Welcome to the Nederman Holding Q1 presentation for 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing hash five on their telephone keypad. Now, I will hand the conference over to CEO Sven Kristensson and CFO Matthew Cusick. Please go ahead.
Good morning, everybody, and thank you for coming and listening to us. We are here to present the first quarter of 2024. If we start with a small summary, we say that we have had a quite positive start of the 2024. We have had a good sales mix, and that includes an increasing portion of service aftermarket business, and we have, by that, it come to a slightly better result. The margins are increasing. For the rest, quarter one, we have had a stable performance, and this is in an increasingly uncertain market. But we have been able to keep up the order intake. Healthy orders received. It's actually the second highest quarterly ordering intake ever. So we have a good performance here.
Margins are higher, solid cash flow, and we are continuing advancing and with new product launches, and we do have a stronger presence in a growing industry, and we have also investment in increased capacity and efficiency in different areas.
If I move on to slide four and start my summary of the key financials. Orders received, currency neutrally, they increased 0.8% compared with Q1 2023, which is obviously a very strong quarter. Like Sven mentioned, it, it's our second highest quarterly order intake ever. Organic growth, very slightly negative. We had the acquisition of Aagaard in 2023. That has contributed some of the growth here, too. But the currency neutral plus 0.8% and over that SEK 1.5 billion mark. When it comes to sales, sales were lower than orders, orders received, but just below SEK 1.4 billion, 1.397 million, which is a decrease, both currency neutral and organically.
The main reason behind that, and this shouldn't be a major surprise in terms of the Process Technology division, is that they have had lower order intake in the back end in the last couple of quarters, and therefore, they are the biggest contributors to the decrease. Like I say, over SEK 100 million less in sales than orders means that our backlog of orders has obviously increased. Profitability-wise, Sven mentioned the margins are improving. We've invested in production and logistics, which make a positive contribution to profitability. There's also a favorable sales mix, and we could say between the divisions in respect that the most profitable divisions are those that are contributing more of the overall portion of sales.
The final part is that the service business continues to grow, which is a more profitable part of our business as well. For the first quarter, Adjusted EBITDA was SEK 174 million versus SEK 173 million last year, which gives an EBITDA margin of 12.5% versus 11.7%. Profit after tax, SEK 90 million versus SEK 78 million in the same quarter last year, and that led to earnings per share of SEK 2.57 versus SEK 2.22 in Q1 of 2023. When it comes to cash flow and net debt, cash flow from operations in the quarter, SEK 95 million , it was behind the Q1 of 2023.
But it must be pointed out, this is the second best, again, another second, the second best quarter one for cash flow from operations that Nederman Group has ever seen. This is rather pleasing, and some of that comes down to the order intake, where we have received some down payments on larger projects. Net debt is clearly significantly lower than it was at the same point 12 months ago. If you go into the divisions, Sven, and we start with Extraction & Filtration Technology.
Yeah, Extraction & Filtration Technology, mid-size project focusing on composting, wood, welding, other red dust, general dust application, et cetera. Just reiterating where they are coming from. The development during the quarter can say that we had better orders received, and there has been several major orders, and that is including solutions in areas like green energy, transport, waste management, substituting some of the weaker demand in the other industrial segments like welding and some base industries that are not so eager to invest at this time. Base business has been in line with the 2023 first quarter then, and what is very satisfying is we continue to build our aftermarket business also in this division there, and we had double-digit growth also this quarter.
The backlog remains high, and that is a good foundation for sales development in the coming quarters. It's probably not taking too long because they are having one to two quarters visibility here. First orders booked in Americas for the energy saving system SAVE, who is now getting more and more traction, and it differentiates us from other suppliers that we also have. Our digitalization becoming an increasing part of our offer. We have continued, of course, to book also in EMEA. For different reasons, we have not launched this in Asia and China, since it's a key digitalization part of it. Regarding EMEA, higher volume, positive sales mix, efficient product delivers, and all this together has improved the profitability and shown a bounce back as to where we want to be.
APAC orders generally weak, solutions grew somewhat with the medium-sized orders in China and in India. Still not on a satisfactory level. America as a whole saw flat development in orders and sales versus Q1. But there's a solid order growth, including breakthrough of our SAVE system. Relocation of RoboVent, the company we acquired, number one in welding in U.S., we are moving the whole operation, not a far distance. It's in the same vicinity of Detroit, and we expect this to be completing during this quarter. It will increase capacity and efficiency definitely, but of course, there is a hard pressure on the staff doing this exercise during Q2.
