Welcome to the Nederman Holding Q2 presentation for 2024. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CFO Matthew Cusick. Please go ahead.
Good morning, everybody, and welcome to Nederman's interim report for Quarter Two of 2024. If I start by dispelling maybe any rumors there may be, Sven is not here today. Unfortunately, he had to attend a private event, a funeral, but like I say, that would probably be the first question: Where is Sven? And I've put that one away. If we move on to the Quarter Two, fortunately for me, this is a rather good report to be presenting, as we see it. This is the second most profitable quarter ever in the Nederman Group history. Unfortunately, for this presentation, the Quarter Two last year was actually the most profitable quarter in the year, so some very tough comparative figures, but we will come back to that.
Quarter 2, 2022 had good profitability development, higher margins, overall, and strengthened position for the Nederman Group. In the quarter, we have continued to focus on the development of the range. We've made some new product releases, which I will come back to, and we believe we are strengthening our leading position in what is an uncertain macro environment. Solid profitability in the second quarter, stable cash flow, advanced positions in some growing industries around the world, and that is something that we take out as a clear positive, going forward. Growing service business with a continued positive development in all four of the divisions' operations in that respect, and that is reflected, not least in the margin improvement that we see, this quarter.
If I move on to the key financials and starting on slide four with orders received. Orders received for the group as a whole were down, that's quite clearly in the Process Technology division, which we know is inherently volatile with the large project business, making up the vast majority of the sales in that division. The other three divisions are rather solid on the order intake. Nevertheless, that doesn't compensate for the downturn versus the extremely strong Quarter Two last year, it must be said. Currency neutral order intake is 8.9% down in Quarter Two this year, quarter-on-quarter. Organically, that's 9.9%. Year to date, SEK 2.934 billion versus just over SEK 3.505 billion last year.
Currency neutral, 4.1% down, and organically, 5.5% for the year to date. Like I say, a very differing picture between the divisions, which we will come back to later on. Moving on to slide 5. Sales clearly decreased during the quarter versus, again, what I must point out was a record quarter for sales in Quarter 2, 2023. SEK 1.467 billion is down 0.5%—down from SEK 1.631 billion in Quarter 2 last year. This is Process Technology, again, accounting for the entire drop there. Currency neutral, 10.6% down, organically 11.9% down.
Year to date, we're at SEK 2.864 billion after half a year now, versus SEK 3.113 billion at this point last year. Currency neutral, 8.3% down, and organically, 9.6% down. What we can see on these charts as well, on the bottom left and right of slide number 5, is that the currency impact has been relatively negligible so far this year. We have seen at least for over the first six months of the year, in total, a relatively stable Swedish krona, even if it has fluctuated somewhat during the first six months of the year.
Profitability, like I already mentioned, now on slide 6, this is the second most profitable quarter ever, and that is by quite some way, and we are rather pleased with this outcome. It is lower than Quarter Two last year, like I mentioned, and it is down to the lower volumes in Process Technology. For Quarter Two, adjusted EBITDA, SEK 188 million, just below the SEK 195 million that we did in Quarter Two last year. Adjusted EBITDA margin, now at 12.8% versus 12.0%. So going in the right direction, and I'll come into some explanations of that via the different divisions, as we move on today.
Profit after tax, SEK 97 million versus SEK 100 million in Quarter Two last year, gives earnings per share of 2.77 krona versus 2.86 krona Q2 last year. Year to date, EBITDA, almost exactly at the same level as last year, SEK 366 million versus SEK 368 million. The margin clearly improved 12.6% EBITDA margin for the first six months of this year, versus 11.8% at the same point last year.... Profit after tax, SEK 187 million versus SEK 178 million last year. Remember, last year, we had a restructuring that cost approximately SEK 20 million in China that did impact things. That is one of the outcome of that restructuring is one reason for the improving EBITDA margin we now see.
Earnings per share, SEK 5.34 for the first six months is ahead of the SEK 5.08 for the first six months of 2023. When we look at the chart, like I say, it's quite clear that this is, this is the second most profitable quarter we've ever seen in both in Swedish krona and the most profitable when it comes to, margin. Cash flow and net debt, stable cash flow position. A dividend paid out in the year of SEK 139 million. That was SEK 7 million higher than last year. That was paid in May, which obviously impacts the net debt, and, and as always, quarter two has a, has a, an increase in debt following the dividend payout.
