Interim report 1 January – 30 June 2020
THE INTERIM PERIOD
» Net revenue totalled SEK 1,084 million (1,145)
» Operating profit amounted to SEK 126 million (145)
» Profit before tax amounted to SEK 116 million (136)
» Profit after tax amounted to SEK 89 million (106)
» Earnings per share were SEK 3.20 (3.80)
THE SECOND QUARTER
» Net revenue totalled SEK 546 million (581)
» Operating profit amounted to SEK 69 million (74)
» Profit before tax amounted to SEK 64 million (69)
» Profit after tax amounted to SEK 49 million (54)
» Earnings per share were SEK 1.77 (1.93)
Important events during the period
» Limited impact of the COVID-19 pandemic to date
» The AGM decided that no dividends should be paid
» Conversion of personnel convertibles implemented
CEO’S COMMENTS ON THE GROUP’S DEVELOPMENT DURING THE PERIOD
During the second quarter, we have been able to successfully maintain our margins in a challenging situation. The stable start to the year and the strong results over the past three-month period generated an enhanced profit margin since the start of the year. The market situation has generally stabilised in recent times, and incoming orders for the first half of the year increased in relation to the comparison period. The level of activity was high above all in the medical technology sector, while sales linked to automation projects have remained strong.
On the whole, the financial effects of the ongoing pandemic were limited during the interim period. There have been considerable variations in the degree of impact, however, both between and within our business units. The production stoppage in the automotive industry and periodic shutdowns in other sectors impeded developments for parts of the Group’s operations. However, the resulting loss of sales was compensated to a large extent by an upturn in other areas. We implemented a rapid adjustment in line with the altered conditions in order to optimise our sales activities and reduce our costs. The government support we received further dampened the negative impact on our profits.
In relation to the record results achieved during the comparison period, sales fell by 5 per cent and operating profit declined by 13 per cent. The operating margin fell from 12.7 to 11.6 per cent. The profit margin was 10.7 per cent (11.9) and continued to exceed our long-term goal of at least 8 per cent.
The Industrial Products business unit
Within the Industrial Products business unit, sales fell by just over 17 per cent, while operating profit declined by 21 per cent in relation to the comparison period. The operating margin was 13.8 per cent (14.4). Strong growth for the business unit’s proprietary products, particularly within infrastructure and marine, has contributed to good margins being retained overall. The production stoppages by automotive manufacturers mainly affected Blowtech’s two facilities, resulting in a significant drop in sales. However, rapid adjustments, good cost control and government support measures have minimised lost profits. The automotive manufacturers have opened up again during the second quarter, and volumes have gradually increased, although to a lower level than previously. A number of redundancies have been effected within the business unit, and some of the workforce remain covered by short-term temporary layoffs.
The Industrial Solutions business unit
Sales within the Industrial Solutions business unit fell marginally, while operating profit declined by 10 per cent compared to last year. The operating margin was 11.2 per cent (12.3). Sales of the business unit’s proprietary automation solutions increased, while an element of general restraint within a number of sectors dampened demand for customer-specific products. A less favourable project mix, combined with reduced profits in those units that have been affected by the pandemic, explain the slightly poorer profitability in relation to the comparison period. Applicable travel restrictions have meant that the scope of service deliveries has been at a low level and the development work relating to new digital aftersales solutions is continuing. In addition, alternative solutions for the installation of automation equipment are being evaluated in those cases where the potential for physical presence remains limited.
The Precision Technology business unit
Overall, the Precision Technology business unit reported marginally higher sales, while operating profit was just over 4 per cent below that of the comparison period. The operating margin was 18.1 per cent (19.4). The companies that have a high proportion of assignments towards the medical technology sector continued to develop strongly. The conditions were generally more restrained within other sectors, partially as a result of the pandemic, and there were large variations within the business unit. Temporary layoffs and a few redundancies have been implemented in some of the companies, while others have reinforced their personnel resources in order to respond to increasing demand. A general stabilisation was experienced on several markets at the end of the period, for example with new project enquiries being received from the automotive industry where development activities had been suspended for a period.
Our decentralised, entrepreneur-governed business model comprising three business units has proven to be successful in times of crisis. The mix of industries with a high share of sales within sectors that are less sensitive to the economic situation, such as medical technology as well as the packaging and food industries, is contributing to good stability. Our focus on profitable growth, by adopting a long-term approach when working with strategic customers and assignments, is also playing a role. At the same time, active product development is generating increased sales of proprietary products, where we have the potential to make optimum use of available resources. This also applies to our project operations to a great extent. The Group is still facing challenges, of course. We have not achieved the internal goals we had set for 2020, yet we have still performed strongly under the prevailing circumstances. Healthy staff, high flexibility, active sales and cost control are the cornerstones of our operation.
We are making preparations for the further upturn that is indicated within medical technology, both directly and indirectly linked to COVID-19. For companies with automation projects within Industrial Solutions, extensive deliveries and installations are anticipated. In this respect, we are working with alternative solutions where physical presence is prevented by travel restrictions, although the ongoing existence of restrictions in the long-term will have a negative impact on us. The same applies to aftersales activities, above all service, which have been at a reduced level during the pandemic. Within automotive manufacture and other operations that have been shut down, volumes are gradually increasing, although they are not expected to return to the forecast levels this year. At the same time, we are witnessing growth in other sectors. Our financial strength provides us with good conditions to adapt and further develop our offer. Through innovations, technical development and proactive sales work, we will make use of the new business opportunities being generated by altered behavioural patterns. Furthermore, our aim is to continue to identify complementary acquisitions in accordance with our long-term strategy. Based on developments during the first half of the year, we are positive about our potential to continue to perform well in the near future.