© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to Nederman Holding Q3 report for 2020. Today, I am pleased to present CEO, Sven Kristensson; and CFO, Matthew Cusick. [Operator Instructions]I will now hand over to Sven Kristensson. Please begin your meeting.
Thank you very much, and good morning, everyone, and welcome to this call, where we are going to talk about Nederman Holdings' Q3 2020 Report. We start with the 2 headlines, good margin development despite market challenges. We have, through the period here, been able to, not only maintain, but actually slightly improve our end margins, which we think is a good achievement considering the market challenges we have seen over the period. And this is a result of the early actions taken already in late Q1, Q2 and now resulting -- and that we have a good cost control and we see also that we had a bounce back in September when it comes to sales and order intake after very slow July, August. You can also say the digital solution displayed strength. And we have, since a couple of years, 2, 3 years, focused a lot on the digitalization journey in Nederman as well as the cleaner journey where we now have solutions with the acquired companies as well as with our own developed equipment where we continuously introduce these on the market. And we have seen that, if you could say, a positive effect of the corona pandemic and the closedowns and lockdowns, has been that people see that being able to have remote services, better understanding, has a value. And we've seen that in a strong order intake in that part of our business.
If I move on to Slide 3 nnow, and go through some financials for quarter 3. Orders in the quarter amounted to SEK 827 million versus SEK 965 million last year, that's a decrease currency-neutral of 5.6% versus the same quarter last year. We've got some comparisons with Q2 in our report this year is -- I think that's quite relevant in order to understand how the world is developing in these unstable times versus quarter 2 where our order intake was up by almost 12%. Sales for quarter 3, SEK 826 million versus SEK 1.089 billion, which is in Q3 last year, which is a decrease currency-neutral of 16%. Adjusted operating profit for the quarter SEK 63.5 million versus SEK 77.9 million. As Sven has already mentioned, our operating margin has increased from 7.2% in quarter 3 last year to 7.7% in quarter 3, 2020. Net profit, SEK 31.5 million versus SEK 52.8 million last year, which gives us an earnings per share of SEK 0.90 versus SEK 1.50 in 2019. If I move on to Slide 4, and take the financials for the year-to-date, we are on orders received at SEK 2.562 billion, which is versus SEK 3.028 billion at this point last year, that's a currency-neutral decrease of 12.5%. Sales have decreased at the same time with 12.3%. Operating profit, including our restructuring costs of SEK 75 million was SEK 125 million for the year-to-date versus SEK 235 million at this point last year. Adjusted operating profit, where we add back restructuring and acquisition costs, comes to SEK 202 million versus SEK 236 million for the first 9 months of last year. Adjusted operating margin is increasing for the year-to-date as well, 7.4% versus 7.3% at this point last year. Net profit, SEK 55 million versus SEK 153 million, gives us an earnings per share of SEK 1.58 versus SEK 4.37 at this point last year. If we then move on to Slide 5, and Sven will tell us a little bit about Extraction & Filtration Technology division.
Yes. Extraction & Filtration Technology is the largest division, and they mostly work under brand Nederman. Their focus areas are wood industry, welding industry, metal fabrication, composites and other gas applications, just to refresh your memories here. The key activities for the division has been to continue launching what we call future-proof, smart IoT-enabled filters, so they can optimize and control the air filtration. We have also slogans like taking control over your air filtration. This has been a plan. It's been slightly delayed because we, not because of the R&D people, which is the normal case, in this case, it's been the lockdowns, and we had, had a plan to early in Germany for the metal industry, have a big launch and in late August, in Atlanta, for the wood industry, the world's largest woodworking. Unfortunately, which -- 6 months ago, I did not think would happen, they closed down both of them. So we have had to launch them in a different way, trying to use and develop online webinars. And we had some success in -- more than some, I would say, we have been able to get our message across, but it's, of course, a drawback and disappointing when we had 80% of all filters, advanced filters, at the AWS show in Atlanta would have been with Nederman IoT-enabled filters. But again, we have to adapt, improvise, and overcome, as one of our division managers takes from Clint Eastwood's. So we have had to do it this way. We have also launched a dental market system for aerosols, which has been a topic now with people not wanting to go to the dentist and the dentist not wanting to take care of it. So we have launched that spec for the American market. It's a known fact that the aerosols could be a very significant problem in dental, and it's a 20-year-old knowledge. But now it starts to move. Further measures relating to cost implementation have also made us reduce our expenses considerably. When it comes to the market, we can, of course, go through all these. But you can see, it has been like a rollercoaster. They open, they close, they open and they close, and we see different effects in different markets, and it changes week by week, and it's also so that, that's not a long visibility on decisions in this case. But if we summarize it, APAC has come back, especially in China. They are moving faster than the rest of the world, especially China, and they have booked some large orders. And also, we see returning Southeast Asian end market there. North America has had a difficult time. Wood industry has been okay. Some of the engineering markets, car industry and so on has been significantly weaker. And in Europe, as you see, here in Germany, being weak. We have Belgium that has been less affected, Netherlands and so on. But I leave that for you to study, and it's very much the same pattern as you probably see with other people working with investments-related and also the engineering sector as such. So should we...
