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Ladies and gentlemen, welcome to the Nederman Holding Q4 2019 Report. Today, I'm pleased to present CEO, Sven Kristensson; and CFO, Matthew Cusick. [Operator Instructions] I will now hand over to the speakers. Please begin.
Yes. Good morning, ladies and gentlemen, and welcome to this call presenting Nederman Group for Q4 and the full year in 2019. Starting with the first part, with the Q4. We can conclude that we had a very good quarter when it comes to orders received and operating cash flow, coming back to that later. However, the hesitancy to finally book orders have been such that we got them very, very late in the year. It was almost like Christmas, which some of them we have expected significantly earlier or got the down payment, so we could book them. So the result when it comes to sales and then also the result slightly lower than we expected and slightly lower than the extremely strong Q4 2018.We had strong organic growth on orders received and it has been bearing between regions. EMEA had an extremely strong organic order intake in the quarter. We had growth in Asia Pacific. The Americas were slightly negative versus a very strong Q4. The volatility comes from Process Technology mainly where we have the large projects. We have released some new products, and we have integrated our digital solution with the continuation of releasing Luwa's Digi 7, which is a new control system. And we will also continue to integrate our Insight facility and capability in that. We also made a significant move in the MCT, the Measurement & Control Technology (sic) [ Monitoring & Control Technology ], side of the business where we, beginning of December, acquired Gasmet Technologies in Finland.Shortly, about Gasmet Technologies. It's a world-leading supply of FTIR, Fourier Transform Infrared spectroscopy, and that is to be used for mainly gas analyzing solutions for continuous emissions. It measures mercury, dioxins and others. We also have, in that part, a portable solution for firefighters and other specialists. We -- or Gasmet develop and market complete solutions for monitoring industrial emissions and portable instruments to study climate change and ensure people's safety. It's based in Helsinki. We have further subsidies in Germany, U.K., Canada, Hong Kong and a very small one in Austria. It's one of the leading companies, technology-wise. It fits very well into the other technology leaders we have with NEO Monitors and Auburn FilterSense. Gasmet has about 120 employees, and the sales 2018 was EUR 21 million. And we acquired it for SEK 509 million. They have a huge installed base and it's very complementary technology-wise to NEO Monitors and Auburn FilterSense. So we take it and it's already integrated in the MCT division.
If I move on to Slide 4 now and go through some of the financials. Firstly, for quarter 4 for 2019, incoming orders were SEK 1.14 billion versus SEK 968 million in Q4 last year, which is an increase of 18.1% currency-neutral. Sales were SEK 1.087 billion versus SEK 1.069 billion in 2018. Currency-adjusted, that's 1.8% higher than the fourth quarter of 2018. Adjusted operating profit was SEK 113 million versus the, like Sven already mentioned, extremely strong SEK 129 million in 2018. The adjusted operating margin for Q4 2019 was, therefore, 10.4%. Net profit for the quarter was SEK 72.4 million versus SEK 89.4 million in Q4 last year. Earnings per share, SEK 2.06 versus SEK 2.55 last year. All of the last year comparables that I referred to there are, as we've mentioned previously, restated retroactively with -- for IFRS 16, so the numbers you see are directly comparable. If I move on to Slide 5 and the group financials for the full year 2019. Orders increased currency-neutral by 15.2% to SEK 4.17 billion from SEK 3.48 billion in 2018. Sales, SEK 4.31 billion in 2019 for the year versus SEK 3.55 billion in 2018; currency-adjusted, increased 16.6%. Adjusted operating profit, SEK 349 million for the full year 2019, that's up from SEK 319 million in 2018. And operating margin is then 8.1%. Net profit for the full year, SEK 226 million versus SEK 203 million. 2018 (sic) [ 2019 ] earnings per share up then to SEK 6.43 versus SEK 5.78 in 2018. The dividend the Board is proposing is for SEK 2.50 per share, which is an increase from SEK 2.30 per share in 2018. If we then move on to the divisions on to Slide 6, and Sven will tell you a little bit about what's happening in the Extraction & Filtration Technology in Q4 for 2019.
