Interim report 1 January – 30 September 2020

CEO’s message

Record high earnings, sequentially improving demand, but challenging market conditions going forward.

Third quarter
The market situation gradually improved during the quarter, but with a continued negative impact by the covid-19 situation. Overall, demand was at a slightly lower level than the corresponding period last year, and since the outbreak of the pandemic, the development has varied significantly across the different customers, companies, segments, and geographical markets. Order intake amounted to SEK 4.5 billion, corresponding to a decrease of 3%, of which 2% was organic. The development sequentially improved for the engineering industry but was still weaker than last year. Fewer capital-intensive investments and new projects within a number of customer segments negatively impacted demand. Demand remained strong for companies with customers in the medical technology and pharmaceutical sectors, which was partly attributable to covid-19. Performance was also good in the water/wastewater segment and across much of the process industry. In the energy segment, order intake for valves for power generation levelled off during the quarter but invoicing growth remained strong. 

Sales amounted to SEK 4.6 billion and was organically unchanged compared to the same period last year. The strongest performance came from the business areas Benelux and Flow Technology, which was primarily fuelled by the energy segment, along with good development in the medical technology and pharmaceutical segments. The weakest development was in the business areas UK and Measurement & Sensor Technology.

The EBITA result improved by 16% to SEK 685 million, corresponding to a record high EBITA margin of 14.9% (12.8%). The result includes several non-recurring items that are primarily attributable to the pandemic, and in total, they had a positive impact of SEK 21 million. Excluding non-recurring items, EBITA margin was 14.4% (12.8%). The improvement was primarily attributable to the strong performance of companies in the energy, medical technology and pharmaceutical segments, as well as good cost management. Margins were strengthened for seven of our eight business areas, with the strongest development in the Flow Technology and Industrial Components business areas.

Our highest priority continues to be the health and safety of our employees, customers and suppliers. Thanks to the amazing efforts of our employees, we have been able to quickly and efficiently adapt to the prevailing circumstances and act on business opportunities. Although we operate in a global market, many of our companies have a strong local presence, which has so far proven to be a strength during the pandemic. The cost reduction programmes that were initiated have been pursued by companies experiencing a decline in order intake. The number of employees involved in various types of temporary lay-offs and short-term work decreased during the third quarter and amounted to around 600 of our total 7,200 employees at the end of the quarter. Since the end of March, the workforce has been permanently reduced by approximately 260 individuals. Several companies are evaluating additional needs to permanently reduce the number of employees.

Cash flow improved thanks to favourable development of working capital and the strong result. Inventory remained at a rather high level, yet with a slightly downward trend. During these uncertain market conditions, we have intentionally held back activities to lower inventory levels in order to ensure delivery service and availability to customers. Trade receivables developed in line with sales. 

We accelerate our efforts in the areas of sustainability and digitalisation so that we can continue increasing value to customers by enhancing efficiency and offer solutions that reduce environmental impacts. Our long-term sustainability vision, that will be presented in November, includes not only long-term, measurable sustainability goals for the Group as a whole, but also higher climate ambitions.

Acquisitions
Two acquisitions were made during the quarter. One was the Dutch company HoFa, which offers customised industrial fasteners, and the other was the British company UK Gas Technologies, which offers custom-made solutions for high-purity medical and laboratory gases. Subsequent to the end of the quarter, Indutrade also acquired the Czech company Cheirón. It offers primarily medical technology products, specialising in equipment used for healthcare applications in surgery rooms, intensive care wards, emergency wards, and cardio units.

In total, we have acquired nine companies thus far in 2020 with total annual sales of slightly more than SEK 700 million. The market situation has gradually improved, and we have a good inflow of interesting companies. We have deliberately prolonged the acquisition discussions to ensure that the right conditions exist for profitable growth in our acquisition candidates. Indutrade acquires companies with the intention of holding and developing them over the long term and we assess the future acquisition opportunities as good.

Outlook
The business situation remains uncertain given the prevailing conditions, with a rising number of covid-19 cases at several geographic locations. We expect that demand will gradually improve in most of the segments where performance has been weaker. Demand in the energy segment in particular, as well as the medical technology and pharmaceutical segments is expected to remain high, yet with a slightly lower rate of growth. As the level of activity increases in our companies, so too will the cost levels. 

Our focus remains on creating sustainable, profitable growth, both organically and through acquisitions, and I am convinced that with our dedicated employees, diversified structure and strong balance sheet, we have all the prerequisites for continued competitive value-creation. 

Bo Annvik, President and CEO

Note
The information in this report is such that Indutrade AB is obligated to make public in accordance with the EU Market Abuse Act and the Securities Market Act. The information was submitted for publication by the agency of the following contact persons at 12.00 CEST on 20 October 2020.

This report will be commented upon as follows:
A webcast of the report will be presented on 20 October at 2.30 p.m. (CEST) via the following link: 

https://tv.streamfabriken.com/indutrade-q3-2020

To participate in the conference call and to ask questions, please call:

SE: +46 8 566 427 03
UK: +44 333 300 9273
USA: +1 8 335 268 383

For further information, please contact:

Bo Annvik, President and CEO
Tel. +46 8 703 03 00

About Indutrade

Indutrade is an international technology and industrial business group that today consists of more than 200 companies in some 30 countries, mainly in Europe. In a decentralised way, we aim to provide sustainable profitable growth by developing and acquiring successful companies managed by passionate entrepreneurs. Our companies develop, manufacture, and sell components, systems and services with significant technical content in selected niches. Our value-based culture, where people make the difference, has been the foundation of our success since the start in 1978. Indutrade's net sales totalled SEK 18.4 billion in 2019, and the share is listed on Nasdaq Stockholm in Sweden.

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