10/22/2024

speaker
Matthew Roberts
Chief Executive Officer

Thank you and good morning everyone. We are here to present the Nermann Group Q3 in 2024. And the headline we have had high level of activity and good orders received, especially in three out of four divisions. If we look at some of the highlights, we have continued investments in a more challenging market. We have a continuous strong focus on operational efficiency and the high rate of innovation. The operational efficiency we'll see we have now taking over the new manufacturing and logistics site in Helsingborg and they are moving in and it will take a few months more. We have also taken first part of the Thomasville with Northup now in the duct and filter and we are continuing to build further warehousing and manufacturing for the heavy duty side of it. And we had a very good inauguration ceremony in Chesterfield US close to Detroit for Rob O'Ven where we also now have the possibility to work in a more efficient way. We have also launched a number of new products and systems. So what we see is that we are advancing our position in a slightly or in a weaker market. We had good orders, we had organic and currency, currency neutral order intake growth in three out of four divisions. And we continue to get orders this far near my new target industries. We consider as under the stock and financing having a solid profitability and we had a strong cash flow. And again, we made the smaller acquisition of dual air technologies and it gives us a compliment there with new solutions combining traditional air man Rob O'Ven solutions to new sectors such as defense aeronautics, et cetera.

speaker
Sam Johnson
Chief Financial Officer

If we go on to the key financials now and on to slide four, orders received as Sven mentioned, three of our four divisions saw organic and currency neutral growth during quarter three. Orders for the quarter 1.437 billion Crona versus 1.488 billion in quarter three last year. If you look at the charts, if you see the chart on slide four directly below that, you can see there's quite a lot of currency impact during negative during the quarter versus quarter three last year. The Swedish Crona among other things appreciated approximately 5% versus the US dollar during quarter three this year. In the same quarter last year, it was actually sliding. So that makes quite a big impact. Well, organic growth in three or four divisions, the other three didn't quite compensate for the drop in process technology, which we'll come back to. Orders received now on a rolling four quarter basis on around 6 billion Crona. For the year to date, orders, order intake is now 4.37 billion Crona versus 4.538 at this point last year. That's currency neutral .9% down. Again, it's the process technology division with the large projects that is the main reason behind that. If you look at sales, a couple of lower sales in the quarter versus Q3 of last year, that must be said. We had fewer major orders at the start of the quarter. We received quite a few at towards the end. Those did not then materialize into sales in time to be booked in quarter three. And obviously process technologies we know have fewer large projects in their backlog right now. We'll come back to backlog for that division. Sales for the quarter 1.416 billion Crona versus 1.574, a very strong comparative figures last year. Currency neutral growth minus 6.8%. Again, we see a currency impact of minus 52 million in the quarter versus the same quarter last year. Year to date sales 4.28 billion Crona versus 4.687 billion by the end of September 2020. C currency neutral, that's .8% down. Once more of that is largely process technology division. We have some acquisition growth. It's a relatively small percentage of our overall sales, approximately 1% contribution from acquisitions this year. Profitability was solid and the margins improved. Adjusted a beta 161 million Swedish Crona versus 175 million in the quarter last year. That gave us an a beta margin of .4% up from .1% in Q3 2023. Profit after tax 70 million Swedish Crona, which gives earnings per share of 2.00 Crona versus 2.43 in Q3 last year. For the year to date now we're on 523 million Swedish Crona and adjusted a beta versus 543 at the year after nine months of last year. That's a margin of 12.2%. So that's up .6% versus the 11.6 last year. Profit after tax 258 million gives an earnings per share of 7.34 Crona, which is slightly below the 7.51 that we were at at this point last year as well. Cash flow Sven already mentioned a strong cash flow. This is a very important for us that we continue with this. It enables the investments in these growth enhancing activities that we have the investments in the factories and the operations and the product development. Quarter three have cash flow from operations of 181 million Crona, which is up from 137 in Q3 last year. Year to date now 351 million Crona in cash flow from operations is slightly down from the 364 million at this point last year. Net debt appears to have increased significantly. Excuse me, it must be pointed out in this 1.761 million that we now see net debt, there's a significant increase in the IFRS 16 calculated debt. This is related to the new leases that we have entered into for both the Helting Board premises and the one in Chesterfield, Detroit, US for Rob event. They impact the balance sheet significantly there. And if we look at net debt excluding RFRS 16, we're actually reduced clearly in the quarter. If we move on to the divisions and make a start with extraction and filtration technology, Sven.