Yes. Nederman Extraction & Filtration Technology and for those who remember, it's where we have systems and product distributed mainly under the brand Nederman and it's welding, wood, automotive is the large portion of its composite manufacturers as well. So we had a slight decline in orders during Q4. There were a few orders for large system sales increase, and we had an order backlog, which I think is fair to say that is larger than at the end of 2018. EMEA did mostly a very good job; Nordic, strong sales growth; and U.K. increased mainly due to continued demand for solutions in the welding segment; Southern Europe had good sales growth; Poland, very strong end; but Germany, dependent on the car industry, had a very strong start of the year 2019 but were in the end of last year more hesitant and we saw a slowdown, especially for those working close to the automotive industry; North America, a slight decline; and distributor markets, where we have lots related to auto industry, they had a weaker quarter; as well as in APAC.
If I then move on to Slide 7, Nederman Process Technology division for Q4.
Nederman Process Technology. Just recapping, it's where we sell mainly large projects to foundries, smelters. It is fiber manufacturing, textile. It is the chemical processing industries. Large projects, very often USD 1 million to USD 5 million on each order. We had a very strong quarter when it comes to orders received. But as we say, they were received very late in the quarter in late December that we could not convert them into sales before year-end. We have major projects that are booked and the profitability improved also due to the favorable mix in project sales. EMEA, major largest smelters and foundry orders of SEK 50 million was booked. There was also strong demand from the asphalt industry. Uncertainty on the investment and cautious in North America and APAC and several anticipated orders have been postponed. And this is something we have been coming back to many times that it comes late. They take the decision very late in the process, and we continue to see that. Textile segment is, of course, something that remains relatively weak, but we have booked quite a few large orders, and there are many smaller orders coming back here in quarter 4. We also launched the Digi 7, which is a new generation of control system that is also prepared to use inside the IoT solutions going forward.
Moving on to Slide #8, Duct & Filter Technology Q4 2019.
Yes. As you remember, Duct & Filter Technology is supplying both Nederman and external customers with ductwork and filters. Nordfab, which is our duct company and duct group sells various type of piping system, had a weak fourth quarter. The big shortfall here is the problems emanating from the ERP implementation in U.S., which led to significant delivery disruption during the quarter. Not satisfactory, but that is what it was. They should be resolved during Q1, and we will, after that, have a system that gives us better control, better efficiency. We also are expanding the reseller. It led to a positive development in EMEA and APAC during the quarter. Menardi, selling filter solutions, continued to see customers in North America postponing decision on larger investments. This goes also all the way back to Process Technology where you see the hesitation continues. In EMEA, we saw better -- had a better development and it follows the same pattern as we've seen for the group as a total.
If I move on to Monitoring & Control Technology on Slide #9.
Yes. Nederman Monitoring & Control Technology where we have developed Nederman Insight, where we have NEO Monitors, Auburn FilterSense and now likely the Gasmet acquisition, Gasmet Technologies Oy. We have a strong Q4. We posted double-digit organic growth again in order intake, and we significantly increased the strength of the division by adding Gasmet, as we discussed earlier. We had, especially from NEO Monitors, showing strength and had a very good last quarter. Also good invoicing, combined with some contribution from Gasmet, division's profitability improved. And we have also made a change so we now have a proper divisional manager. As you all know, I've been sort of acting as that but Ketil Gorm Paulsen has been appointed as of January 1 the Head of Division Monitoring & Control, and he comes from NEO Monitors where he has been doing an excellent job for us.
If I move on to Slide 10. We see some financials from the regions. And like we said at the very outset of this presentation, it was quite different development between the regions. EMEA had some extremely strong organic growth in order intake, in particular, in the quarter, with the last foundry orders -- order booked in Europe as well as the large -- yes, it's actually booked in Sweden as well for those that are interested. And then we have a rather large project in Process Technology on the textile front in Egypt. But we, overall, have grown rather well in EMEA. APAC, currency-neutral growth was very slight, but organically, however, it was a decline. And in Americas, we -- I think Sven has already mentioned, the biggest contributing factor is the lack of investment in the larger projects in North American market. If I move on to Slide 11, we can see the cash flow from operations. This slide shows cumulative cash flow and there is a very clear trend that seems to me from year-on-year 2018 and 2019 where we see a significant improvement in cash flow in Q3 and then Q4, in particular. And 2019, it was an extremely strong end to the year. This is -- of course, it's not entirely related. We have rather good working capital management, I would like to say right now, but we have seen significant down payments on projects, which we have then booked as orders, but given how close they were to the year-end when we booked, then we have had basically no time to even start processing the projects there for a rather cash-positive position Process Technology at the year-end. Net debt has increased significantly in Q4, obviously related to the acquisition of Gasmet, though somewhat positively impacted by the fact that we have had such a good development in our operating cash flow in the quarter. So moving on to Slide 13, a summary of Q4 from Sven here.