If I place some financials on this division Extraction & Filtration Technology, we see incoming orders SEK 360 million versus SEK 494 million in the same quarter last year is an organic decrease of 20%. Sales down by 19% as well. As we said, we've managed to reduce expenses significantly, and our adjusted EBITA has decreased to 48.6%, but that gives us an EBITA margin of 13.6% of sales versus 12.6% for the same quarter last year. And so margin improvement in this division, year-to-date the margin is 12.9% of sales versus 13.1% for the year-to-date last year. So obviously, we've managed to compensate for some of the rather large drop in revenue that we've seen, particularly in Europe and Americas. I'll move over back to Sven again, and we'll talk about Process Technology.
Yes. Process Technology, a large system very much integrated in the process of our customers, and it's largely for foundries, smelters, textile or fiber and other significantly large investment. Our key activities in this segment has, of course, been to try to secure what business is there and what is planned, and try to build a strong backlog. Here, we've seen a return in the textile fiber segment, especially in September. But it will be so that we have a pipeline, and we'll see when the decision-makers are ready to sign. Of course, the -- we are moving forward. We have seen an extra -- and with our digitalized filters, with our ability for a remote control, remote services, so one has given us an advantage in this market. And we're also dealing with the potential aftermarket revamping for large, especially, American groups at this time. We have had the continued focus on cost control, and we have managed to keep the expense under control in order to secure that we can deliver a profitability even in this demanding time.Weak demand, although some writing in the market situation can be seen. And it's been especially in September, where we've seen that the orders and projects had booked earlier are now restarted and is moving on although some are pushed in or many are pushed into Q4. And there are some optimists in some areas of the market, and we can see increased activity meeting starting to be launched. Then, of course, it doesn't help that we are now seeing lockdowns in Europe again. Textile segment has been challenging for some time. Spin mills has suspended production for long period. But we can see, as mentioned earlier, that we see some recovery and interest in improving their capabilities. We have had problems in the Indian market where we have not been allowed to have more than 10% of the workforce, including white collars and blue collars, which has slowed down work, which has led to that. We had to change some destinations of where we could perform work. But that is, as of October, now open again. So it's now only trying to find the right orders. The orders received in the quarter were clearly better than '19, and it was very much in September where we saw the customers coming back to us. It's also expected that foundry and smelter had a very weak performance. There has been a low level demand from automotive industry, and some have been postponed. Increased activity has been seen towards the end. Again, I'm talking about September where we've seen activities. We have been active on the aftermarket, keeping the machinery rolling at our customer, and that has been successful so far. So now over to Matthew.
Financials for the Process Technology division, if we take order intake against quarter 3, SEK 233 million versus SEK 281 million in quarter 3 last year. That's an organic decline of 7.4%. Sales were down significantly more from a very high SEK 419 million last year to SEK 266 million in the quarter this year. Nevertheless, EBITA dropped by approximately SEK 7 million from SEK 21.5 million in 2019 to SEK 14 million this year. SEK 14 million in EBITDA gives us a margin of 5.3%, which is an improvement of -- from 5.1% in quarter 3 last year. If we look at the year-to-date, growth and order intake is down organically by 24%. So what we see is a slight improvement in this quarter, given that we only decreased by 7.4%. Sven, I'll move it back to you in the Duct & Filter Technology.