What we can say on the cash flow from operating activities is with lower order intake in Process Technology division, we do also have fewer down payments received on large projects, and that impacts somewhat negatively on the cash flow from operations. Nevertheless, for the year to date, SEK 170 million is still rather strong. And then if we look at the rolling four quarters cash flow from operating activities for Nederman Group, on the left side there, we are still over the SEK 500 million mark. Net debt, like I mentioned, it's increased somewhat from the same point last year, given that we have made rather significant investments in product development and also in some investments in production efficiency in several of our plants around the world.
If we then dive down a little deeper and go into the different divisions within the group, Extraction and Filtration Technology. The development for them in the quarter has been one where we've seen a higher number of larger orders received. They count large orders as greater than SEK 5 million in individual size. Record number of large orders received, but the activity is dampened on what they call mid-size orders, between SEK 1 million and SEK 5 million. There's been significantly fewer of those, and there is some rising economic certainty in certain markets. That we cannot get away from that, but increased R&D expenses with several product launches has meant that we've been able to perform rather well on the market here.
We had some one-off costs as RoboVent moved the entire operations onto one new site. Good growth in service sales. This is a positive, and this is part of the strategy for the group as a whole, as we know. But good to see the results of that from E&FT. Increased sales volumes on products is also a positive, but this improved sales mix with more service and more product sales didn't fully offset the increase in expenses and one-off costs, for example, from RoboVent that we saw. If we take it region by region, in EMEA, E&FT saw growth in orders and sales. The growth was largely 4 major orders came in in EMEA, and that's healthy, and that impacts things positively.
While there is still lower activity in some markets, it's dampened, it's the usual companies and countries, and it's Germany, U.K., and perhaps some other countries that work closely with Germany as well. Americas reduced overall order intake for Americas as a whole, however, USA saw strong growth with major orders and rather solid base business in the US as well. So a slightly different picture versus Europe. APAC had a recovery versus recent quarters, and this is something that's positive. It was behind Q2 last year that we're more concerned about how they've been performing versus recent quarters.
Two major orders secured in the quarter, one in China, one in Australia, and a little bit more activity and a little bit more traction clearly in China now. Extraction and Filtration Technology, what have their key activities been? A number of product launches, Low Vac Plug and Play, MCP-GO, SmartFilter was launched, PAK-M, which is a high vac filter for the dust and fume extraction, for extraction and filtration. This was, this is important for the Nederman Group as a whole, and this is where we feel we're getting some traction, is these newer energy-efficient products and solutions and filters. They are attracting interest on the market. It's giving better. We are able to— How can I say this?
We are able to give our sales organization very good material to sell to customers over total cost of ownership. We're never the cheapest. Our solutions are often the most expensive in the initial cost, but when it comes to energy efficiency, we're clearly better than most, almost all of the competition. And this development that we're doing in our size, on a generally very fragmented market, means we're able to invest more and more, and this is giving us some traction that others are not having. We've launched the Future of Welding concept. It's related to the latest ISO standards and requirements. RoboVent, like we mentioned, they moved their entire production and offices, and the distribution as well, from the two sites into one during the quarter.
That did come with some one-off costs and not least double rental costs, but it was a full operational move, and that impacted somewhat negatively in the quarter. These digital solutions for fume extraction presented at two health and safety conferences in the year. Again, new products, new development, and interesting for customers. When it comes to the financials, orders received, currency neutral, were up 2% in quarter two, very slightly down organically, 0.5%. Sales, 3.4% up in the quarter, and flat organically. Adjusted EBITDA, down from SEK 84.5 million to SEK 78.0 million. The one-off costs from the move of RoboVent and increased R&D expenses are the two biggest factors there in the profit reduction.
When we look year to date, 2.3% growth in orders received, currency neutral, and 3.3% growth in sales, and profit 14.1% EBITDA margin versus 14%, gives SEK 181 million in adjusted EBITDA versus SEK 173 million at the same point last year. So improvement for the division for the first six months of the year is clear. Process Technology, where I suspect the most questions might come, this quarter from those listening. Order growth clearly down. Only two major orders were booked for the Process Technology division. Lower sales, yes, but the most important thing there for us, perhaps, is that's in line with our current expectations and the budget that they have.