Yes. Extraction & Filtration Technology. Very strong profitability, though a slight decline in orders versus a very high Q4 2018, but going into 2020 with a better backlog. Process Technology. Very good order intake at the end of Q4. Sales behind earlier expectations. As explained, very late last confirmation on the orders coming in, in December. Duct & Filter Technology. Weaker end to the year, very good start, but it was very much related to the operational difficulties which are now starting to be resolved. Monitoring & Control Technology. Good organic growth and profitability development, very good profitability development and Gasmet acquisition. It's very pleasing that we're now getting these capabilities more and more complete when it comes to adding capabilities in the MCT technology. For the group, very strong order intake, very strong cash flow. Results somewhat behind our own expectations due to the very late order intake in Q4. For the group, again, significant strengthening of the Monitoring & Control Technology division, which is very important going forward in our journey towards a clean air company.
Slide 14, the final outlook for the coming period.
Yes. Many of Nederman's markets, including the U.S. and China, and recently also to some extent, Germany are still characterized by uncertainty and cautiousness. The coronavirus outbreak in China has added further uncertainty, though it's too early to accurately assess the impact on Nederman's sales and operations. Despite Nederman's strong Q4, decisions on major investments still being delayed, resulting in considerable volatility in orders received. Despite the challenges above, Nederman's basic view remains one of cautious optimism. Environmental issues will remain important for our customers and that can be expected to soften the effects of a weaker economy. And the group continues to strengthen its position in several key areas where future growth will occur.
On Slide 16, you can see some dates for the financial calendar 2020. The January to March interim report is released on the 21st of April this year. The Annual General Meeting is on the 27th of April. And the January to June report will be released on July 14. Okay. That's the end of our presentation for you guys.
[Operator Instructions] And our first question comes from the line of Daniel Lindkvist from Handelsbanken.
Just a few questions. Looking at the order intake, could you characterize it that high-margin order intake when we go into the Q1? It seems that way looking at EMEA and the divisions.
I would say that the divisions, like we say, we're going into Q1 2020 with a higher backlog in the Extraction & Filtration Technology division and that -- some of that is from EMEA. So the answer to your question is, yes, that's quite good margin business for us. Within EMEA, there was a larger proportion in Q4 -- of the orders received, a larger proportion were actually Process Technology orders, you're not surprised you -- us by that due to the size of them. But having said that, they're not bad margin orders considering they are Process Technology division orders.
I think it's fair to say also that after the Luwa acquisition, we've spent quite the time, that's something we always do and have to do. We focus more on bottom line growth than on top line growth. So I would say that the Luwa order backlog, and that also includes in the Process Technology, is significantly more healthy today than it was when we acquired the company. But that is a part of our way of working and you will see a significantly more healthy backlog.
Okay. Perfect. And then my next question is with the Americas division -- or geographical area. In Q4 last year, how much was an effect of sales being postponed from Q3 into Q4 and supporting a strong Q4 there? And also on the project side, it seems like you have projects last year in Process Technology not being there this year, and also we have the Nordfab business. Could you just give them a proportion of the -- because in my view, this was the negative in the report. If you have the positive on the EMEA's strong order intake in the quarter, then I was a bit negatively surprised by the Americas.
Yes. You've got some points that I was going to answer. Extremely accurate on Q4 last 2018. But it wasn't insignificant. I think it's a good question because we have this -- or everyone else, let's say. We have this big -- this hurricane hit at the end of September 2018 that basically meant we could not -- you could not deliver anything out of our factories in the North Carolina area. So that rolled into Q4, which gave us quite a few million on our bottom line in Q4 which should have been in Q3. I don't want to get to the numbers, Daniel, otherwise, we could potentially be misleading so...
Yes. Yes. Okay. But I guess it's still a significant effect in that?
Absolutely. And particularly when you then compare to the -- we have the comp from -- versus Q4 this year where we have some problems actually getting things out in Q4 in that time. So those 2 correspond completely the opposite direction. And then if we were talking about larger projects, we had -- we did book more large projects in North America in Q4 2018 than we did in Q4 2019. That is absolutely correct. And that is where the last deviation in the -- overall, that's the single biggest explanation for the deviation in the order intake, Q4 versus...
