Interim report, January - September 2002
- Inflow of orders: SEK 8,447 million (8,312)
- Invoiced sales: SEK 7,957 million (7,495)
- Earnings after financial items: SEK 640 million (298)
- Earnings after financial items, excluding non-recurring items: SEK 317 million (342)
Disposal of the Rail business area
During the period, the Cardo Rail business area was disposed of to Vestar Capital Partners, which took over the operation as of September 25 2002 through a company newly established for the purpose. Cardo Rail is included in Cardo’s consolidated financial statements until this date.
The capital gain on the disposal of Rail amounts to SEK 323 million, which is equivalent to earnings per share of SEK 10.78.
As of January 2002, Cardo Pump includes the acquired companies Swedmeter AB and Nopon Oy with an aggregate annual turnover of approximately SEK 150 million. As of the same date, Cardo Door includes the acquired company Amber Doors Holding Limited with its subsidiary Amber Doors Limited. Amber Doors has an annual turnover of approximately SEK 240 million.
The Group’s inflow of orders during the period amounted to SEK 8,447 million (8,312), which is 2 percent lower than the previous year at a comparable structure of the Group after adjustment for the effects of exchange rate movements.
Invoiced sales amounted to SEK 7,957 million (7,495), a rise of 6 percent after adjustment for the effects of exchange rate movements. Company acquisitions account for 4 percentage points of this figure.
Operating earnings, excluding non-recurring items, amounted to SEK 394 million (418), providing an operating margin of 5.0 percent (5.6). Pump’s and Rail’s earnings increased during the third quarter. Door’s earnings were adversely affected by the continued weak state of the construction market in Europe. Measures will be taken with a view to cutting Door’s costs and enhancing its efficiency. The cost of planned measures is estimated to amount to approximately SEK 40 million and will be charged to earnings for the fourth quarter.
Excluding non-recurring items, earnings after financial items were SEK 317 million (342), providing a profit margin of 4.0 percent (4.6). Earnings per share after full tax excluding non-recurring items were SEK 6.76 (7.42). Earnings per share after full tax were SEK 17.54 (6.45) including non-recurring items, i.e. the capital gain on the disposal of Rail and the provision for the restructuring of Pump during the previous year.
The impact of exchange rate movements on Group earnings was only marginal.
Cardo Door's inflow of orders for the current structure was 2 percent lower than the previous year after adjustment for the effects of exchange rate movements.
For industrial doors and dock loading systems, demand was lower than the previous year. Demand for residential garage doors was on a par with the previous year, despite a further decline in the German market. The trend for service remained good even if the growth rate was somewhat lower than the previous year.
During the third quarter, Cardo Door won its biggest ever order in China. Three Megadoor hangar doors, the largest measuring 150 x 27 meters, are to be supplied to the Chinese aircraft maintenance company Gameco. The order is worth almost SEK 30 million. Other major orders included one for 60 industrial doors and about 50 dock loading units for Davids Distribution in Bangkok. The Norwegian food group RIMI bought 60 industrial doors and 87 dock loading units for a distribution center in Riga; and in Turkey 45 industrial doors were sold to Ford’s dealer Autosana Ford and 40 industrial doors were sold for installation in nine fire stations in Istanbul.
Invoiced sales amounted to SEK 3,791 million (3,615), which adjusted for the effects of exchange rate movements and company acquisitions is on a par with the previous year. Operating earnings amounted to SEK 177 million (233). The continued weak market conditions have resulted in lower volumes and reduced margins in industrial doors and dock loading systems. This, together with a somewhat lower-than-expected growth rate in service, had an adverse effect on earnings.
With a view to making the marketing effort in Sweden more efficient, the two sales companies Crawford and Allhabo are being amalgamated into one company. A similar process is being implemented in the UK, where the sales companies Crawford-Hafa, Faltec and Amber Doors are being merged. In addition, as a consequence of the reduced demand for industrial doors, measures will be taken to cut the costs and enhance the efficiency of production. Among other things, the production of industrial doors in Torslanda, Sweden, will be moved to the main plant in the Netherlands. The cost of the planned measures is estimated to amount to approximately SEK 40 million and will be charged to earnings for the fourth quarter.
