10/22/2024

speaker
Sven Kristensson
President and CEO, Nederman Group

Thank you and good morning everyone. We are here to present the Nedermann 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 that operational efficiency will see. We have now taken 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 taking first part of the Thomasville with Northrup 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 Robben, 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 weaker market. We had good orders. We had organic and currency-neutral order intake growth in three out of four divisions. and we continue to get orders for near my new target industries. We consider, under the circumstances, having a solid profitability and we had a strong cash flow. And again, we made a smaller acquisition of dual wire technologies, and it gives us a complement with new solutions combining traditional airman robovent solutions to new sectors such as defense, aeronautics, etc.

speaker
Unknown
Chief Financial Officer, Nederman Group

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 kronor 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 large currency impact during negative during the quarter versus quarter three last year. The Swedish kronor, among other things, appreciated approximately 5% versus the US dollar last During quarter three this year, in the same quarter last year, it was actually sliding. So that makes quite a big impact. 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 six billion kroner. For the year to date, order intake is now 4.3%. 7 billion krona versus 4.538 at this point last year as currency neutral 2.9 down um again it's the process technology division with the large projects that is the main reason behind that if you look at sales um a couple of uh lower sales in the quarter versus q3 of last year that that must be said We had fewer major orders at the start of the quarter. We received quite a few 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 kroner versus 1.574, 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. Corona versus 4.687 billion by the end of September 2023. Currency neutral at 7.8% down. Once more, that is largely processed 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 our margins improved, adjusted a bit to 161 million Swedish kronor versus 175 million in the quarter last year. That gave us an EBITDA margin of 11.4% versus up from 11.1% in Q3 2023. Profit after tax, 70 million Swedish kronor, which gives earnings per share of 2.00 kronor versus 2.43 in Q3 last year. For the year to date now, we're on 523 million Swedish kronor in adjusted EBITDA versus 543. at the year after nine months of last year. That's a margin of 12.2%, so that's up 0.6% versus the 11.6% last year. Profit after tax, 258 million, gives an earnings per share of 7.34 kroner, 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 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 had cash flow from operations of 181 million kroner, which is up from 137 in quarter three last year. Year to date now, 351 million kroner in cash flow from operations is slightly down from the £364 million at this point last year. Net debt appears to have increased significantly. It must be pointed out in this £1.761 million that we now see in net debt that 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 for both the Helsingborg premises and the one in Chesterfield, Detroit, US for robovent, they impact the balance sheet significantly there. And if we look at net debt excluding RF-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
Sven Kristensson
President and CEO, Nederman Group

Yep, extraction and filtration technology, Large customer bases, woodworking, metal industry, welding, etc. For those who do not remember. Some of the highlights is that we had the highest orders received 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 mid-size orders. The quarter ended with an all-time high order backlog, supporting good sales in the coming quarters. Something worth mentioning is that a lot of the orders came slightly later than we had expected. That means that we were not able to ship, not only because of storms, bushfires and other excuses, but also because some of the orders came in later in the quarter than may be expected. If you go a little bit for the division in the different regions, EMEA grew in orders received and in sales. There were a number of major orders secured through distributed channels, We had a better and a good level of mid-size 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. So 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 Duerr. It's not a huge company. but it has active climate control, air filtration, and it's focused on US and Canada markets. It's a good complement to existing business where we are having the technology for on-tool extraction and at source. Here we have encapsulating climate control environment and this fits very well for especially the aerospace and for some of the defense industries. It's been integrated in the States organization mainly 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 environments. Again, we continue to launch with a 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. And that is, 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
Unknown
Chief Financial Officer, Nederman Group

When it comes to financials for extraction and filtration technology, orders received, as Sven mentioned, highest ever for a single quarter if you adjust for currency. Unfortunately, with the US dollar weakening against the Swedish kronor, we were very slightly below Q3 of last year. 674 million kronor in orders received is reasonably pleasing, though 676 last year. Currency neutral growth, 2.5%. Organic growth, 1.3%. And year-to-date, it's a rather similar picture. Currency-neutral growth is now 2.4% 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 expectations for the quarter. These delays from the hurricane were a little bit... were very unexpected 653 million last year comparative figures the abita margin now 12.4 percent gave us 78 million swedish krona in adjusted abita versus 83 million in quarter three last year year to date now 13.5 percent abita 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 kronor versus 256 at this point last year. With that, we move on to process technology.

