Interim report second quarter and first half of 2020
|Second quarter 2020
1 January – 30 June 2020
Strong earnings despite lower demand and uncertain market conditions.
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.
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.
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.