Remember, Process Technology went into 2024 with a significantly lower order backlog than they went into 2023 with. This is a cyclical business, particularly fiber and textile, but other industries as well, and significantly more volatile than the other three divisions. Stable development of service continued. Service clearly improving its share of the division's sales, and that's reflected in the EBITDA margin, which is, in percentage terms, a record for the quarter, even if, in the Swedish krona, there's a clear reduction there. Improved sales mix, like I said, more profitable projects as well. The Process Technology have a very clear, what they call, refer to their playbook, where we are very careful to select projects with the right margins.
If projects are going to drive aftermarket business in the future, which could be profitable for us, then maybe we're willing to take slightly lower margins, but otherwise, projects need to be absolutely on satisfactory levels and without any inherent risk. We have seen competitors to this division who have some rather major problems following significant growth. We are looking for profitable growth, not growth for the sake of it. Process Technology had a small warehouse, which they actually rented out to an E&FT division in Germany. We have sold that during the quarter, and that boosted EBITDA by SEK 6 million.
So the 13.3% is slightly artificial, but there's still around 12.5% EBITDA for the quarter, even if you exclude this, so still a record quarter for this division in EBITDA margin. If we move between the business units for Process Technology, textile and fiber actually increased versus quarter 2 of 2023, but that was from a very low level. There's a slight upturn now, and perhaps China could be mentioned there, that we've been booking slightly more orders there. In India, we've been stronger, but China has been rather weak. We've now seen some start of a return of inactivity in China. The capacity utilization at many spinning mills is still rather low, which curbs demand for new equipment there.
In foundry and smelters, metal recycling is clearly a driver, all sorts of metals from steel to aluminum, lead, including lead batteries as well. However, orders and sales did decline versus quarter 2 of 2023. Customized solutions, also orders down, partly reduced because of the mining sector. Key activities, we have a plant in Germany where we've installed a new sandblasting system and a paint line as well. That's been completed during the second quarter. That increases production capacity and lowers costs and transport needs as well. And we've continued the rollout of this energy efficient fan for the fiber and textile market, which we launched late last year. I've actually included one more slide on this division, one more slide on a slide here.
If you see the top right, there's a chart there, which those of you that have Excel sheets and follow net demand, orders, and sales on a sustained period of time, will probably be or will be able to work this out for yourselves. But we constantly monitor the backlog for Process Technology Division, and this graph is going back to 2020, and looking at the backlog level. And we can see, even if backlog is lower than the peaks from the middle of 2022, it is still clearly higher than the troughs that we saw during the COVID time. We're talking double, more than double the level of the backlog from the pits of the COVID time.
So although there is a downturn in Process Technology, it's a downturn from very high levels, and they still have backlog to deliver out quite significant sales in the second half of this year as well. Moving on to Duct and Filter Technology. Excuse me, I may be able to talk on numbers here for a moment, as otherwise, Tomas Hagström, the head of the division, will never forgive me. Sales in the quarter, SEK 410 million versus SEK 644 million, is a clear reduction, as orders were as well. Adjusted EBITDA, however, SEK 54.4 million is 13.3%. It's a record for Process Technology Division. 11.5% last year was very good, but 13.3% is beaten, beating that.
For the year to date, they are now at 10.7% adjusted EBITDA versus 10.1% at this point last year. So despite a significant drop in sales, they have managed to increase the aftermarket business and increase the profitability on projects to come up with what is, for them, a rather good or very good EBITDA margin. Sticking with the theme of good EBITDA margins, we then move on to Duct & Filter Technology. In the second quarter, they increased both orders and sales versus quarter two of 2023. Nordfab in at the forefront, but Menardi as well. Several orders, what's perhaps even the most pleasing thing, growth segments, battery manufacturing, food and green energy have all yielded a good order intake there. Profitability, extremely good.