Duct & Filter Technology is where we have our special ducting and filters that are replacement in ducts and filters that are in our equipment. Key activities has been to complete the restructuring program to protect profitability, and that has been done. In U.K. work, we have started the preparation for what seems to be not unlikely a hard Brexit, and this is a very important market for us. If we look at the total, Nordfab, under the brand where we sell our ducts, we have had an overall negative growth compared to Q3 last year. Sales declined in U.S., but if we compare to Q2, we have seen a modest recovery. And again, the same pattern late during the quarter, it became better and better. In Europe, we have seen a decline. And -- but we have seen that in our APAC, small operation in Thailand, we have seen the profitability improvement continue. And we have seen that -- especially compared to last quarter, we have seen a significant upturn. Menardi filter, it has been affected by the fact that we have not been allowed nor any other service within 2 sites, and that's a situation where they have not been able to do the replacements as planned, and thus postponed them. And Europe, we've been in line with last year. But the U.S. market is significantly larger for us.
Incoming orders in quarter 3 for Duct & Filter Technology were SEK 92.1 million versus SEK 135 million in the same quarter last year, so that's as a negative organic -- that's an organic decline, I should say, of 21%. Sales were down also by approximately 21% is very much seen throughout business. So sales for the quarter SEK 106 million versus SEK 154 million -- SEK 155 million last year. That includes sales to our other divisions. Adjusted EBITDA for the quarter, SEK 14.4 million versus SEK 21 million last year is exactly the same EBITDA margin of 13.6%, which also shows that we've been able to keep our costs both in manufacturing and our general expenses under control. Year-to-date, the division has seen an organic decline in orders of 19.2%. If we move on to Monitoring & Control Technology now, Sven.
Yes. If we haven't had happy messages, we can now take the best of the last in this presentation of the 4 division. Monitoring & Control is, as you know, the acquired companies, such as Gasmet and NEO Monitors, measuring gases and particles and controlling also leakages -- potential leakages in filters and predictive maintenance possibilities, et cetera. The key activities has been to launch, now delayed due to the fact we couldn't go to the exhibition we planned to, but we have launched them, and we have had the largest inside sales. And sort of a breakthrough here. It's 1 order for 120 filters at the customer for one single plant in the U.S. I'm sorry, we are not allowed to tell you who it is. The inside technology with monitoring and alarm functions will be used to EPA reporting. That is to meet the emissions reporting from the Environmental Protection Agency. So even if we have a negative twittering when it comes to environmental things, there are still things happening also in the U.S. market. We have continued to incorporate with the other divisions, launching the smart filters. And that has been the Extraction & Filtration lead for the wood, the latest launch. Highlights. Highest ever quarterly order intake for the division. Asia remains division's strongest region. A significant growth, both in orders and sales. And we continue the positive development. We had a slight order decline in EMEA. And it's been the lockdown -- very hard lockdowns, in U.K. and Germany, especially, that has pushed orders forward and given us problem to assess -- access customers. In U.S., we have grown compared to last year and also last -- in Q2, so that has continued.
Financials for the quarter for Monitoring & Control Technology orders received were 143 million versus 54 million in the same quarter last year. That's currency-neutral growth of 175% organically. So there is underlying growth -- just purchased organically growth is 24%. In sales, we sold for SEK 115 million versus EUR 56 million in the same quarter last year. Currency-neutral growth of 115% there. That volume growth gives us an adjusted EBITDA of SEK 22.4 million versus SEK 1.5 million in Q3 2019. The EBITDA margin adjusted is, therefore, 19.4% versus 2.7% in the same quarter last year. If you see, on the right-hand side, the year-to-date currency-neutral growth on orders is 119.5%. Despite the extremely low Q2 or tough Q2, we should say, organic growth is still positive as well in this division with 2%. And EBITDA margin for the year -- EBITDA for the year-to-date now SEK 60.5 million versus SEK 12 million at the same point last year, 17.1% EBITDA margin for the year-to-date is above the Nederman average for the rest of the Nederman [indiscernible] would expected now. If I move on to Slide #9, there's some financials for the region. There's quite a lot of numbers on this, but perhaps the most telling thing here that we see in the order intake in APAC has bounced back fast or faster than the other regions. Americas and EMEA is still showing orders declining in the quarter, but, obviously, a clear upside in Asia versus Q3 2019. I think that's the most important numbers on this slide. If I move on to Slide 10, we see the cash flow from operations, and we see the Nederman typical trend continues with an improved cash flow throughout the year. A reasonably solid quarter of cash flow. We've made money. We've managed to collect it and we kept our working capital under control. And this is, obviously, extremely important in these times. Cash flow from operations SEK 141 million so far this year. And this is despite having a cash outflowing from the restructuring programs. Approximately half of the spend -- cash flow is hit as well. So we can be in a good position there. And of course, if you move on to Slide 11, if you keep your cash flow coming in, your debt comes down as well. And we see a slight reduction in net debt for -- over the quarter.Sven, back over to you, a summary of quarter 3.
