Interim report 1 January – 30 June 2022

THE INTERIM PERIOD
»    Net revenue totalled SEK 1,927 million (1,522)
»    Operating profit amounted to SEK 244 million (226)
»    Profit before tax amounted to SEK 233 million (221) 
»    Profit after tax amounted to SEK 182 million (172)
»    Earnings per share were SEK 3.14 (2.97)

THE SECOND QUARTER
»    Net revenue totalled SEK 942 million (824)
»    Operating profit amounted to SEK 98 million (123)
»    Profit before tax amounted to SEK 95 million (117) 
»    Profit after tax amounted to SEK 74 million (91)
»    Earnings per share were SEK 1.28 (1.57)

Important events during the period
»    Extended credit facilities
»    2:1 share split implemented

CEO’S COMMENTS ON THE GROUP’S DEVELOPMENT DURING THE PERIOD
The Group
We are able to sum up a strong first half of the year. Despite more acute challenges, the Group is reporting growth and healthy margins. The latter are not quite matching the high levels achieved last year, although the operating profit improved by 8 per cent. Operating margin amounted to 12.7 per cent (14.8) and the profit margin was 12.1 per cent (14.5). Net revenue increased by 27 per cent, of which 12 per cent was organic growth.
     During the second quarter, primarily profitability was affected by the increasingly difficult external factors. Compared to the corresponding period last year, net revenue rose by 14 per cent, mainly related to our latest acquisitions, while operating margin fell from 14.9 to 10.5 per cent. 
    The trend from the previous quarter, with a declining level of activity within several sectors, has been amplified in recent months. There are also areas where we are witnessing continued strong demand, but in the current situation, with significant shortages of materials and components, lead times are growing longer. Our operations are flexible, but the above challenges have nevertheless affected our efficiency to a certain extent. At the same time, we have experienced tangible cost increases as a result of escalating purchase prices and the lingering effects of the Coronavirus pandemic.

The Industrial Products business unit
Compared to last year’s first six months, sales rose by 43 per cent, of which 21 per cent related to business combinations. The operating profit improved by 22 per cent.  
    On the whole, the business unit is reporting a healthy volume of orders, although disruptions in our customers’ supply chains have resulted in delays to deliveries and to the start-up of new projects. This trend is most noticeable in the automotive sector, which has become increasingly cautious. During the second quarter, we witnessed reduced margins as a result of significant cost increases. The impact on profits of the implemented price adjustments will not become apparent until later. One positive factor is the good business opportunities that have been generated in the wake of the increasing commitment to sustainability among a number of customers. In this respect, the business unit’s companies, all of which work with polymers, are well prepared when it comes to important factors such as the choice of materials, production methods and circularity.   

The Industrial Solutions business unit
In relation to last year’s first six months, sales rose by 30 per cent, of which 16 per cent related to business combinations. Operating profit improved by 13 per cent compared to corresponding period last year.
    Generally speaking, the second quarter was characterised by diminishing contract volumes and delays to a number of major automation projects. In addition, the operations in China were hampered by a period of lockdown linked to the Coronavirus pandemic. The difficulties in terms of compensating fully for increased costs in ongoing assignments had a direct impact on profitability. There have been indications of a lower rate of growth and a declining willingness to invest among major players, primarily within the packaging sector, and this has given rise to more aggressive marketing activities within the business unit. This includes investments in aftersales, with software as part of the expanded offer. The development of new business areas, for example for sustainable energy solutions, as well as the establishment of new geographic markets, are progressing. 

The Precision Technology business unit
Sales decreased by 4 per cent and operating profit fell by 19 per cent compared to the first half of last year.  
    A generally cautious attitude was observed during the second quarter, above all among major customers as a result of significant disruptions in their supply chains. A number of areas are reporting high activity, although growth is being dampened by the same reasons. Our own operations are also being affected by a shortage of input goods as well as cost increases that cannot be directly compensated through price adjustments. Last year’s extremely high capacity utilisation, in combination with a favourable product mix, resulted in excellent profitability, which has now reverted to a more normal level. In order to maintain this, aggressive sales activities are being conducted through new and more in-depth collaborations between the companies in the business unit.

Future development
The indications of lower volumes and falling demand that we received from a number of customers towards the end of the previous quarter have largely been realised. The challenges linked to the shortage of materials and components have hampered both our own operations and those of our customers. Overall, the Group still boasts good delivery capacity, but the conditions have conclusively become more difficult. This is seen most clearly in the impact on our major automation projects, where many customers are postponing deliveries of ongoing projects and delaying the start-up of new ones. At the same time, costs are continuing to increase. We are continually adjusting our prices, although with a somewhat delayed effect. One sign of improvement since the end of the previous quarter is that staff absence related to Covid-19 has decreased.
    We are definitely in a tough situation, but we have confidence in our business model. It provides the Group with the necessary tools to adapt rapidly in the event of both upturns and downturns. Our committed employees are constantly looking for new ways of making progress. We are therefore shifting up a gear in areas such as sales and innovation. In order to reinforce the impact of this work, the collaboration between our companies is also being extended.
    A prolonged period of strong results has provided the Group with a solid financial position. Through recently expanded credit facilities, we have further reinforced our potential to remain aggressive when it comes to investments within marketing activities and technical development, for example. Our financial strength also provides us with good conditions to implement further strategic acquisitions.