speaker
Matthew Roberts
Chief Executive Officer

Yeah, exploration and filtration technology. Large customer bases, woodworking, metal industry, welding, et cetera, for those who do not remember. Some of the highlights is that we have the highest orders we see for a single quarter, currency adjusted. Second only to Q3 2023. We have had strong growth in major orders, solid base business and increased number of midsize orders. The quarter ended with an all time high order backlog supporting good sales in the coming quarters. Something worth mentioning, a lot of the orders came slightly later than we had expected. That means that we were not able to shift, not only because of storms, bushfires and other excuses, but also because some of the orders came in later in the quarter than maybe expected. If you go a little bit for the division in the different regions, in me I grew in orders received and in sales. There were a number of major orders secured for distributed channels. We had a better and a good level of midsize order with something that has been a bit lacking over a period of time here where we've seen the hesitation of maybe smaller customers with activities maybe postponing some of the investment. We had the strongest ever quarterly order intake in America. We had six major orders, three of them in the welding and one in the woodworking. And as mentioned, we had some deliveries that were delayed because of Helene, but again, we will deliver them this quarter. That's not a major issue, but it explains a little bit that we should have had a better sales figure. APAC saw some recovering orders received. We had growth in Southeast Asia, Australia, but we do see remaining challenges in India and especially in China. We see weak sales in those regions. Another look at some of the key activities. We, as mentioned earlier, acquired Doerr. It's not a good company, but it has an active climate control application and it's focused on US and Canada markets. It's a good compliment to existing business where we are having the technology for on tool extraction and at source here we have encapsulating climate control environment and it fits very well for especially the aerospace and for some of the defense industries. It's been integrated in the SACE organization, the Mania of Robovent and they have now started to quote and see at least one a week. So let's see how we can further develop that business. We did launch a new 8x mobile high vacuum series. It meets the latest standards on combustible dust environment. Again, we continue to launch with the steady pace new latest technology both for the hardware as well as we do with the digitalization. We did participate in the largest, I think it's the world's largest international woodworking fair. It was this year in Atlanta and we had lots of success with our digital solution, our integrated particle measurement, integrating into our system and we strengthen our position as the cleaner company also in the woodworking industry. We have taken access and we've got access to the new production and logistics facility in Helsingborg and they have started to move in and modernize the facility. What we will have is a continuous move during the coming month and it should be ready in February next year. We have Robovent's new plant. It was an operation that had divided in like in Helsingborg in several old facilities. Now we have a fully operational new site with better efficiency for both logistics and manufacturing for the future.

speaker
Sam Johnson
Chief Financial Officer

When it comes to financials for extraction and filtration technology, orders received as I mentioned, highest ever for a single quarter. If you adjust the currency, unfortunately with the US dollar weakening against the Swedish Krona, we were very slightly below Q3 of last year. 674 million Krona in orders received is reasonably pleasing though 676 last year. Currency neutral growth 2.5%, organic growth .3% and year to date it's a rather similar picture. Currency neutral growth is now .4% for the division, 1.962 billion in orders received so far. Sales also grew currency neutral but slightly down versus last year. 633 million was a tiny bit behind our expectation for the quarter. So these delays are called from the hurricane where it is a bit over the unexpected. 653 million last year comparative figures. The EBITDA margin now .4% gave a 78 million Swedish Krona in adjusted EBITDA versus 83 million in quarter three last year. Year to date now .5% EBITDA margin is in line with where we were at this point last year. Given that sales are slightly higher than this point last year, the adjusted EBITDA now 260 million Swedish Krona versus 256 at this point last year. With that, we move on to process technology.