Yes. Let's do a quick summary of the different divisions and for the group. Extraction & Filtration Technology, the shutdown and the lockdowns have had a major impact in Europe and Americas. However, it seems like Asia is opening up, and we've seen positive trend there. Process Technology, still under a lot of pressure when it comes to getting orders done, but we've seen, in the quarter, a growth in fiber and textile and especially APAC again coming back.Duct & Filter Technology at negative growth, but a slow pickup has been seen, especially later in the quarter. Monitoring & Control, very strong order intake, and again, Asia driving very strong for this division as well. So if you look, overall, for the Nederman Group, we have, despite the situation, had a good margin development. The digital solution displaying strength. We have seen growth in Asia, but Europe and America is very slow in recovering. We have solid cash flow. If we then take the very long outlook this time, I've been saying that there is currently extreme uncertainty regarding the development of the global economy. During Q4 2020, Nederman expects the effects of COVID-19 pandemic to remain considerable in most of the group's markets. We're doing our outmost to navigate successfully in a highly unpredictable time and have high level of readiness to adapt our operations. A contributing factor to these difficulties have made differences in COVID-19 restrictions between different countries. Prevailing and regulations are also changed in one direction or another and designed from authorities all over the world, often difficult to interpret from a long-term perspective. Accordingly, it's currently not possible to provide a detailed forecast of developments in the coming quarters. A positive effect of the lockdown is that they have shown what the world looks like when the air is not polluted by industrial emission. This is the world that Nederman is working to create by offering the effective industrial air filtration, instead of paralyzing pandemic. We demonstrate every day that this can be achieved in every installation that we implement.
Okay, on Slide 14, we see the financial calendar. I believe the only data we have not previously released is the interim report of January to September. Next year, that will be released on October 22, 2021.And with that, I think we can open up for any questions that our listeners have.
[Operator Instructions] We have a question from Daniel Lindkvist from Handelsbanken.
Can you hear me?
Yes.
Yes. So I mean, just looking at the quarter, there were some dramatic numbers as expected, but now you see signs of activity picking up. So my question is simply, how much is postponed volumes and not lost business? Are we talking 75% or something? Or can you give us some flavor on how you view things?
Yes. It's very difficult to give you a straight answer, but very few of the orders will be canceled as long as our customers are alive and kicking. They want to do these changes. And there's also a push for the environment. So yes, I would say that could very well be. Then how outdrawn this recovery will be, that's something else. And that's very much depending on the general, how should I say, what's going to happen there, are we seeing significant closedowns again and so on, then they could postpone even further.If it -- we have some, they have been postponing it from April. Now it seems that they are restarting it now in October that project, because they have to if they are going to continue doing business and so on. So you are not completely wrong because -- and I can't say exactly, but it is very much about the gut to sign that paper, do the investment, and it's very much related to how their own business is performing.
Okay. But simply, at some point, you need to do the investment to the same business?
Yes, Absolutely. If we take Process Technology division, we hear nothing of any project. And they're the ones do these longer-term projects. They're the ones that we're not hearing the projects are canceled, it is delays. I mean, that's the division that...
It's delays and it's also delays in the decision process. But it's not only the decision processing within the company, the decision processing governmental bodies are also slowing down when it comes to new legislation and things like that, we see a lot of that happening right now. They cannot take simply -- they are so preoccupied with what they are going to do with lockdowns, et cetera, and so on. So it seems like they are paralyzed to take any other decisions at the moment.
Good. And then just moving on to the Monitoring & Control Systems, it really sticks out. So now it seems you have a big order supporting you. But even so, we've seen a strong development. So my question is simply, should we -- is this due to legislation, equitization demand of the customers, previous sales initiatives or simply current customers expanding their business with you? What's the explanation?