Improved production efficiency, which is this payback from investments that we've been making in the facilities. Improved inventory processes, which is also a payback from the investments we've made in expanding the warehouses and in improving layouts and such, and that will continue for this division. And then, of course, increased sales volumes mean better absorption of fixed overheads as well. In Nordfab, orders received and sales grew versus both Q2 last year and Q1 of this year. Like I mentioned, major orders in battery manufacturing. This Nordfab Now concept with delivery within 24 hours, that's launched in early April, and this is connected to the inventory processes and ensuring that we have the correct articles in stock, high volume, high movers, in the...
in order that we are able to dispatch orders very quickly. This accounted for almost a fifth of the orders in the quarter in Thomasville, and we expect that to increase further. In Menardi, orders were down versus Q2 last year, but historically at high levels, and we saw a pickup in quarter two. Orders received in May, that was the second highest ever for a single month, so there's definitely something positive there. Carbon steel producers, carbon black, are examples of a couple of industries in which orders were received. Key activities: I've mentioned Nordfab Now, the launch of that is absolutely a major thing for the Nordfab ducting organization.
BIM objects, we've now connected up to BIM objects for Nordfab, and, it's been launched for the US and Europe, and it's resulted in a large number of product downloads, and we would continue to work with that, and we anticipate that that should be able to drive further sales volumes. In Australia, profitability is not at a satisfactory like, level right now, and we have initiated a cost-saving program there. It's a rather small part of the business right now. We would like it to be, a bigger part, but the, the first thing to do is ensure that we are making money before we grow the business. Coming on to the financials for Duct and Filter Technology, 5% organic currency neutral, and organic, it's the same thing in this division, no acquisitions made in the last 12 months.
So 5% order intake growth, 8% in sales growth to SEK 236 million in sales in quarter two, which gave an EBITDA of SEK 49.4 million, which is a margin of 20.9%. Year to date, the order intake was slightly, very slightly positive. Sales 3.1% now gives SEK 443 million in sales for the first half of the year. SEK 92 million in adjusted EBITDA versus SEK 83 million last year, so tough comparative figures, which they have managed to beat, and that means 20.8% EBITDA margin for the division for the year to date. Moving on to Slide 11, Monitoring & Control Technology. In the quarter, orders received declined very slightly versus quarter two last year.
Hopefully, you remember it, how extremely good quarter one of this year was. The year-to-date growth in orders received for the division is 11.1%, which is in line with where we want to be for this highly profitable division. The substantial order backlog helped with a new quarterly sales record. The backlog is still at a high level, and we can expect rather strong sales going forward from here. We should expect rather strong sales going forward from here. One of the key activities in relation to that is increasing production capacity for NEO Monitors in Norway, for example. We will continue working with that, and there will be some layout changes and expansion there.
Profitability improved compared with 2024 quarter one, and in absolute numbers versus quarter two of last year as well. Higher sales volumes, larger share of portable products, that contributes to the higher margins versus quarter one. If we take it region by region for Monitoring and Control Technology, EMEA performed well. Gasmet and NEO Monitors both performed strongly and achieved several major orders in France, UK, and Switzerland, among other places. Sales increased even more. Gasmet were very strong in Europe in quarter two. We also there's not something that's not of insignificance here is a 5-year service contract was secured for the Lower Saxony Chamber of Agriculture, and service business is important for Monitoring and Control Technology as well. These measurement instruments have an aftermarket. They require recalibration.
They require servicing, and for example, connecting our Gasmet instruments to our Insight app is enabling us to do some of this service work remotely now, which ought to increase margins further for this division as well. In Asia, sales increased versus Q1 and Q1 last year and Q2 of this year. Sorry, the other way around, Q1 of this year and Q2 of last year, mainly driven by NEO Monitors performing very strongly in the region, particularly in China. In Americas, we had somewhat of a decrease overall in the quarter, but that was fewer major project deliveries for NEO Monitors, while Gasmet and Auburn FilterSense were in line with the second quarter of last year.
Key activities I mentioned already, the continued investments in NEO Monitors production capacity, those will continue, and we are preparing for the launch of the next generation of Insight products, in the framework of and under the management of our OTC, our Operational Technology Center. This is important. This is where monitoring and control technologies capabilities on digitalization are combined with the filtration knowledge that Process Technology division and Extraction and Filtration Technology division have. This is how we are able to launch these digital filters, these more energy-efficient filters, that are giving us a strong position in what is a tough market right now.