speaker
Matthew Roberts
Chief Executive Officer

Yes, process technology. Here we are in Horta application meaning recycling of metal, waste, et cetera. It's also number one globally on high end filtration and climate control for spinning industry and weaving industry and some others. Here we had a development with fewer major orders. There is a continuous slowdown in cyclical industries and we have had a period of lower orders received which has been expected as we've seen the development coming this way. We also had a lower sale but the clear increase in margins gave us a strong EBITDA and we continue to develop the aftermarket service business and it gives us a stable and profitable development. We see that even though the volumes are short we can make profit in this more cyclical division. If we go to the textile and fiber which is mainly sold on the brand Liva, it's been a very challenging situation. We have a high market share and we are impacted by a weaker demand and low capacity utilization in the global spinning mills. That's been especially a very weak trend in China and Turkey. However, in US we have booked and secured two major orders and we see a continuous tendency of insuring to the US market. When it comes to foundry and smelters, we had an increase versus the same quarter last year. We had three large order including one to aluminum recycling. As mentioned before, we have a big focus. We have good, strong, clean solution for metal recycling which is a growing trend. If you look at the aluminum in Europe we have about 85% recycled aluminum, US less than 40, China less than 10. I admit the few years old figures but you get the rationale here that there is a possibility for further investment in this area. There is a strong underlying sustainability trend and that will continue the demand for this recycled product. If we go to customer solutions, both orders are received and saved for lower than last year. There's a reduced activity in European, read German chemical industry. The fabulous prices of energy and those problems have made the chemical industry in Germany very hesitant to further invest there. Which has had an impact on us as well. The strategic sustainability oriented investment in for example, mining and petrochemicals are expected to increase demand in the long term or midterm here. We see possibilities here but maybe it's not gonna happen in our strong position in Germany but in other geographies. Key activities, new sandblasting, paint line, et cetera are now fully operational in our facility in Friesenheim, southern Germany and we have by that increased capacity and reduced manufacturing costs. So we are continuing to invest, to increase our positive development. The role of container of the division's new energy and the efficiency of textile industry which is again an important aftermarket or upgrade possibility on existing business and customers. And as energy prices are soaring, we've seen a large interest in what can see small but very innovative new products.

speaker
Sam Johnson
Chief Financial Officer

Financial to process technology, external orders received in the quarter 353 million versus 419 million in Q3 last year is 13% reduction. Sales 403 million versus 555 million is a clear, it accounts for the entire decrease for the group in quarter three this year, 24% down for the division. Despite that adjusted the beta 46 million versus 51 million in Q3 last year gives a margin for this quarter just finished of .4% which is extremely strong for this division versus .1% last year which was not bad at all it must be said. Year to date now, orders received 1.19 billion versus 1.45 billion last year is .5% down. Sales 1.205 billion, Swedish is approximately half a billion down from this point last year, 29% reduction in sales. Again, despite that an increased margin now up 11% for the year to date gives 132 million Krona in a beta versus 167 million at this point last year. Duct and filter technologies,

