© 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.
So good morning, and welcome, everyone, to the Nordic Waterproofing Webex presentation after the first quarter here.Let me start with reminding everybody that this presentation is being recorded, and the names are visible for the participants. And let me then start with introducing our CEO and President, Martin Ellis.And I'll hand over to you, Martin, for the presentation here.
Yeah. Thank you very much, Palle. Welcome all. Thank you for participating. We have seen in our report, we had a subdued quarter due to harsh weather -- unusually harsh weather, and somewhat weaker demand in both Finland and Norway.Moving on to Page 2. Our net sales decreased to SEK 804 million compared to SEK 911 million in the quarter last year, plus 1% comes from acquisitions. There were no currency effects from the SEK and it boils down to a 13% reduction in organic development.EBITDA decreased to SEK 17 million compared to SEK 30 million last year. Operating profit also decreased to SEK 21 million loss compared to SEK 11 million loss last year. Let me remind you that the first quarter is always a small quarter and usually translates into a loss at the EBIT level. In the SEK 21 million loss, there's included a SEK 6.4 million charge for costs related to the mandatory bid by Kingspan.The cash flow from operating activities was minus SEK 83 million compared to minus SEK 58 million last year, the reason for that being mainly an increase of our working capital from an extremely low level at the end of December last year. Net debt now stands at SEK 861 million, which is down compared to the same period last year, it was SEK 1.058 billion then, and slightly up compared to the SEK 749 million we had at the end of last year.Moving on to Page 3. Demand was impacted, obviously, first of all, by the harsh weather, but also by a slowdown in commercial new build. We have seen renovation still remaining stable, and residential new build continued quite deeply depressed in all of our geography, obviously linked to the high level of interest rates.Bitumen-based waterproofing operations were, as I said, heavily impacted by the weather. And the market situation, in terms of underlying demand, is most challenging in Finland and Norway, whereas Denmark and Sweden are relatively stable. Sales for our EPDM products, synthetic rubber, on par with last year, and especially our Belgian subsidiary, Distri Pond, who had a bit of a slow end of the year; last year, had a positive development.Prefab wood-based elements has a high exposure to residential new built in our other businesses, and manage to have a flat development in sales in Denmark, but had a negative development in Norway. Overall profitability level of this business unit improved, but obviously, it's still at an unsatisfactory level.Our green infrastructure business unit had a decrease in sales to less roof projects this year, but it's a seasonally extremely low quality for that business. Installation Services, there we had a major effect in terms of our roofing business in Finland having lower sales, lower general demand, and also a drop in margins due to the inefficiency which harsh winter generates. The flooring for cruise ships continues to show excellent performance. Order books for Installation Services continued to be on par with previous year in Finland and Denmark, and slightly weaker in Norway.Moving on to Page 4. Faced with the generally somewhat lower demand, we have started implementing and negotiating contingency measures. And this definitely, after a bit of a time lag, will have obviously a positive effect on our bottom line. We continue to see flat -- slightly deflated in some cases also slightly increasing costs for most of our input materials, but I would say the general picture is flat.In the high interest environment, I mentioned, we've sharpened the focus on our debt level, and adjusted multiples we are prepared to pay for acquisitions. Our largest shareholder, Kingspan, completed their mandatory offer of SEK 160 per share with an acceptance of 4.8% of the total share capital.Over to you, Palle, for some more detailed figures.
Yes. Okay. Thank you, Martin. So as we said, net sales decreased about SEK 100 million from SEK 911 million to SEK 804 million. On a rolling 12 basis, we continue to be close to SEK 4.5 billion, organic development minus SEK 13 million, and basically all that is volume price impact in the quarter was pretty close to 0. And then, yeah, acquisitions 1%, and currency have no impact.EBITDA decreased from SEK 30 million to SEK 17 million, and EBIT from minus SEK 11 million to minus SEK 21 million here. On a rolling 12 basis, EBITDA stands at 10.4%. And as Martin said, the advisory cost related to the mandatory offer was a bit more than SEK 6 million in the quarter, having that impact.If I move on to Slide 6, we can see that gross margin for the quarter was actually up from last year, from 22.1% to 23.7%. This is mainly driven by the areas within Products & Solutions. Net financial items were unchanged at minus SEK 14 million, whereof interest cost now stands at minus SEK 13 million in the quarter. And the EBIT margin for the quarter was negative minus 2.6% and during the last 12 months, we stand at 6.5% EBIT margin.Moving on to Slide 7. I'd say that we continue to have a solid balance sheet that allows us to do selective acquisitions whenever something interesting comes up. The interest-bearing net debt increased to SEK 834 million from SEK 724 million at the beginning of the year, and it's worth remembering the first quarter is seasonally weak for our cash flow. However, we're well below the value where we were a year ago at 997. The equity asset ratio was strong at 50.2%, above 50%, and the net debt-to-EBITDA ratio at 1.9x. This remains well below the covenant for our financing agreement here.Moving on to Slide 8. ROCE is pretty much flat in the quarter, stands at 10.0% now, started the year at 10.2%. And capital employed development has flattened out, as you can see in the recent quarters here. And the change in ROCE is basically driven by operating