Other key activities has been the launch of the MCP Air Purification Tower, and it has generated a good interest from the market, and we have already booked orders on that one. We have also started to get closer to the consultants by launching BIM objects platform. We have our ProQuote system that helps us dimensioning the system and being more efficient another investment in digitalization and even efficiency. Now, we make it even easier for the consultants and architects to position our product in a facility by using BIM objects. We believe that that will further strengthen our position as the preferred solution.
When it comes to figures for Extraction & Filtration Technology, orders received were 2.7% currency neutral higher than Q1 2023 at SEK 616 million. Sales reached SEK 636 million, giving an Adjusted EBITDA of SEK 103 million, which is a 16.2% margin, which is a clear improvement over the 14.5% seen in quarter one of last year. On to Process Technology, Sven.
Yes, Process Technology, where we deliver larger projects, especially world leader in textile, foundries and smelters, but also in other areas like waste recovery and metal scrap recovery, et cetera. During the quarter, we had a drop in orders received, but it was still very strong. It's something that we anticipated and talked about in earlier calls. As expected, also the sales decreased compared with a very, very strong Q1 last year. Profitability remained high with a positive sales mix and a good efficiency in execution of our project. Again, our efforts to grow the service aftermarket business continued, and that helped to keep up the good margins. If we look at textile and fiber, orders received and sales decreased significantly compared to 2023.
The capacity utilization in spinning mills is low, and that is curbing the demand for new equipment, and especially so in China. It's the world's largest textile market, but the demand currently is weak. India remains more stable, both in India but also in the neighboring countries where we export them. The innovation that we launched in 2023 at ITMA continues to generate additional business. It delivers a significant energy saving, and it's a part of our theme in the different divisions, producing products that can save energy in different way, and we've seen a very positive interest in these new innovations. If we go to foundry and smelters, for the segment as a whole, orders received and sales declined compared to the strong Q1.
However, a strong sustainability trend is contributing to an increase in demand for solutions in example, for example, metal recycling, and then we are talking here about magnesium, we're talking mainly on aluminum, but to a small portion also in the ferrous metals. There was one major order booked for a smelter project in EMEA. When we come to customers, customized solutions, we had a strong order growth, and it was quite a few orders that were booked, especially in Americas, and we are talking here about recycling of material, mainly. Activities, we continue to strengthen our efficiency, not, also in this division.
We have installed new equipment, sandblasting, painting, in our main facility in Friesenheim, South Germany, and that will increase both capacity, efficiency, and therefore also, since we're using more automated processes, a lower cost, and making us even more cost competitive. The restructuring program in China has been completed.
Briefly on financials for the Process Technology division. Orders received were SEK 486 million, which is 7.7% currency neutral and organic, down on last year. However, still rather strong. This is, I won't call it a surprise, but pleasing to see. Sales, as we've mentioned already, clearly lower than Q1 last year, as expected, SEK 392 million. The Adjusted EBITDA, due to the favorable mix with more service business and higher margin projects as well, was SEK 32 million, which gave a margin of 8.0%, down slightly from 8.3% in quarter one last year. Now on to Duct & Filter Technologies then.
Yeah, Duct & Filter, where we supply duct work for specialty applications with heavy dust loads and suppression systems, and also filter technology, filters for our internal and external sales as well. For the quarter, we can say that orders received and sales decreased slightly compared to the strong 2023. New orders were secured in what we call in growth segment, battery manufacturing, food, green energy, especially so that we are entering into this market as well. Profitability was strong, and that's primarily due to improved manufacturing and inventory processes in the U.S. factories. And that is a result of earlier investments, especially in Nordfab's plant in Thomasville, where you might recognize that we increased the building site.
We have added new, even more modern, equipment, and we have our solar panels, making us, in North Carolina, the largest private supplier of solar-produced electric energy. Leaving that and going into Nordfab specifically, Nordfab performed very strong, as we say, in orders and sales. EMEA and APAC were slightly weaker, and profitability developed well following the investment in the production. And in early April, the Nordfab Now concept was launched, offering delivery of selected range within 24 hours. So we are adapting to the trend of internet trade and so on, and people not wanting to wait for their goods. So we have a new concept, and it's officially launched, and it attracts good reviews from our customer base.
In EMEA, orders received declined versus the previous quarter, as well as versus first quarter in 2023, but remains on an historically good level. New orders were secured in competitive cement industry and also in some others. The key activities during Q1 was Nordfab Now, and it was officially launched on April 8. The Quote to Order to QTO was launched also in Australia. If you remember last year, we acquired some and are building up our facilities also in Australia. T he implementation of BIM objects, mentioned also in EFT, will further help consultants, architects, to make life easy for them. And that is something we continue, making life easy for, easy to do business with. We have internal saying that our target is to Nederman should be easy to do business with.