Briefly on the financials then for Monitoring and Control Technology, orders received very slightly down in the quarter, 1.6% down, 11.1% year to date in currency neutral and organic growth, gives SEK 418 million in order intake for the first half of the year. Sales in quarter two, SEK 206 million, clearly up 14.9% up versus quarter two of last year. EBITDA, SEK 39 million, is 18.9% for quarter two, an improvement over quarter one, as I mentioned. So far this year, then after six months, SEK 393 million in sales has led to SEK 67 million in EBITDA, which is on par with where we were at this point last year.
17% EBITDA margin, like I say, we've improved strongly in the second quarter on the margin. We talk about outlook. Demand is slightly slower. We cannot get away from that, but we have a good base business and a strong digital range, which we feel means leads to us doing rather well on this current market. Having said that, even if the division's divisional performance is largely positive, there is a risk with interest rates, economic activity, generally, the general economic environment, and investment appetite, it can impact on investment decisions. And geopolitical uncertainty is never usually a good thing for business and for investments. If we look a little short term, more short term, with our large backlog that we have, we still have a good, strong backlog.
Our ability to increase share of sales in industries and also with good structural growth, these recycling industries are one example, where battery plants are another. We take a cautiously positive view on the opportunities for the second half of this year still. As we've said for some time, even if the outlook in industry can be dampened by external factors, the long-term potential is clear. In a world where there's growing insight into the damage that poor air does to people, their demand with a leading industrial air filtration range has a key role to play and is. We clearly have good possibilities for continued growth. The financial calendar interim report for quarter three is released on the 22nd of October of this year, and the year-end report for 2024 is on the 13th of February, 2025, as you know.
With that, I think I 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 Lena Blom, from Handelsbanken. Please go ahead.
Hello, Matthew, and thank you for the presentation and for taking my questions.
Good morning, Lena.
Good morning. So my first question is related to orders received and your current order backlog. What is your view of the orders received in the quarter? Are there currently sufficient order backlog to support good growth in the coming quarters, or how should we interpret this?
What we can say, the backlog overall. If you've done your math on it, our orders, orders and sales, you probably have done this. The backlog is largely the same level as it was at this point last year. So, we're still in a rather strong position. There's a difference in the dynamics between the divisions in that we have a higher portion of the backlog in Extraction and Filtration Technology and Monitoring and Control Technology, and a lower portion in Process Technology. That bodes well for profitability although the two divisions with the higher backlog are typically slightly more profitable than the Process Technology division.
When it comes to if we're talking growth, I'm not sure that you will see huge growth figures in the coming quarters, but we have got a very strong position still, or we're in exactly the same position almost as where we were 12 months ago. So you can make what you will of that, given what you know about the profitability on the divisions. Process Technology, I was very clear to point out that on that in this presentation, they have got a lower backlog than they had some time ago, but it is still at rather high levels, and we're not at any point there in sort of panicking or have any concerns there.
This is a cyclical business, and we expect to be able to take market share, and when this comes, when the investments come back, we will be there to take them.
Super. Thank you. And then it's good to see that you were able to keep profitability at a higher level during the quarter. Could you give some color on what is the main contributor to this development? Is it mainly that you were able to maintain a higher share of sales that make more service and aftermarket, or is it more to it?
There is, there's a few reasons. The service business growth is perhaps the single largest one. We've managed to grow the portion of service, or we've grown service sales in total, and that means that the portion has grown even more as the solution sales in Process Technology have declined somewhat. Then you can, if I take it division by division, where there are significant changes, Process Technology, clearly more service business. Also, the projects that we have, we've had fewer projects in the fiber and textile industry, which typically does have lower margins. So that has helped in that respect from a mix within the division. Then we have a higher portion of Monitoring and Control Technology for the group as a whole, which is clearly strong.
Then the final one, and this isn't insignificant, is in Duct and Filter Technology, largely, but also other divisions. We are investing in our own premises and machine park, and we've looked at the production process in Thomasville, for example, on the ducting designing in quite a lot of detail, made big investments, and those are paying off now. So a very nice one to be able to say is that in the Thomasville plant, where we produce ducting, 50% of the electricity that we have used in the first six months of the year has come from our own solar panels. And that's just that's one small example. But it... There's a lot of factors, but I think I've covered most of them in my answer there.