The Process Technology in Americas, basically?
Yes.
Yes. So -- and the Nordfab is a bit hard to quantify from the outside. How big effect does the ERP matters have in that business? And is it normally the strongest part of the year for Nordfab?
For -- it's a strong part of the year, but Nordfab is not -- it's not as seasonal as other parts of our business are. But it's -- to quantify the ERP, I would say that some of that -- we finished the year with a higher backlog than we should have done, for example. We didn't get things out of the door, but we have lost some business because some of that business is very quick. When customers call, they want delivery within a day or 2. And we weren't able to fulfill for some period of time, particularly during -- well, it was during latter part of Q4.
Okay. Okay. So not getting things out, that should be a bit supported then into Q1 instead?
Yes. Yes. That -- this is not a backlog business. Relatively, the backlog was up quite a few percentage points. But that in millions of kroner, we're talking less than 2 handfuls in additional revenue, so it's not a huge amount.
Okay. Perfect. And then moving on to APAC. Could you just -- I think, Luwa, if we look at their Q4 last year, was there something to keep in mind there because you had -- even though the results, as you mentioned, you're really focused on the bottom line and kept it really well in the quarter. But the top line and the order intake in the APAC division, could you just elaborate on that?
Yes. Luwa, if I take the top line, first of all, that's perhaps the easy one. Luwa, during -- we acquired Luwa on 15th or 16th of October 2018, I can't remember off the top of my head. But at that point in time, Luwa, during the year up until that point, price and net of our ownership, orders have been booked that were significant orders but perhaps at margins that Nederman would not have booked things at. However, they were still profitable and you see that in Q4 that there was extremely high sales revenue from Luwa in Q4. What we have done now, we have a change in management in Luwa and something that Sven referred to before. We've worked very hard to look at only the -- look at bottom line rather than top line growth. It's very easy to grow the top line growth, particularly in Process Technology, if we want to, but we really need to make profitable business. And therefore, if we take the APAC region as a whole, the single biggest change in the quarter is from Luwa.
Yes. So basically, you're not taking orders now that you would have taken -- or they would have taken before you acquired them.
That is correct.
That is correct. And that was the same when we acquired EFT some years ago in 2012. Prior to the sales process, they do simply talk line by. It's sort of -- but that's the name of the game and that's something we were very well aware of going into. We are very, very keen, I guess.
And no one could say you overpaid for Luwa, given the development we've seen. So it's...
No. That was a very...
No, no, no. I still have to congratulate you guys on that one. And then just on my last question. If you look at the business area, Monitoring & Control Systems, how much is underlying improvement and how much is Gasmet? Because it seems like the underlying business should be performing really well. Is that correct?
Yes. It was a very strong invoice -- order intake and invoicing quarter from the -- if you call the underlying, the non-Gasmet business, more than...
Yes. The non-Gasmet business.
It was extremely good as well. Gasmet gave us a little bit amount in the quarter given that it was -- we were so late. Have we done the deal a few weeks earlier, it would have been even better. One thing I also point out on this is that Gasmet is a rather seasonal business as well. They have a lot of sales to governmental organizations and also some sales by distributors. And there is -- particularly on the governmental side of the business, there's an incentive to often spend your budget before the end of the calendar year. So it is a higher proportion of sales towards the end of the year for Gasmet and there won't be a huge contribution in quarter 1 from Gasmet, for example. However, we did benefit slightly in the final part -- final few days of the year. I mean we only took them over on the 9th of December, so it wasn't as much as we would like to have had in quarter 4.
And then just my last question, just on the Gasmet acquisition. Will we see some cost for the acquisition also in Q1? It seems to, like you say, they were a bit lower than I expected, the cost for the acquisition. Will we see something later? Or this is all this cost that will be there?
They could be. So there are some small costs to come in quarter 1. It's not many millions. It's a couple of million mostly.
Okay. But it could be a slight negative effect from that in Q1 as well?
Yes. We don't -- actually, Gasmet will not contribute to EBIT in quarter 1 actually. That is how seasonal their business is.
[Operator Instructions] And as there are no further questions registered, I now hand back to our speakers for any closing comments.
Okay. We thank you for taking the time listening to us this morning. And thank you once again, and we'll meet again later in the year. Thank you very much.
This now concludes our conference. Thank you all for attending. You may now disconnect.