results. Cash flow from operations has been at a good level, at SEK 478 million on the rolling 12, last 12 months here versus SEK 317 million for the 12 months before that. And cash conversion continued to be above 100%, which is not necessarily the long-term level we will be at, but that has been there as well last year. And of course, going forward, we closely monitor our operating receivables in all our businesses, considering the business climate that we see on most of our markets.Moving on to Slide 9, and looking into Products & Solutions, where net sales decreased 11% from SEK 701 million to SEK 627 million. All the development is organic. No impact from currency or acquisitions. Some of the areas within Product & Solutions managed to keep a flat development of sales in this environment, like SealEco and Taasinge Denmark and the membrane business in Sweden. Net sales for Products & Solutions on a rolling 12 basis currently stands at SEK 3.2 billion.EBITDA increased for the area from SEK 52 million to SEK 61 million, as did operating profit EBIT from SEK 22 million to SEK 31 million. And the EBITDA margin increased, and now stands at 9.7%, and yeah, versus 7.5% in the first quarter last year. Generally, the different businesses here maintained or even improved their margins in the quarter here. We've seen improved EBITDA for the Taasinge Group, but there was also an impact of one-off last year in the first quarter, that is a large part of that increase. And for the latest 12 months for this area, we are at 13.7% EBITDA margin.Then moving on to Slide 10, where we can see installation services, where we had a net sales of SEK 202 million, a decrease with 16%, organic development minus 21%, and impact from acquisition 5%. EBITDA decreased to minus SEK 24 million versus minus SEK 12 million and EBIT to minus SEK 32 million versus minus SEK 22 million. The EBITDA margin was obviously negative in the quarter as well with minus 11.8%, and at the latest 12 months, the margin now stands at 5.2%.Our roofing activities in Finland saw reduced profit levels due to the operational inefficiency from the harsh winter but as well as weaker market. The result from our Norwegian entity was on par with last year. And we saw a good result in the Danish franchise network, however, not on the level with a strong first quarter last year.Then moving on to Slide 11. I pass it back to you, Martin.
Yes. Thank you very much, Palle. So just a summary of target sales growth, obviously, there hasn't been a sales quarter in this quarter, but we believe that in terms of our share of markets and given the downturn in general demand. So we are certainly holding our positions in terms of market share. In terms of profitability, we have missed our 13% ROCE threshold also in this quarter, but we retain a really strong capital structure, where we are well below our 3x debt on EBITDA target ratio. In terms of dividend policy, we have also a situation where the Board proposed a SEK 5 per share dividend to the general assembly today, and that would be in excess clearly of the 50% of net profit, which is our target.So now looking very much forward to your questions.
Yes. Okay. Thank you very much, Martin. Then, let me say, I will open up for questions, and I ask the participants either raise your hand in the meeting here or send a question in the Q&A feed. You can also mail me. [Operator Instructions]
Then the first question here comes from Sofia Sorling at Carnegie.
Okay. Can you hear me?
Yes, loud and clear.
So, my first question is related to the market demand in Finland. You mentioned that we should expect a continued downturn in Finland. But you also mentioned that your order books were on par with last year. So could you give us more details on where you see the weaker demand in Finland? Is it in any particular customer segment? Is it mainly due to the new construction market or more related to both new construction and renovation market in Finland? That's my first question.
Yes, Sofia, the order book, I would say, is sort of -- it's a good indicator [ of cost ], but it's not absolutely what reflects the general market situation. So we do expect a very slow 6 months to come in Finland. There are some indications that, after that, there could be a pickup. So if you look at the people who are very upstream in the construction process, they seem to see a slight positive effect recently. But we are clearly preparing for a relatively low level of activity, very much focused on new build -- residential new build and to some extent, commercial new build. So this is the situation we see. And it's -- I would say, it's a general -- it concerns all of our segments.
Yes. Okay. And the renovation market in Finland, is that something that you see is more stable as in the other Nordic regions or do you see that as a weaker renovation market than the other Nordic regions?
Yes. I think, overall, renovation remains fairly stable throughout. But Finland right now seems to be the weakest spot, and we do see a reduction in demand there, also people trying to push forward projects. This is because of the higher financing costs.
All right. Okay. And what do you expect in terms of price increases ahead within your different product segments? Do you expect to be able to increase prices, at least a low point or do you expect to decrease prices?
Yes, we do not expect to be able to increase prices right now in the foreseeable future. And we're obviously fighting very hard to keep our price level where it is.We might see a slight erosion in price -- sales prices going forward, and that obviously will depend very much on the demand level. If demand levels remain stable, then obviously, we'll probably be able to avoid that. If demand reduces further in volume, it's difficult to say how much our prices come down, but they probably will come down slightly.
[Operator Instructions] Okay, if there are no further questions, I think we'll wrap up the meeting. So you want to say some last words, Martin?
Yes. Well, thank you all for participating, and I look forward to being with you in a few months' time.
Okay. Thank you very much.
Bye-bye.