The inflow of orders rose by 2 percent for the current structure after adjustment for the effects of exchange rate movements.
In water and wastewater, which is Cardo Pump’s biggest segment, demand increased compared with the corresponding period the previous year. In the building services segment, demand also increased, while in the process industry it was on a par with the previous year.
During the third quarter, a number of major orders were received in Asia, including ones in China for pumps, mixers and compressors for delivery to three treatment plants and for process pumps and mixers for three paper mills. The total value of the orders amounts to SEK 19 million. Nopon compressors worth SEK 4 million were sold to a water treatment plant in Korea.
In the USA, orders received included two, together worth approximately SEK 8 million, for pumps for a wastewater treatment plant in Connecticut and for a water supply project in North Carolina. The subsidiary Lorentzen & Wettre received an order from a big paper mill for a system worth SEK 4 million for the automatic measurement of paper quality.
A number of major orders, worth together SEK 18 million, were received in Spain relating to equipment for wastewater treatment. In Slovenia, the pulp and paper maker VIPAP and a wastewater treatment plant in Maribor bought pumps for a total of slightly more than SEK 6 million.
Invoiced sales amounted to SEK 2,191 million (1,972), which adjusted for the effects of exchange rate movements is a rise of 11 percent. Company acquisitions account for 8 percentage points of this figure. Operating earnings rose to SEK 126 million (113 excluding restructuring costs).
After adjustment for the effects of exchange rate movements, Cardo Rail’s inflow of orders was 5 percent lower than the previous year. Invoiced sales amounted to SEK 1,975 million (1,908), which is a rise of 4 percent adjusted for the effects of exchange rate movements. Operating earnings amounted to SEK 146 million (126).
Liquidity and financing
At September 30, the Group’s liquid funds stood at SEK 1,186 million (222) compared with SEK 264 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 3.4 billion (3.3).
Cash flow from operations was SEK 707 million (246) after tax, which is equivalent to SEK 23.57 (8.20) per share. Adjusted for the effects of exchange rate movements on the change in working capital, cash flow was SEK 20.53 (14.07) per share after tax. The Group’s gross investments, excluding company acquisitions, stood at SEK 227 million (223).
Net liquid funds at September 30 amounted to SEK 456 million (-1,405) compared with SEK -1,242 million at the beginning of the year.
Equity amounted to SEK 3,743 million (3,435), which is equivalent to SEK 124.78 (114.50) per share.
The Group’s equity ratio at September 30 was 58.0 percent (42.9).
The number of employees in the Group at September 30 was 6,306 (7,924).
The interim report has been drawn up in accordance with recommendation RR20 of the Swedish Financial Accounting Standards Council concerning interim reports. The accounting principles used are the same as in the annual report for 2001 except for the new recommendations of the Swedish Financial Accounting Standards Council effective as of January 1 2002. The application of the new recommendations has not given rise to any adjustment of previously reported periods.
The parent company
The parent company's earnings after financial items amounted to SEK 584 million (66), its gross investments to SEK 0 million (0) and its liquid funds to SEK 0 million (1) as against SEK 0 million at the beginning of the year.
The assessment in the previous report still applies:
"Market prospects continue to be difficult to assess, not least when it comes to Germany. As regards Cardo, the Group is still considered to be capable of showing greater growth than that of the underlying market for the whole year."
Malmö, Sweden, November 8 2002
Cardo AB (publ)
President and CEO
This report has not been subjected to special examination by the Company’s auditors.
Cardo's report on operations for the whole of 2002 will be published on February 10 2003.
Enclosed: 1. Invoiced sales, operating earnings and operating margin by business area
2. Consolidated income statement and balance sheet in brief
3. Consolidated cash flow statement in brief
4. Group financial summary
5. Disposal of the Rail business area