We have also upgrading plant production in Thomasville, and there are more continuous improvement and investments going in there to further strengthen the manufacturing site and distribution.
External orders received decreased by SEK 9 million, 4.2% for the division in quarter one. Nordfab, Menardi down is what we could say there. Sales, SEK 207 million, slightly below last year, 2% only down. But the Adjusted EBITDA, due to the improved margins and efficiency in production, 42.6 million, a whole SEK 1 million higher than 2023 Q1 gave, and EBITDA, very healthy EBITDA margin of 20.6%. On to Monitor & Control Technology now, Sven.
Yeah, Monitor & Control Technology for surveillance as well as for monitoring particle gases, et cetera. So if we go for the development during the quarter, it's been the highest ever order received for a single quarter, and it's been particularly strong with Gasmet. We have very good traction with our latest launch, the portable emission analyzer, GT6000 Mobilis. New order securing biofuels industry and for the incineration of medical waste. Sales increased compared to 2023, and that was the largest growth seen in NEO Monitors. Profitability was negatively impacted by more solution side and a less favorable mixing product side.
What also created problems was the Finnish strikes that made life more difficult for us, and there was also things we can find all kinds of explanation of Easter blocking some of the things in Norway. But if we look at EMEA, orders received increased both Gasmet and Neo. There was a strong order intake Gasmet, particularly in our setup in U.K. and Germany, and we have also good sales growth. But as mentioned, the strikes in Finland generated issues for us in March. In APAC, orders received increased again versus last year's Q1. However, the sales were flat, partly due to supply issues here. Work to develop the division distribution sales organization in China is generating clear results. We are about to set up a service center.
We are about to set up a test center, so we do not have to send the full equipment back to Europe here. In Americas, we have noted slightly lower orders received, but another strong sales quarter. We participated in Houston for the petrochemical industry, and saw good interest for NEO Monitors' new developed products. Sales grew from both NEO and Gasmet, but AFS had a somewhat of a decline. Key activities, investment in the production capacity for NEO. We have passed emission analyzer certification field test that will further broaden the use and the applied market we can go to. Nederman Insight was renamed OTC, and that's a preparation for new product generation have started.
Financials for Monitor & Control Technology. As Sven mentioned, orders received the highest ever quarter, single quarter for orders received, SEK 234 million, is a 23% growth versus last year. Sales hampered a little bit by a couple of reasons, which you've heard, SEK 187 million, still actually higher than last year. But this mix has impacted the margin, and we ended the Adjusted EBITDA was SEK 28 million versus SEK 33 million in quarter one last year. That's a margin of very nearly 15% versus 19.3% last year. If you just look at the outlook and some other information, Sven?
Yeah, the outlook, we would say that demand and orders received remained fairly solid, while our base business and strong digital rate enable us to assert ourselves well in the current market. Divisional performance remains positive. There is a higher inflationary pressure and weaker economic outlook will impact customer investment decision. Does remain, and it's also a high cost inflation, salary inflation pressure around the globe. There's a growing geopolitical uncertainty, and of course, if you want to be negative, that could increase to further protectionism and so on. But in view of our large order backlog and our ability to increase our share of sales in the industries with good structural growth, we take a cautiously positive view of opportunities for the year, and we see that we are continuing to strengthen our position.
We have a very good offer, attractive offer, a mix of digitalization, a mix of efficiency-creating solutions, easy to do business with through BeMarket, ProQuote, the QTO, et cetera. So reasonably optimistic for the remainder of the year. Some other information, we are committed to the Science Based Target initiative, and doing this Scope 3 analysis, 99% of Nederman's greenhouse gas emissions emanates and are attributable to the use phase. That means that product innovation, collaboration with customer will remain the main focus moving forward.
Just shortly on the financial calendar, the annual general meeting is tomorrow, the 26th of April, 2024, for those who have registered. The quarter two report is released on the 12th of July of this year, quarter three on the 22nd of October this year, and the year-end report for 2024 is released on the 13th of February, 2025. With that, I think we can open up for any questions that listeners may have.
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 Lina Blume. Please go ahead.
Good morning, Sven and Matthew. This is Lina Blume from Handelsbanken. Thank you for taking my questions.
Good morning, Lina.
Morning.
My first question is related to demand. It seems like the momentum that you have in America, or more specifically the U.S., is continuing to be strong. What is your current view of the development in EMEA, demand wise? And maybe if you could talk a bit on if you have any expectations of that going forward?