speaker
Matthew Roberts
Chief Executive Officer

Sven. Yes, so going over to duct and filter where we under the name Nordfab and Menardi sells filters and duct work in suppression system. If we looked at the development during the quarter, we've had a good level of orders and we have secured orders also in new growth segment. We had growth both in US and the media and the good and very strong profitability continues. This has been positively impacted by the investment in production facilities and machinery. We have definitely improved, we are automating the processes, we have new equipment and we are now currently also installing the ADV is for more automated handling and the Nordfab now which I mentioned later. So again, Nordfab had orders received in sales in US group strongly. We have new orders in battery manufacturing and other segments. Investments being made in increased manufacturing and additional warehouse and capacity also for heavy gauge duct. This is large duct work that goes into some of our internal use for this hot air application, recycling of metal, et cetera, and also in battery and all other. We have increased significantly our capacity. We are taking market share with our Nordfab now concept and we are adding also this second line of heavy duty with more modernized new equipment and also increasing the capacity here. Nordfab now with deliveries within 24 hours have continued to drive order volumes in Thomasville. We have, and here comes also the need for the ADVs, the modernization of the semi-automated or automated warehousing and distribution because we are now unique in this that we can supply most of standard product within 24 hours. Menardos orders received remain on historically high levels we have efficient deliveries and high manufacturing utilization have good profitability. We've got one large order, very large order high profit lower margin, but very good order anyway. Helene negatively impacted manufacturing because it was in South Carolina where we have our main factory for Menardos. The key activities is a continuation of a digitalization journey. We have now introduced the beam objects and we are continuously rolling out that to customers and resellers and it generates a large number of product downloads. So a combination of our efficiency in manufacturing and distribution combined with the digitalization and simplification of the order process and also for architects to utilize our product is given us a strong position. New laser welding system for facility in Thailand is being installed this quarter and it will raise the product quality for the entire APAC region. It further increase the distance to the local competition that cannot meet this quality level.

speaker
Sam Johnson
Chief Financial Officer

Orders received as Sven mentioned developed well in quarter .4% currency neutral growth leaves 203 million in order intact for the quarter versus 195 million in Q3 2023. Year to date we are now clearly positive .7% currency neutral growth, 592 million versus 582 in the first nine months of 2023. Sales for the quarter, 221 million Kroner up .6% currency neutrally from Q3 last year gave us a very strong a beta margin of 24% or 45 million Kroner from 39 million Kroner or .5% in Q3 last year. Year to date now the division has 137 million Kroner in a beta that's up from 121 million last year and that is an a beta margin of .6% for the year to date versus 19 last year. Onto monitoring and control technology division Sven. Yes, we

speaker
Matthew Roberts
Chief Executive Officer

take monitoring control and technology and during the quarter we had strong orders received. We have a large order backlog and that led to a slightly higher sales versus Q3 last year. Neon monitor reported strongest growth followed by gas net. Sales declined slightly in over a few percent against it which we have to remember very strong comparison quarter. Geographically wise we have in EMEA in sales term the strongest region during Q3 substantial contribution from successful project delivery from Neon monitors and gas net. Orders received were largely in line with Q3 2023. APAC orders received declined slightly and this reduction was linked to the weak performance of Chinese economy. We saw a decline in demand here during the summer. However, Neon monitors and gas still booked several strategically important orders in the region. So it's not doom and gloom but compared to the strong growth we have had in the region earlier it was a slight decline. We also seen in APAC delays on certain deliveries and that has been due to the request of the customers and some of the sales is now pushed into Q4 and mainly because their facility were not ready to take on board the equipment we should ship. In Amarcas orders received increased sharply in Amarcas especially stronger melt before Neon monitors. We had two major orders to the oil and gas industry and following introducing Neon as a cleaner company the capability is backing the smaller company Neon Monty and we are now allowed to work directly with the larger petrochemical activities. Key activities continue to increase production capacity and efficiency for Neon monitors. It's needed, we need to increase our capacity there and we are continuing to work with that and that's the work that we'll continue throughout the year. And ongoing preparations in our OTC operational technology center for launch of the next generation of inside products. We have got a new certificate obtained for the newly launched GT 6000 Noblis. It's a very advanced new product which include market analysis training for sales and partners external webinars and we've seen a strong interest in this new very efficient mobile measurement product.