All of it. Because what we have -- there are -- let me -- one thing is that we, of course, have developed our own products and have been launching them. Now it may be a little bit delayed because we were planning to have it in conjunction with the large shows and so on. We have our own development. We have also -- we should have launched new products from NEO Monitors and that is one-time and so on. What we are seeing is that we are launching new products. We have also added safe resources. And we could have done even more if we only have been allowed to travel to Hong Kong and the U.S., where we should sign some papers and do open new sales channels. But even so, we are now using the size and body that we have created in this division, whereas before, the individual companies were very regional, if I say so, because they didn't have the global reach as we have. And that we are adding. We see even more possibilities to do that, to do exactly the same as we do in these few markets, we can do in all markets. Oversimplifying a little bit. It's also so that legislation is driven very much on the fact what can be measured. And we have, especially in certain areas, been able to show you can measure on a significantly more distinct and accurate level. And again, that drives legislation. However, some of that legislation has now been postponed due -- not due to anything else, but that it seems like the notifying bodies and the governments are unable to get back together and sign the papers and focus also on these things. But if you look 1 year, or 2, or 3 ahead, I think that this will be continued. Of course, anything can happen in these times, but it will be a continued demand for being able to prove and measure. That is a basis. As we say, you have to measure and control, and then you filter. And we can do all, and we can make sure that this is -- that the industry is not contributing to the air pollution, and that's giving us a better world. Now I'm sort of almost preaching, but that's what -- so yes, I think that there is definitely demand. And we have been working very hard for a couple of years to get into it. Remember how much money we have spent on the acquisition and especially on our own product development. So that's the...
If we look at the big order you received in this quarter, is that from a customer that's simply expanding their business, they've tried you out and now they expanding? Or is it the new customer altogether?
It's the new customer. I didn't know that. This system didn't take -- increased. It's something that we have developed. We were the only one that, in this case, with the knowledge and it's not more unique. And I'm sure that [ seems ] anyone, if they want to develop it, they could probably.But this is our niche, we know what it takes to measure and control these types of emissions. Very few others do. We have, since 3 years, developed this reporting system. And now we are -- and we have had many -- test installation for a long period, one year and so on. And now we got this breakthrough, and we have many other discussions. What happens due to the COVID-19 if there is a delay, I don't know. But -- and there are probably some delays. But we look very positive to the ability. And we also look positive to the thing that we are the cleaner company. We can -- as I mentioned before, we can both measure, we can control the process and we can clean the air.
So this monitoring control system, it could even be a breach for you selling the rest of your offering to these customers?
I think that it's already been. To a certain extent, we made a very big secondary aluminum. So it's recycling our aluminum. And one of it is perming factors, and that we got the order on a higher technical level on, if you say, in -- it wasn't in kroner, but in higher price, it was that we could prove that we were future-proof. We could give them, today, a solution that works with also extra -- extra all, including knowledge and follow-up, et cetera. We could also say, if you want to continue to develop, we will continue to develop the programs and the capabilities with this. That has been a determining factor in a couple of cases during this year. Although there have been too few large orders, unfortunately, due to the situation we are in.
That's the same for everyone.
Yes.
Yes. So then just my last question. I mean, now you have your savings program. It seems to already kick in, in this quarter. So to what degree should we expect this to stick if we have a fully normalized situation again with demand? So what I'm asking is simply, is there an outlook for you to leave this difficult period being an even more effective company?
Answer to that, if you want the short answer, yes.
And what's the long answer?
The long answer. What is the new normal? It would be the -- we don't get into that extra because we usually try and keep it to around an hour or so. But we see, in the short term, that this is a sustainable -- it's not that we will -- at the level we are, this is sustainable. When it comes back, we will need to look at what we -- we need to look at where potentially we expand. And obviously, Monitoring & Control Technology is going well, and the digital solutions, the [indiscernible] Process Technology and Extraction & Filtration Technology are also very important. So it might need some different competences. But -- in the short term, the profitability that is protected by what we have done here, but we will not slow down on our R&D efforts. We will continue to launch new products here. We will continue to spend, to keep ahead and to stay ahead of competition in these deals.
[Operator Instructions] There are no further questions registered, so I hand back to the speakers for any closing remarks.
Thank you very much for taking the time and listening to us, and we hope you all have a good continuation of the day.So thank you from Helsingborg and Matthew and Sven.Thank you.