Mm-hmm. Yeah, it's almost like, Henry Kissinger said: "Who do I call when I want to talk to Europe?" And, it's very scattered picture where you have, reasonably good demand in some, countries. It's been weaker, especially in Germany and in Scandinavia. Sweden, for instance, you've seen the economy has not been, growing that, that well. Having said that, we have, seen a, also in some areas, wood application, and that is coupled a bit to less investment in furniture and so from private people. So that has been... So Europe is, it's a mixed bag. Then if you go to some of the, recycling, if you go to, yeah, different, more structural businesses, there's a reasonably good demand. So, I'm not too negative.
It's been, I think, and now I'm not an economist, but I think that there has been in Europe a pushback for industry serving the consumer and construction industry, and there we've seen lower demand and in structural areas like green energy and recycling and so on, we see very good demand. So it evens out a little bit here. I'm not too worried about it in the medium term.
Super, that's, that's clear. Thank you. And, and then you report a weaker development in the APAC region. Could you give us some information on China versus India during the quarter?
I can, I can maybe answer a little bit on that. In APAC, our largest segment in APAC is the fiber and textile business, obviously. And that is rather different between India and China right now, for a number of reasons. I think it's down to some domestic demand issues in China, but then also, the Indian government had been incentivizing investments in the textile industry as well. And so that has meant that there's a rather different picture there. When it comes to other parts of our business, Monitor & Control Technology continue to perform rather well. This is where we have a high-tech product that have no local competition.
We are measuring, for example, at much, much lower concentrations on certain gases than any other companies can do. And that means that that was why we continued with strong growth in Asia, APAC for Monitor & Control Technology division. So a little bit of a nuanced picture, but China certainly not, from an industrial perspective, is certainly not as hot as the U.S. or right now.
China is a mix that there is a significant overcapacity in all manufacturing in China, for the moment, which has generated difficulties for China. We are, however, very small in the Chinese market, and we should be able to do a little bit more. But there are also restrictions we put on ourselves, that we are not launching some of the more advanced digital solutions for reasons of legislation in China, that could generate a significant problem for us on IP rights, et cetera. So, we see that it's a mix of weak textile, where we have the strongest position, very strong demand for measuring technique and MCT.
We could sell even more if we could get the organization up as a supply chain in there. So it's a mixed bag here. There is a very strong demand for the high-end product that we have. They would probably like to have some of the digital product that we have, which we will not sell that. So it's again India, very dependent on the development in our fiber technology textile, and they are doing quite well, both in India and in the surrounding areas. We have a very solid performance in our business there. We are working also with some of the other areas, how to handle that. You have the same problem as you have had in other areas with India, and that is Make in India.
That means that they have strong borders when it comes to customs tariffs, and then they support the manufacturing in India. Since we have a large manufacturing base for the textile segment, that goes very well. We are contemplating how to get inside in some other areas as well. But it's something a lot to be considered here. We are also building out the engineering capacity in India. So we have engineering capacity that is supporting, especially Process Technology on a global draftsman, doing a lot of the generic work that's needed for larger project. And by that, we are both increasing the competency in India, but we are also saving cost, not going via any consultancy firms. So again, it's a mixed bag here.
Super. Thank you. And then it seems like the demand is continuing to be strong in industries such as green energy, battery manufacturing, and recycling. But what is your view of the demand in the more traditional industries, such as textiles, as I mentioned, welding, wood and paper? Is it possible to say if we are seeing any recovery in these industries, or is it too early to draw conclusions?
I think it's too early to draw a conclusion. We believe that our position. We see that what we, t here is a lot of restructuring in Europe, for instance, they are putting factories in, they try to concentrate on fewer sites, but that is not all bad for us. We sell the same concept, we get in from the aftermarket then, and so on. But I would say the demand is so, so. But we believe that we are increasing our positions here through, especially on the high end. On the low end, we are not there, but in the high end, we see that there's an increasing interest for our, what we call future-proof solutions, with energy saving, control systems, efficient supply of the filters, et cetera.
So, I think it's very difficult to say, but I don't think we will see a dramatic downturn. I think we will maybe wobble a quarter or two in this, but I'm very positive that Nederman will come out stronger in this environment.
Super. And then in Process Technology, you report that geopolitical turmoil and weakness in certain markets is expected to yield lower orders over the next few quarters. Should we interpret this as you expect a lower organic sales growth or even negative organic sales growth in division in the coming quarters?
Process Technology division still has a reasonable backlog. They've had a very good quarter this quarter, so it's a little, it's too early to be too depressed on, on there. They're not at the high levels that they were 12 months ago, so you can't expect SEK 600 million+ quarters for sales for that division anytime soon. But they almost reached SEK 500 million in orders in quarter one. That was- we saw that as positive. And so in the short term, it's not too bad. There's less that long-term visibility in Process Technology, however, than there was 12 months ago.