speaker
Sven Kristensson
President and CEO, Nederman Group

Yes, process technology. Here we are in hot air application, meaning recycling of metal materials waste, etc. 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 thought we can make profit in this more cyclical division. If we go to the textile and fiber, which is mainly sold on the brand Luva, 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 U.S., we have booked and secured two major orders, and we see a continuous tendency of insuring to the U.S. market. When it comes to foundries and smelters, we had an increase versus the same quarter last year. We had three large orders. including one to aluminium recycling. As mentioned before, we have a big focus, we have good strong clean air solution for metal recycling, which is a growing trend. If you look at aluminium in Europe, we have about 85% recycled aluminium, US less than 40%, China less than 10%. I admit a 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 custom-made solutions, both orders received and saved were lower than last year. There's a reduced activity in European REED 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 going to 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 rollout continues of the division's new energy-efficient 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 be small but very innovative new products.

speaker
Unknown
Chief Financial Officer, Nederman Group

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 Q3 this year, 24% down for the division. Despite that, Adjusted to beat 46 million versus 51 million in Q3 last year. Gives a margin for this quarter just finished of 11.4%, which is extremely strong for this division, versus 9.1% 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. It's 17.5% 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 kronor in EBITDA versus 167 million at this point last year. Duct and filter technologies found.

speaker
Sven Kristensson
President and CEO, Nederman Group

Yes, going over to duct and filter where we're under the name Nordfab and Menardi sells filters and ductwork and compression system. If we look at the development during the quarter, we've had a good level of orders and we have secured orders also in new growth sectors. We had growth both in US and EMEA 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 ATV is for more automated handling and the Nordfab now, which I mentioned later. So again, Nordfab had orders received in sales in US grew strongly. We have new orders in battery manufacturing and other segments. Investors being made in increased manufacturing and additional warehousing capacity also for heavy gauge ducting. This is large duct work that goes into some of our internal use for this hot air application, recycling of metal, etc. And also in battery and all other. We have increased significantly our capacity. We are taking market share with our North Ham Now concept and we are adding also this second line of heavy duty with more modernized new equipment. They're also increasing the capacity here. Nordfab now, with deliveries within 24 hours, have continued to drive all the volumes in Thomasville. We have, and here comes also the need for the AGVs, 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, low margin, but very good order anyway. Helene negatively impacted manufacturing because it was in South Carolina where we have our main factory for Menardi. 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. 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 giving us a strong position. New laser welding system for facility in Thailand is being installed during this quarter and it will raise the product quality for the entire APEC region. It further increases the distance to the local competition that cannot meet this quality level.

speaker
Unknown
Chief Financial Officer, Nederman Group

Orders received, as Sven mentioned, developed well in the quarter. 7.4% 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, 2.7% currency neutral growth, 592 million versus 582 in the first nine months of 2023. Sales for the quarter, 221 million kroner, up 8.6% currency neutrally from Q3 last year. gave us a very strong EBITDA margin of 20.4% or 45 million kroner, but up from 39 million kroner or 18.5% in Q3 last year. Year to date, now the division has 137 million kroner in EBITDA. That's up from 121 million last year. And that is an EBITDA margin of 20.6% for the year to date versus 19 last year. On to Monitoring and Control Technology Division, Sven.

speaker
Sven Kristensson
President and CEO, Nederman Group

Yes, we take Monitoring and Control 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. NeoMonitor reported strongest growth followed by Gasnet. Sales declined slightly in urban filters and against debt, which we have to remember, very strong comparison. Geographically-wise, we have in EMEA, in sales terms, the strongest region during Q3. Substantial contribution from successful project deliveries from Neomonters and Gassman. 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, Neuromonitors and Gasman 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 tube four. and mainly because their facility were not ready to take on board the equipment we should ship. In Americas, orders received increased sharply in Americas, especially strong demand for neomonitors. We had two major orders to the oil and gas industry, and following introducing Nederman as a cleaner company. The capability is backing the smaller company, NeoMonty, and we are now allowed to work directly with the larger petrochemical activities. Key activities, continued investment to increase production capacity and efficiency for NeoMonitors. It's needed. need to increase our capacity there, and we are continuing to work with that, and that's work that will continue throughout the year. Ongoing preparations in our OTC, Operational Technology Center, for launch of the next generation of InSight products. We have got a new certificate obtained for the newly launched GT 6000 Moblitz. It's a very advanced new product, which includes market analysis, training for sales and partners, external webinars. And we've seen a strong interest in this new, very efficient measurement, mobile measurement product.

