Interim Report January-September 2020

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For further information:
Jonas Gustavsson, President and CEO, +46 70 509 16 26
Juuso Pajunen, CFO, +358 10 33 26 632

Stable results in a recovering market

Despite a decline in net sales due to the Covid-19-pandemic, we are delivering solid results. We have successfully navigated through an uncertain period together with our clients, who require sustainable solutions. We are continuing to strengthen our balance sheet and increase our focus on growth, said Jonas Gustavsson, President and CEO.

Third quarter 2020
– Net sales amounted to SEK 4,021 million (4,562)
– EBITA, excl. items affecting comparability, was SEK 288 million (345)
– EBITA margin, excl. items affecting comparability, was 7.2 percent (7.6)
– EBITA totalled SEK 271 million (309)
– EBITA margin was 6.7 percent (6.8)
– EBIT (operating profit) amounted to SEK 229 million (274)
– Basic earnings per share: SEK 1.29 (1.67)

January-September 2020
– Net sales amounted to SEK 14,084 million (14,345)
– EBITA, excl. items affecting comparability, was SEK 1,146 million (1,216)
– EBITA margin, excl. items affecting comparability, was 8.1 percent (8.5)
– EBITA totalled SEK 1,106 million (1,041)
– EBITA margin was 7.9 percent (7.3)
– EBIT (operating profit) amounted to SEK 972 million (978)
– Basic earnings per share: SEK 5.64 (6.50)

In the third quarter, we continued to feel the impact of the ongoing Covid-19-pandemic. Towards the end of the quarter we noted a recovery in most of our key segments and markets. Despite a decline in net sales, we can report solid results and cash flow. This enables us to continue strengthening our balance sheet and increase our focus on growth. We have maintained a high capacity for delivering to our clients, in parallel with a focus on cost optimisation and increased flexibility in the organisation.

Performance in the third quarter
Net sales amounted to SEK 4,021 million, which is a -7.6 percent year-on-year decline, adjusted for currency effects. Net sales was impacted by the Covid-19-pandemic, primarily in the automotive segment, but also as a result of the ongoing repositioning within the Energy Division. The market for infrastructure was generally good, but we noted a weak trend in the real estate segment in Scandinavia and Switzerland. Meanwhile, Food & Life Science and several other business areas within Process Industries and Management Consulting experienced persistently strong growth in the quarter. Our order backlog remains stable. 

Extensive measures focusing on efficiency and cost reductions, combined with a slight recovery in September, contributed to a stable result. EBITA excluding items affecting comparability was SEK 288 million (345), corresponding to an EBITA margin of 7.2 percent (7.6). Currency effects had a negative impact on EBITA of approximately SEK -15 million.

Our financial position has strengthened, with a net debt/EBITDA ratio excluding the effect of IFRS 16 and items affecting comparability of 2.0x (2.7), and SEK 1.3 billion in available funds and just over SEK 3 billion in unused credit facilities.

Extensive measures
We were quick to implement strong measures to mitigate the effects of the pandemic. In the second quarter, 1,900 employees were under various short-term work schemes, which dropped to around 800 by the end of the third quarter. The plan is for these schemes to essentially cease by the end of November.

The previously announced efficiency programme of SEK 120 million is proceeding as planned and additional activities carried out during the quarter brought total costs down by roughly SEK 490 million through a combination of short-term and permanent savings.

Based on the cost-effective structure we have established, our focus is on pursuing growth in those segments where we are seeing long-term stable demand. As a result, our portfolio has shifted towards strategically important growth segments such as infrastructure and the process industry, as well as food and pharma. A healthy trend in the Nordic public sector, the persistently stable bioeconomy sector, where AFRY holds a world-leading position and the favourable trend in the food and pharma industry are all contributing factors.

Performance in the divisions
The Infrastructure Division was affected by a weak trend in the real estate segment in Scandinavia and Switzerland. However, the trend in water and environment has indicated steady growth on most markets. We are seeing healthy underlying demand for our services as society transforms and there is a greater need for sustainable solutions.

The Industrial & Digital Solutions Division was impacted by the negative trend in the automotive industry, where clients have had a low rate of development and went through internal restructuring.  A gradual recovery was noted during the quarter, albeit from low levels. Based on the situation, we have begun repositioning our offer to the automotive industry with the aim of delivering even more high value adding services. Meanwhile, we have noted a strong growth in Food & Life Science.

The Process Industries Division experienced a robust trend in our core markets, and major projects are progressing as planned. However, the division was to some extent affected by the Covid-19-pandemic with longer decision-making processes for new business.

The Energy Division’s ongoing repositioning is proceeding as planned, which has helped maintain healthy results. Several projects have been postponed due to the ongoing pandemic, particularly within hydro, thermal and renewable sectors, which may impact sales in the coming quarter. 

In the Management Consulting Division, energy consulting operations continued to perform strongly and clear indications of increased activity within the bio-industry sector were noted towards the end of the quarter.

We have delivered exciting projects for our clients during the quarter and I would particularly like to highlight our continued partnership with Metsä Fibre at the new bioproduction facility in Kemi, Finland. We have also won an order from Sermsang Power Corporation, a renewable energy producer, for a wind power project in Thailand, and from Øresundsbro Konsortiet as a partner for support and development of their IT system.

An attractive employer
I am delighted to see that AFRY has achieved top ratings in Academic Work and Universum’s surveys, in which young people select Sweden’s most attractive employers. This is evidence of a successful brand change and the fact that we have managed to communicate sustainability as a central aspect of our vision and business strategy. AFRY has also achieved a relatively even gender balance in its management team (40/60), earning a place on the Allbright Foundation’s green list.

A long-term, sustainable recovery driven by digitalisation
The need for a societal green recovery after the Covid-19-pandemic has boosted the need for digital and sustainable solutions. AFRY is well positioned to contribute to this development: we have a business that is increasingly focused on transformative segments with long-term growth, in-depth sector knowledge and a strong digitalisation offer.

We noted a slight recovery and stabilisation at the end of the quarter, but there is still considerable uncertainty as the pandemic continues globally. Although the challenges are far from over, we are optimistic about coming through this stronger than before. We hold a market-leading position in sustainable solutions, and we have broad exposure to many industries and markets. Our focus is to drive growth, maintain flexibility, and optimise costs to take AFRY to the next level.

Our employees have made a fantastic contribution and I would like to thank everyone for their considerable commitment, flexibility and strong client focus.

I would also like to welcome you to our virtual capital markets day on 24 November, at which we will present our strategy going forward.

ÅF Pöyry AB (publ), SE-169 99 Stockholm, Sweden
Visitors’ address:  Frösundaleden 2, 169 70 Solna, Sweden
Tel. +46 10 505 00 00   Fax +46 10 505 00 10 /
Corporate ID number 556120-6474

This report has been reviewed by the company’s auditors.

This information fulfils ÅF Pöyry AB’s (publ) disclosure requirements under the provisions of the EU’s Market Abuse Regulation and the Swedish Securities Markets Act. This information was released, through the agency of the above-mentioned contact person, for publication on 23 October 2020, at 07.00 CET.

All assumptions about the future that are made in this report are based on the best information available to the company at the time the report was written. As is the case with all assessments of the future, such assumptions are subject to risks and uncertainties, which may mean that the actual outcome differs from the anticipated result.

This is a translation of the Swedish original. The Swedish text is the binding version and shall prevail in the event of any discrepancies.

The full report including tables (pdf) is available for download.

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