Nederman Reports 18.1% Growth In Orders In Q4 2019

Company Performance

Nederman Reports 18.1% Growth In Orders In Q4 2019

Nederman focuses on Luwa bottom line growth, acquires Gasmet Technologies Oy Nederman posted a very strong fourth quarter 2019, in terms of orders, and operating cash flow. For quarter 4 for 2019, incoming orders were SEK 1.14 billion versus SEK 968 million in Q4 2018, which is an increase of 18.1% currency-neutral. sSales were SEK 1.087 billion versus SEK 1.069 billion in 2018. Currency-adjusted, that's 1.8% higher than the fourth quarter of 2018. Adjusted operating profit was SEK 113 million versus SEK 129 million in 2018. The adjusted operating margin for Q4 2019 was, therefore, 10.4%. Net profit for the quarter was SEK 72.4 million versus SEK 89.4 million in Q4 last year. Earnings per share, SEK 2.06 versus SEK 2.55 last year. For the full year 2019, orders increased currency-neutral by 15.2% to SEK 4.17 billion from SEK 3.48 billion in 2018. Sales, SEK 4.31 billion in 2019 for the year versus SEK 3.55 billion in 2018; currency-adjusted, increased 16.6%. Adjusted operating profit, SEK 349 million for the full year 2019, that's up from SEK 319 million in 2018. And operating margin is 8.1%. Net profit for the full year, SEK 226 million versus SEK 203 million. Divisionwise, Nederman Extraction & Filtration Technology had a slight decline in orders during Q4. Nederman Process Technology deals with large projects across various industries – textiles, chemical processing, foundries, smelters. This division had a very strong quarter in terms of orders received. However, this does not reflect in the results as the orders came in late December and could not be converted into sales before year-end. In EMEA, some of the largest smelters and foundries booked orders of SEK 50 million with Nederman. There was also strong demand from the asphalt industry. There is uncertainty on the investment, investors are cautious in North America and APAC and several anticipated orders have been postponed. “Textile segment is, of course, something that remains relatively weak, but we have booked quite a few large orders, and there are many smaller orders coming back here in quarter 4. We also launched the Digi 7, which is a new generation of control system that is also prepared to use inside the IoT solutions going forward,” informed Sven Kristensson, President, CEO & Director, Nederman Holding AB, during a conference call. Nederman’s Duct & Filter Technology division supplies both Nederman and external customers with ductwork and filters. Nordfab, Nederman’s duct company and duct group sells various type of piping systems, had a weak fourth quarter. The big shortfall here is the problems emanating from the ERP implementation in US, which led to significant delivery disruption during the quarter. “Menardi, selling filter solutions, continued to see customers in North America postponing decision on larger investments. This goes also all the way back to Process Technology where you see the hesitation continues. Performance in EMEA was better, a pattern we've seen for the group as a whole,” said Kristensson. Nederman Monitoring & Control Technology had a strong Q4, posting double-digit organic growth again in order intake. This division has been responsible for developing Nederman Insight - NEO Monitors, Auburn FilterSense, and has acquired Gasmet Technologies Oy. Regionwise, the company performed well in the EMEA, with strong organic growth in order intake, in particular, with the foundry orders. The company’s Process Technology division booked a fairly large order on the textile front in Egypt. In Americas the biggest contributing factor for the poor performance is the lack of investment in the larger projects in North American market. Outlook Many of Nederman's markets, including the US and China, and recently also to some extent, Germany are still characterised by uncertainty and cautiousness. “The coronavirus outbreak in China has added further uncertainty, though it's too early to accurately assess the impact on Nederman's sales and operations. Despite Nederman's strong Q4, decisions on major investments still being delayed, resulting in considerable volatility in orders received,” informed Kristensson. He further added, “Despite the challenges, Nederman's basic view remains one of cautious optimism. Environmental issues will remain important for our customers and that can be expected to soften the effects of a weaker economy. And the group continues to strengthen its position in several key areas where future growth will occur.” After the Luwa acquisition, the company has focused more on bottom line growth than on top line growth. According to Kristensson, “I would say that the Luwa order backlog, and that also includes in the Process Technology, is significantly more healthy today than it was when we acquired the company. But that is a part of our way of working and you will see a significantly more healthy backlog.” According to Matthew Cusik, Senior VP & CFO, Nederman Holding AB, “We acquired Luwa in October 2018. During the year up until that point, price and net of our ownership, orders have been booked that were significant orders but perhaps at margins that Nederman would not have booked things at. However, they were still profitable and you see that in Q4 that there was extremely high sales revenue from Luwa in Q4. We now have a change in management in Luwa. We've worked very hard to look at only the bottom line rather than top line growth. It's very easy to grow the top line growth, particularly in Process Technology, if we want to, but we really need to make profitable business. And therefore, if we take the APAC region as a whole, the single biggest change in the quarter is from Luwa.” Vision for Luwa Nederman will continue to develop the Luwa business and find synergies within the group. According to Tomas Hagstrom, Senior Vice President and Head of Division – Process Technology at Nederman Group, “We will build on the strength of Luwa. Nederman specializes in 4.0 digitisation, which will benefit Luwa too. The technologies of the group’s divisions can be combined to offer solutions to various industries. Nederman’s 2025 vision is to grow the company as a clean air company, and Luwa is an important part of that vision.” DigiControl 7: Industry 4.0 in clean air for textile industry Luwa Air Engineering recently announced a major development to its DigiControl suite of air engineering controls. DigiControl 7 is the latest in a line of market-leading systems from the company. Renowned for its quality and performance in the control of textile air conditioning and filtration, Luwa has now produced a combination of hardware, software and cloud services to move industrial environments to a new level. DigiControl 7 is capable of precisely controlling industrial environments with minimal human intervention. Specifically, spinning and weaving operations with natural fibres will be closely maintained for maximum yield and quality. “Our strength is the coordination of equipment, control and applications knowledge. DigiControl 7 builds on that strength with top-class controls technology and IoT solutions,” said Ulf Mattison, CEO, Luwa. Luwa’s integration with Nederman allows it to leverage its parent company’s innovative Insight remote monitoring platform. Insight brings real-time oversight to production and filtration operations, integrating sensor data across the cloud. In addition, Insight can produce predictive notifications to operators and maintenance teams so that unplanned downtime is minimised. Ulf Mattison, CEO of Luwa states, “Our strength is the coordination of equipment, control and applications knowledge. DigiControl 7 builds on that strength with top-class controls technology and IoT solutions.”