Interim report second quarter and first half of 2020

Second quarter 2020
  • Order intake fell -1% to SEK 4,604 million (4,653). For comparable units, it was a decrease of -5%. The decrease was mainly due to the covid-19 pandemic.
  • Net sales rose 1% to SEK 4,614 million (4,587). For comparable units, it was a decrease of -5%.
  • EBITA rose 5% to SEK 602 million (574), corresponding to an EBITA margin of 13.0% (12.5%).
  • Profit for the quarter rose 1% to SEK 370 million (365), and earnings per share were SEK 3.05 (3.02).
  • Cash flow from operating activities increased and amounted to SEK 806 million (488).

1 January – 30 June 2020

  • Order intake rose 8% to SEK 10,005 million (9,263). For comparable units, it was an increase of 1%.
  • Net sales rose 7% to SEK 9,590 million (8,953). For comparable units, it was a decrease of -1%.
  • EBITA rose 10% to SEK 1,218 million (1,111), corresponding to an EBITA margin of 12.7% (12.4%).
  • Profit for the period grew 6% to SEK 758 million (715), and earnings per share were SEK 6.27 (5.92).
  • Cash flow from operating activities increased and amounted to SEK 1,227 million (656).

CEO’s message

Strong earnings despite lower demand and uncertain market conditions.

Second quarter

As a result of the covid-19 pandemic, uncertainty has characterised the second quarter, and overall, demand was at a lower level than in the past. The development varied however considerably across companies, segments, and geographic markets. Order intake amounted to SEK 4.6 billion, a decrease of -1% of which -5% organically. Demand remained strong for companies with customers in the medical technology and pharmaceutical industries, which was partly attributable to covid-19. In the construction and infrastructure industries, demand from the Nordic customers was good and the power generation segment was strong during the quarter. The development in the engineering industry was weaker, particularly in the automotive industry. However, the situation improved slightly towards the end of the quarter. Demand fell in the aircraft industry as well.

Sales rose 1% in total during the second quarter but declined -5% organically. The Benelux and Flow Technology business areas reported the most positive development in organic sales growth, driven by valves for power generation and good performance by companies in the medical technology and marine segments. The weakest performance was by companies in the UK, Measurement & Sensor Technology and Fluids & Mechanical Solutions business areas, primarily because of weaker demand and uncertain market conditions due to covid-19.

Profitability improved for the Group as a whole and the EBITA margin was 13.0 % (12.5%). The improved margin derived mainly from strong performance in companies with customers within medical technology, pharmaceuticals and energy. For the companies with decreased net sales the earnings drop was dampened by temporary cost saving measures and lay-offs. Operating margin improved for five of the eight business areas, with the strongest performance in business area Finland and Industrial Components. Margins deteriorated in the UK and Measurement & Sensor Technology business areas due to significantly lower sales, unfavourable mix adjustments and under absorption of production costs.

The health and safety of our employees, customers and suppliers is always the highest priority and determined efforts are ongoing throughout the Group to cope with and manage this challenging situation. Our decentralised structure, with agile companies working closely with their customers, has facilitated both the financial as well as the operational adaptations that were necessary to do. All companies that experienced a decline in order intake have actively pursued cost saving measures during the quarter. The furlough support that has been available in several countries has helped many companies with considerably declining volumes avoid permanent staff reductions. Of our 7,400 employees in total, approximately 1,500 were affected by various types of temporary lay-offs and short-term work during the quarter. Those figures declined somewhat towards the end of the second quarter, such that approximately 1,000 were still affected in this way, which corresponds to 14% of the Group's employees. Several of our companies are evaluating the need to make permanent staff reductions. 

The Group’s financial position remains strong. Cash flow improved thanks to greater working capital performance compared to last year. Inventories remained however at a slightly high level, but activities to lower inventory levels have intentionally been restrained so that we can ensure delivery service and availability to customers during these uncertain market conditions. Receivables fell in line with the decline in sales.

The transformation in digitalisation and sustainability have accelerated due to the pandemic. These are two important areas that both strengthen competitiveness and generate new business opportunities. Activities to further speed up development in these areas were initiated during the quarter.

Acquisitions
We purposely did not complete any acquisitions during the quarter, but several discussions with interesting companies are ongoing. Due to the unstable market situation, we have decided to extend the acquisition processes to ensure that the right conditions exist for profitable growth in our acquisition candidates. Acquisition opportunities remain favourable, with a good inflow of interesting companies.

Outlook
The current market situation involves both challenges and opportunities and I am confident that our entrepreneurial MDs are doing their utmost to ensure the long-term growth and success of their companies. We have also noticed a gradual improvement as countries and markets have started opening up again. The pace of improvement varies however considerably across companies, segments and geographic markets. Our diversified structure with more than 200 companies in a variety of segments and countries gives us good risk diversification, which creates conditions for stability despite the challenging market conditions.

Indutrade’s strategy and business model works well and we have a stable foundation for continued long-term, competitive value creation. Our performance is based on our skilled and dedicated employees working in all the Group's companies, and I would like to sincerely thank each and everyone for amazing efforts during these challenging and turbulent times.

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 Swedish Securities Market Act. The information was submitted for publication by the agency of the following contact persons at 11.00 a.m. (CEST) on 17 July 2020.

Further information
For further information, please contact:
Bo Annvik, President and CEO, tel.: +46 8 703 03 00,
Patrik Johnson, CFO, tel.: +46 70 397 50 30, or
Frida Adrian, Vice president Communications, Sustainability and IR, tel.: +46 70 930 93 24.


This report will be commented upon as follows:
The interim report will be presented in a webcast on 17 July at 1.30 p.m. (CEST) via the following link:

https://onlinexperiences.com/Launch/QReg/ShowUUID=53DF5716-0F6E-48F4-9982-5C11E30E3F25

To participate via conference call and ask questions, call:
SE: +46 8 505 58 366

UK: +44 333 300 9030
US: +1 6 467 224 956

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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About Us

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.