speaker
Sam Johnson
Chief Financial Officer

Financial monitoring and control technology orders received up .1% versus Q3 last year, 208 million Crona now. That clearly exceeded the sales of 190 million. Like Sven mentioned there were some delays on deliveries or postponements on deliveries that impacted negatively at the end of the course but still .3% sales growth there. The EBITDA margin down somewhat to .8% gives us 30 million in EBITDA versus 37 million in Q3 last year. If we look here today now we can see that order intake is 626 million Crona, that's significantly more than the sales of 583. So we can see, anyone analyzing this can see that the order backlog has increased in the division in the quarter which bodes well for coming quarters. Adjusted EBITDA 97 million Crona versus 104.6 for the first nine months of last year means that the margin is now .6% versus 19.7 for the first nine months of 2023.

speaker
Matthew Roberts
Chief Executive Officer

So if we coming into the outlook, we can say that demand is slightly slower but our base business is strong in digital range mean we are asserting ourselves well in the current market. Even if the performance of our division is largely positive there is a risk that the example current interest rate weaker economic development will impact customers investment and we have already seen that there whether that's going to continue or not that we will see. Of course, your political uncertainty is another one but without large order backlog and our ability increase our share of sales in industry with good structure go, we take a cautiously positive view of development in the coming quarters. Even if the outlook in our industry could be temporarily dampened by various external factors the long term potential remains. And in a world we've grown inside into damage that poor air does to people near man with our leading position in industrial air filtration has a key role to play and a good potential for continued growth. So it's also so that it gives opportunities in a tougher market situation we continue to strengthen our position in this current environment. And as our Englishman in front of me we can say that Winston churches and never let the good crisis go to waste. It also opens up for good moves and strengthening of our position. So

speaker
Sam Johnson
Chief Financial Officer

some upcoming dates, the gear in report for 2024 will be released on the 13th of February next year. The in report Q1 will be on the 25th of April. The annual general meeting then four days after on the 29th of April. Q2 report will come out on the 15th of July and the Q3 report on the 23rd of October next year. Some dates for your calendars there. And with that, I think we can open up for any questioners that listeners may have.

speaker
Conference Moderator
Moderator / Operator

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Lena Bloom from Handelsbanken. Please go ahead.

speaker
Lena Bloom
Analyst, Handelsbanken

Hi, Sam and Matthew. Thank you for taking my questions.

speaker
Sam Johnson
Chief Financial Officer

Good morning, Lena. Good morning.

speaker
Lena Bloom
Analyst, Handelsbanken

So firstly, on group level, is it possible to give some color on which industries that are currently driving order intake? Is it still industries such as battery, renewable energy and metal recycling that demonstrates higher growth versus the more traditional industries? Or what can you see about that?

speaker
Matthew Roberts
Chief Executive Officer

It's not as simple, but generally speaking, metal recycling has had a, as mentioned, not only aluminum, but others also there. There is a lot of recycling and need of upgrade. We have aluminum, we have lead recycling and et cetera, where that stills activity. Where we've seen that it's a little bit weaker or definitely weaker in some European is the woodworking industry due to the lower activity in construction industry as well as consumer in, yeah, furniture et cetera. That has been definitely been weaker. So everything that goes for recycling is doing better than the rest.

speaker
Lena Bloom
Analyst, Handelsbanken

Perfect, thank you. And then also there has been a lot of discussions regarding overproduction of battery manufacturing in China, affecting competition, driving price pressure across several other markets as well. How is this impacting the demand?

speaker
Sam Johnson
Chief Financial Officer

In the, we could say we've not, if we take China first of all, we've not been being at all in the Chinese battery market. But if we then talk about that potential impact around the rest of the world, we are still seeing growth there because of the reshoring in the US. Yes, maybe there's a slow down coming and some companies are delaying plans and things on batteries, but it's still a market that is there. And it must be remembered, every electric car also has a lead battery in there. And those lead batteries, for example, require recycling and filtration for production. So it is a positive market. Yeah,

speaker
Matthew Roberts
Chief Executive Officer

but it's not, a lot of those equipments are made anyway in China. We are not really, it's more on the US market that we supply some of that. We have supplied to all, but it's not so significant. It's, it is more important than recycling of metals where you have, especially if you have highly toxic materials like in lead batteries and so on, which there has been over the last few years. If you remember all how they shipped it to Nigeria and other places, that's right. We are taking care of our own waste here. It's also seen as an asset when you can recycle the metal in this. So I would say there's been no impact on the other one because we have not been active in that market.

