Interim report 1 January – 31 March 2020
The first quarter
» Net revenue totalled SEK 538 million (564)
» Operating profit amounted to SEK 57 million (71)
» Profit before tax amounted to SEK 52 million (67)
» Profit after tax amounted to SEK 40 million (52)
» Earnings per share were SEK 1.43 (1.87)
Important events during the period
» Limited impact of the COVID-19 pandemic to date
Events after the end of the period
» To ensure financial latitude, the Board of Directors is proposing that no dividend be paid
» Annual General Meeting postponed until 25 June
CEO’s comments on the Group’s development during the period
The year began with the same stable conditions for our business units. During the first quarter, the customer-specific volumes within Industrial Solutions remained at a good level, while activities within project-related operations increased. For Industrial Products, the trend was also positive up until the middle of March, at which point some of the companies in the business unit were affected by the production stoppage in the automotive industry resulting from the COVID-19 pandemic. Within Precision Technology, operations linked primarily to medical technology developed well, while other areas experienced a slightly weaker market climate. On the whole, the financial effects of the ongoing pandemic were limited during the period. Compared to last year’s strong opening quarter, sales fell by 4.5 per cent. Operating profit declined by 20 per cent and the operating margin fell from 12.5 to 10.5 per cent. The profit margin was 9.6 per cent 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 almost 8 per cent, while operating profit declined by 24 per cent in relation to the comparison period. The quarter began strongly, above all in respect of proprietary products targeted at furniture and fittings manufacturers as well as within infrastructure. Around 40 per cent of the business unit’s sales are made up of deliveries to the automotive industry. A slight decline in the sector was being noticed as early as the end of last year, and the production stoppages among vehicle manufacturers in March resulted in a further significant loss of volume. Blowtech’s two facilities were affected first, with staff immediately being laid off on a temporary basis. Several of the other units have also subsequently lowered their rate of production through reduced working hours and the implementation of other measures.
The Industrial Solutions business unit
Sales within the Industrial Solutions business unit fell by almost 5 per cent, while operating profit declined by 14 per cent compared to last year. Developments during the period varied between the companies. Project-related operations at NPB and Canline continued to generate good profitability, while Fredriksons’ Swedish unit demonstrated both growth and stronger earnings. As a result of official decisions, Fredriksons’ unit in China was impeded by the week-long closure in connection with the Chinese New Year holiday, but was soon fully operational again. Usual project variations resulted in lower sales, yet incoming orders were high, particularly towards the end of the period. Apart from in China, the companies in the business unit did not experience any particular impact from the COVID-19 pandemic. If the general travel restrictions persist for an extended period, the potential to install automation solutions may be limited in future, however. Technical developments remained a general area of focus. For example, Jorgensen has expanded its offering with new digital solutions for aftersales and service.
The Precision Technology business unit
Marginally higher sales were reported within the Precision Technology business unit. Operating profit was 22 per cent below that of the comparison period. Generally speaking, operations related to medical technology enjoyed strong development, whereas most other sectors experienced a weaker market climate, partially as a result of the COVID-19 pandemic. For example, the volume of project orders to the automotive industry was significantly lower than normal. The sector spread and the resulting changing assignment structures within the business unit gave rise to unevenly distributed capacity between the production sites during the quarter. The general decline witnessed during the autumn gave rise to a gradual transition for the majority of our precision companies. They were therefore well prepared for the new conditions that now exist, and the situation generally remains stable.
Our business model, with decentralised and entrepreneur-governed operations, made it easier to adapt rapidly to the new conditions arising from the COVID-19 pandemic. Thanks to the solid experience possessed by the various company management teams, locally tailored measures were implemented, for example in respect of the introduction of procedures and guidelines for employees. One outcome of this has been that, to date, we have not witnessed any general increase in sickness absence.
The decision by the Board of Directors to postpone the Annual General Meeting is mainly intended to protect the health and safety of shareholders and employees. At the same time, it is our hope that, by holding the AGM at a later date, more shareholders can be given the opportunity to take part or otherwise exercise their rights. The postponement of the AGM has also given the Group management the opportunity to focus fully on business-related activities in this challenging situation.
Our operations cover many different areas, with a significant proportion focusing on the packaging and food industry as well as medical technology. These sectors are generally less sensitive to the economic situation, and even now are demonstrating relatively good stability. Within the Industrial Solutions business unit, incoming orders have been stronger in recent times than during the comparison period, and on the whole things are looking good for the current year. The resumption of vehicle manufacturing will gradually increase volumes, although not yet fully to the levels previously forecast for the year. Developments around us are creating new patterns of behaviour, which will also entail new business opportunities in the future. We are strengthening our efforts within sales and innovations. After a number of strong years generating good profits, our financial strength provides us with excellent conditions to adjust and develop our offer.