's a bit volatile. There is a more uncertain outlook for the second half of the year. We are not saying that it will be worse or better. We just say we don't know because there are so many uncertainties in the market at the moment. Although various factors may temporarily contribute to demand -- dampened outlook in our industry, Nederman's long-term potential continues to strengthen. In a world which insight into the damage that poor air does to people is increasing, Nederman, with its leading industrial air filtration offering, has a key role to play and good possibility for growth.
Very quickly on the financial calendar. The next time you get to hear us or speak to us in this forum is on the 14th of July when we will release the Q2 report of 2023. Q3 report goes out on the 23rd of October, and our Q4 full year report for 2023 will be released on the 15th of February next year.
And with that, I think we can now open up for any questions that listeners may have.
[Operator Instructions] The next question comes from Anna Widstrom from Handelsbanken.
So my first question is, if you have any additional comments on the volume development organically on group level or by segment?
I can answer that one. A lot more to say on that. Process technology is the one that's they have a negative currency neutral growth, if you look -- if you purely look at the quarter-on-quarter figures. But you should not read too much into that. They are very -- they've had a very, very strong quarter there.
There is 3 out of 4 divisions with negative --having said that, with -- 3 out of 4 divisions with negative organic growth, and Extraction & Filtration technology and Duct & Filter technology are the ones that are slightly earlier in the business cycle. So the -- this is why we're a little bit hesitant -- Looking into the second half of the year, the indicator coming from those 2 divisions is not so -- isn't fantastic. When it comes to Monitoring & Control technology, they've got quite a lot of regulatory and compliance driven business. So they are slightly less volatile and vulnerable to swings in the economic cycle. But we are still a little bit cautious heading into the second half of the year. We're reasonably confident going into this quarter to now, given the backlog that we have in -- and the order intake and hence the backlog that we've got going into the quarter.
And if we maybe could discuss the sort of motivation behind the reconstruction program, sort of what is your current view on China and your operations in the region?
Current view on China, Sven, do you want to give that...?
No, I… But in China -- what we are doing in China is, and has been is that -- what we are doing is both for efficiency -- and we do not want to have small offices and so on. So what we will do and are doing is that we are coordinating process technology and EFT warehousing and assembly activities to 1 factory, and that is in Suzhou.
We then have the sales and we will move into -- more closer to Shanghai because it's easier to recruit people. You have -- it would take 1.5 hour about all the systems because if you have the working permit in Suzhou, you are not allowed to work in Shanghai. And if you are having it in Shanghai, you will never move to Suzhou because then you will lose it. So we are setting up a joint office for MCT, the sales of EFT, sales of PT, closer into the Shanghai jurisdiction and Hangzhou probably. Where we are not including in this restructuring is [indiscernible] who is having their own manufacturing site. So it is to be more efficient, more attractive employer and more focused activities on the high-end area where we think that we have a position. Was it sort of the answer you are looking for, Anna?
Yes. And just a follow-up on that. The reconstruction cost, is this something that we could potentially see more of in the upcoming quarters? Or if you try to like take it or if [ one ] go this quarter?
The -- this is our expectation for the full cost for the move. Unless we identify significant new activities that we need to carry out, we should not see further costs being charged to the income statement for this. But the short answer, no, we are not planning for more here. We will make the move and make the efficiency gain, and that's it.
And going into the process technology, I mean, this business area is currently in the midst of delivering on a lot of big projects. What do you expect to happen to cost and earnings at this segment? Might be slowing down a bit, and we're starting to see a normalization?
The short-term outlook for this division is very good. They're cautious in the management team there, but they are reasonably -- even these guys are reasonably comfortable about the second quarter of the year. There is a risk later on that it could go down.
If we talk about -- and we always do with process technology, the return on capital employed now is extremely good in that division. They have these down payments, relative -- very good cash positive projects. The fact that they had SEK 524 million in order intake in quarter 1 has meant that -- how do we phrase this -- Sven and I, we will be discussing this. The anxiety we had about quarter 2 has now moved 1 quarter at least down the road -- at least there. So it feels like it's reasonably positive. But the results for that division, that shows what they can do with this level of -- they've grown the service business, which is one of the reasons behind -- the factors behind the increased profitability. It's not just that they're delivering on projects. And that means that they are probably in a slightly less vulnerable position than they were when we went into this COVID period, and they've grown service very well over the last 2 or 3 years.
I would say that there is a number of things. That's been a focus over the last few years -- We have -- remember, we have acquired, and there has been a focus a little bit on volume historically. We have defined focused areas where we have a competitive edge or at least we can develop one. We have integrated our, call it, the digital solutions, both -- one is the tools, but especially the offer here where we have been able to show that we are future-proof.
We have signed a number of clean air as a service application where we guarantee the functionality of the system for the coming 10 years, as long as they are using the full pack of measurement, et cetera, and follow-up and service. So there is a part that is growing aftermarket significantly. That has been the strategy for the last 3 years. It has to focus in segment and activities where we have a competitive edge and walk away from nonprofitable filter factory orders and have a discipline, and that is resulting in better results.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
We thank you for taking the time listening to us and hope to meet you in this [ for ] -- again on July 14. Thank you very much.