speaker
Unknown
Chief Financial Officer, Nederman Group

Financials for monitoring and control technology. Orders received. Up 10.1% versus Q, currency neutral versus Q3 last year, 208 million kroner now. That clearly exceeded the sales of 190 million. Like Sven mentioned, there was some delays on deliveries that, or postponements on deliveries that impacted negatively at the end of the quarter, but still 8.3% sales growth there. The EBITDA margin down somewhat to 15.8% gives us 30 million in EBITDA versus 37 million in Q3 last year. If we look year to date, now we can see that order intake is 626 million kroner. That's significantly more than the sales of 583. So we can see, anyone analysing this can see that the order backlog has increased in the in the division in the quarter, which bodes well for coming quarters. Adjusted to beta, 97 million kroner versus 104.6 for the first nine months of last year means that the margin is now 16.6% versus 19.7 for the first nine months of 2023.

speaker
Sven Kristensson
President and CEO, Nederman Group

So, coming into the outlook, We can say that demand is slightly slower, but our base business strategy digital range means we are asserting ourselves well in the current market. Even if the performance of our division is largely positive, there is a risk that, for example, current interest rate, weaker economic development will impact customers' investment. And we have already seen that. Whether that's going to continue or not, that we will see. Of course, geopolitical uncertainty is another one, but without large order backlog and our ability to increase our share of sales in the industry with good structural growth, 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 insight into damage that us two people, Nerman, 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 can say that Winston Churchill said, never let a good crisis go to waste. It also opens up for good moves and strengthening of our position.

speaker
Unknown
Chief Financial Officer, Nederman Group

So, some upcoming dates. The year-end report for 2024 will be released on the 13th of February next year. The interim 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 questions that listeners may have.

speaker
Operator
Conference 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 6 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
Unknown
Chief Financial Officer, Nederman Group

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 say about that?

speaker
Sven Kristensson
President and CEO, Nederman Group

It's not as simple, but generally speaking, metal recycling has had a as mentioned, not only aluminium, but others also. There is a lot of recycling and need of upgrade. We have aluminium, we have lead recycling and etc. Well, that's still 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 the construction industry as well as consumer furniture, etc. That has 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 and driving price pressure across several other markets as well.

speaker
Unknown
Chief Financial Officer, Nederman Group

How is this impacting the demand? If we take China, first of all, we've not been big 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 slowdown 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.

speaker
Sven Kristensson
President and CEO, Nederman Group

But a lot of those equipments are made anyway in China. We're not really. It's more on the U.S. market that we supply some of that. We supply to all. But it's not so significant. 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 gradually stopping and we are taking care of our own waste here. And 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 Neroman 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 Hurricane Helen negatively impacted sales. Could you possibly quantify the financial impact of this event and do you expect it to have any ongoing effects into Q4?

speaker
Unknown
Chief Financial Officer, Nederman Group

Yeah, what we could say of the NFT 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 you're talking a couple of million in a beta that is basically postponed. With Menardi, I don't know so much.

speaker
Sven Kristensson
President and CEO, Nederman Group

It's not such a large... But they 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 a bit more than a handful of millions.

speaker
Unknown
Chief Financial Officer, Nederman Group

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

speaker
Lena Bloom
Analyst, Handelsbanken

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

speaker
Sven Kristensson
President and CEO, Nederman Group

Very simple answer. Lack of sales. Ship the backlog and you'll see the results in time.

speaker
Unknown
Chief Financial Officer, Nederman Group

Exactly. The organization, we're very pleased they're growing more than 10% or currency neutral in sales still. So their focus is to grow that organization. Unfortunately, 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 unfortunately, It's not a bad thing that the 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

super that's clear and then just one last question for me is it possible to comment anything about the market the competition wise right now and how that has developed in the last couple of quarters very good product yeah i think that's i think that's a fair comment we've taken some orders from competitors

speaker
Sven Kristensson
President and CEO, Nederman Group

We are getting orders now from competitors that have filed for Chapter 11, and we try to emphasize financial stability as not only the lowest price, but also quality financial stability for the supplier, which has been apparent for some who now stand without supplied you to choose and supply a file for chapter 11. So currently, we believe that we are quite certain, it's people that believe 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 deutilization journey. We continue to make it easy, as under our slogan, easy to do business with digitalization tools. Being more objective is obviously not internal, but it's something we're co-working with. We have also our own network. ProQuote, QTV, etc., as we talked about, and even got some awards at different exhibitions and fairs. So we believe that we have a strong position. We are not keen to have a prize war and fight with prize. 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
Operator
Conference 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
Sven Kristensson
President and CEO, Nederman Group

Then we thank you for listening to us and next time same place on channel is the year-end report that we will release February 13 next year. So thank you very much and have a continued good day.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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