But I don't think you should be overly negative in this. So we are growing the aftermarket very rapidly. We have very interesting concept, our combination of MCT, PT solutions is getting more and more known in the market, and we also see that there are a pipeline of some large projects that might go ahead. It's more that people are sitting and waiting to put the pen to the paper. I wouldn't be too depressed. I think we will have a balance, but my- maybe not reach the height we had last year.
Super. Thank you. And, and then, on the, profitability, you reported better profitability in this quarter compared to the first quarter of last year. Are there further room for improvements on the margins? And what will be your main focus going forward to reach your targets on EBITDA margins? And would you say that the better sales mix with the larger service business is sustainable going forward?
Service business, we—the part of our strategy is to continue to grow service business faster than the rest of the business over a sustained period of time. But there can be volatility in large, booking large. That doesn't mean we're going to say no to large projects when they come along either. Then the other part is if we look a little bit more short term, we could say for a number of reasons, Monitor & Control Technology, sales were not quite as high as they ought to have been. Had they been higher, that would have helped the margin further. So that's probably where the short term one is.
But those are the two main arms, growing, growing, Monitor & Control Technology faster than, than the rest, but also the service business to grow that faster over a sustained period of time.
But I think it's a midterm, long-term answer to this. There is obviously, since we have a target of 14%, there's obviously room for improvement. It is a mix, of course, of growing sales. It is this valuable value-based pricing that we are continuing to develop and, not being shy, getting paid for our superior solutions. It is also all the investments we have made and are continuously making in the supply chain, both manufacturing, but also how to handle better the logistics. And we see the very good development in investment in the over the last decade in a Polish factory. We are Friesheim in Europe, we are adding capacity also in Denmark. We are moving to a new, more efficient site in Helsingborg.
We are moving, as we speak, the RoboVent plant from a three divided site into one modern facility. We are continuously investing all in now in automatic storage in Thomasville for the Nordfab business. So it's a mix of small—it's not one big revolution. It is what we've been doing over the last decades, small incremental changes in the direction where we can push up, getting better paid for our product, as well as having a better efficiency. We shouldn't forget the efficiency internally with the ProQuote, the different BIM objects and whatever, using digitalization, it's a very wide expression, but using the technology to be more efficient also in administration.
So it's small things, but so it was a very long excursion to say, yes, there is room for more. Having said that, I do not promise that to come next quarter, but we are moving gradually forward.
Thank you. That's, that's very clear. And then, more generally speaking, is it possible to say what share of sales that are sort of new customers, and what share is replacement of, of already existing products?
No, we don't have an answer to that. That would be too much of a guesswork.
Okay, thank you. Then just one last question from my side. We are happy to see that you have committed to the Science Based Targets initiative. Could you go over the process for you going forward, or sort of how close are you to actually submitting a target and so on?
I can answer that one. We are very, very close to submitting the targets. I have a meeting next week, actually next week, with our sustainability manager. So we will be within—we'll be submitting within weeks.
Maybe to next interim report.
Yeah, they will. By next interim report, it will have happened. But then there's a validation process, as we understand it. There's an awful lot of companies that are submitting, submitting-
Yeah
These right now, so that can take some time. But, I mean, this doesn't change the work that we're doing anyway. The 99% of our footprint is the customers' CO2 footprint, is customers' use. And we knew that this is such, f or us, this has been a key for a long time. This is why there's such a business benefit from reducing the energy that's utilized by our filters and our solutions. These fans in Process Technology, for example, the energy saving Extraction & Filtration Technology, we are going to keep working with that. And that's the key to achieving these SBTi targets. But it's not necessarily because of the SBTi targets, but we will be doing that.
Of course, it helps contribute towards it, but, it will also contribute towards our business becoming, more profitable as well. We give our customers better solutions that use less energy. They, they are happy, and so are we.
That's something, that's not new. That's what we've been working with over the last decade, to do this. It's also so that we have already, again, over the last decade, worked a lot to lower our internal use of energy. It's, in fact, so that for the last 10 years, we have decreased our own internal use of energy, electrical energy, with 70%. 71, I think it was. But so it's nothing new. This is more than an administrative thing that we, y es, we submit to this. It's been in our way of working as an environmental technology company. We are focusing at, in driving down energy use, be more efficient in all things what we are doing.
Super, that's, that's good to hear. That was all for me, so thank you a lot again for taking my questions.
Thank you, Lina.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
We thank you for taking the time listening to us, and we will back in the same if you tune in in July, and you will have the Q2 report then. So thank you, everybody, and have a continuous good day.