speaker
Lena Bloom
Analyst, Handelsbanken

Okay, super good to hear. And then you also mentioned that the Hurricane Helen negatively impacted sales. Could you possibly quantify the financial impact and do you expect it to have any ongoing effect in Q4?

speaker
Sam Johnson
Chief Financial Officer

Yeah, what we could say, of the ENFT division, which probably had the biggest impact, that was a handful of million in revenue there. So they have rather good margins on there. So there's a few talking a couple of million in a beta that is basically postponed. With Monardi, I don't know so much. It's not such a large volume. They

speaker
Matthew Roberts
Chief Executive Officer

stopped the production a few days, but it's not the end of the world. It's just pushed into Q4, but there were shipments in the divisions in North America that could not be done. It also had some in MCT that couldn't be shipped due to, or they didn't want it due to the risk of being caught into this. So the result is effect a bit more than it has and it's a handful of millions.

speaker
Sam Johnson
Chief Financial Officer

Exactly, it's important to understand that just delays it. It's not money that will never come back. It will likely, we'll get it all back in Q4 as well.

speaker
Lena Bloom
Analyst, Handelsbanken

Okay, perfect. And then my next question is regarding the a beta development for the monitoring and control technology segments. The decline in a beta compared to last year, what are the main drivers of this decline and what can we expect going forward?

speaker
Matthew Roberts
Chief Executive Officer

Very simple answer, lack of sales. Ship the backlog and you'll see the results in the bank.

speaker
Sam Johnson
Chief Financial Officer

Exactly, the organization, we're very pleased that they're growing more than 10% or currency neutral in sales still. So their focus is to grow that organization. Unfortunately, and I don't want to say unfortunately, but if you look at, like I mentioned, year to date, I think they're 45 million lower in sales than orders. And it's not a bad thing that orders keep continuing to grow, but we need to get the sales to catch up. So some more efficiency in production and actually more capacity in production will clearly drive the margins up when it comes. This has very high contribution margins in this division as we've mentioned before.

speaker
Lena Bloom
Analyst, Handelsbanken

That's clear. And then just one last question for me. Is it possible to comment anything about the market competition wise right now and how that has developed in the last couple of quarters?

speaker
Matthew Roberts
Chief Executive Officer

Very good product.

speaker
Sam Johnson
Chief Financial Officer

Yeah, I think that's a fair comment. We've taken some orders from competitors. We are getting

speaker
Matthew Roberts
Chief Executive Officer

orders now from competitors that have filed for chapter 11. And we try to emphasize financial stability as not only lowest price, but also quality financial stability for the supplier, which has been apparent for some who now stands without the supply due to choose some supplier has filed for chapter 11. So currently we believe that we are quite certain it's performably, we are moving forward and we have a stronger position with the latest technology when it comes to, as I mentioned, we continue with innovation. We continue our de-utilization journey. We continue to make it easy as under our slogan, easy to do business with digitalization tools. Beam object is obviously not internal, but it's something we're co-working with. We have also our own ProQuote, Qtb, etc. As we've talked about and got even got some awards at different exhibition and fast. So we believe that we have a strong position. We are not keen to have a price war and fight with price. That is not how we try to continue with high quality stability, etc.

speaker
Lena Bloom
Analyst, Handelsbanken

Super, thank you very much. And thank you for answering all my questions.

speaker
Teleconference Operator
Call Operator

Thank you.

speaker
Conference Moderator
Moderator / Operator

Thank you. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

speaker
Matthew Roberts
Chief Executive Officer

Yeah, then we thank you for listening to us. And next time, Same Place Science Channel is the year end report that we will release February 13 next year. So thank you very much and have a continuous good day.

Disclaimer

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