Super. Thank you. Regarding the Process Technology division and the profitability reported there, I mean, it's higher compared to last year, despite lower sales volumes. Would you say that it would be able to, you know, maintain a higher margins also when volumes come back, or could an increase of larger orders and increased activity, for example, fiber and textile, lead to lower EBITDA margin going forward?
What can I say there? The division, it's a significantly different division to what it was a few years ago now. This profitability is extremely good on this low margin. We would perhaps like more volume. I mean, shareholders' dividends are paid in Swedish krona, not in percentages. But nevertheless, the Process Technology are generating more cash. They've got a very good Return on Capital Employed still. If they get more project business in, you will likely see some slide in the EBITDA margin from the 12%. They aim to be 8%-10% in that division, even in periods where there's a heavy load of solution sales.
And the solution sales, we can say, "Oh, the margins aren't so good, why don't we just go for the aftermarket?" But you get it's a chicken and egg thing. We want the... The most profitable business we have is the aftermarket. You cannot have that without the solutions business and the initial sales, of course. They could, they could drop from where they are, but they should not be back down at the sort of 5% mark, where they were some years ago. They're clearly somewhere else today.
Super. Thank you. And then staying on the Process Technology division, you reported higher orders received from textile and fiber industries, although from low levels. Are you expecting this positive trend to continue going forward in these more traditional industries?
There is a slightly favorable trend. It's we feel the bottom has been reached, and it's coming back up. How quickly that happens, we don't want to commit to, but we do expect some further improvement there. So there is a pipeline now of quotations out there and some that we're rather confident we might get. It will... The peak from in 2021, 2022 is a long way off, but we are definitely heading in the right direction now. Or the market is heading in the right direction, and we feel we're ahead of the market as well.
Thank you for that. Going forward to the Duct and Filter division, the Nordfab Now concept contributed a lot to the division in the quarter. Would you say that this concept is already at full capacity or is there room for improvement? And how would a higher share of sales from this concept affect the division financially?
Nordfab Now, what it's doing is—it's driving order intake in itself, where customers can get their products within 24 hours. That's clearly a big advantage for a lot of customers. This ducting can be quite bulky sometimes. We are still working on this. We're fine-tuning it to ensure that we have the right parts in stock and the—and those that are demanding. The other point to doing this Nordfab Now, and we is increasing inventory, which when Duct and Filter Technology came to me and said that we're going to need to increase inventory, I wasn't particularly happy, but the logic is absolutely correct. What it does, it frees up the flow in production.
So you can produce these high movers and some of the low, slower movers in larger batches. And that, what that means is that there's more efficiency in the production, better flow there, and that's one thing that's really seen in the margins as well, that we have much better gross profit margins in that division, too. But it ought to drive growth as well, and it we are seeing that it's happening. And we would like more of these low volume orders to be handled through to become under Nordfab Now.
What we get is, I can't remember the percentages we were talking, but it's quite a high percentage of these orders that come in via EDI and are handled, are coming under the, and are called Nordfab Now products. What that means is then we basically don't do any sort of administration or handle it, have to handle it through production. These are simply in and out automated orders, which improves margins, it cuts admin costs. So this is a significant thing for this division that we want to expand further.
Super, that's clear. And then just one last question from me. Something in the report that you are slightly more optimistic about the development in EMEA compared to earlier. Is that correct? Is that your view, and is there some kind of recovery ongoing in this region? You mentioned earlier, lingering weakness in Germany and U.K., for instance, but how does the EMEA market look currently in general?
I can say that, I think EMEA is still clearly behind the USA. USA is much more positive than EMEA. I'm not sure that there is so much of an improvement. What we have seen is, we've seen more larger orders dropping there, which is good, and that's great when they happen. If you take E&FT, they call a larger order just more than SEK 5 million, and they've had lots of those. What's the concern still, and it is more in Europe than anywhere else, is these mid-size orders are not happening. And this is to do with, this is, there is still a hesitancy to invest. That can't, we can't get away from that, and that does exist in Europe.
Super. Thank you for that.
More so than in the U.S.
Perfect. Thank you very much. That was all from my side. So thank you for answering my questions, and have a great summer.
Thank you, Lena. Good to speak to you.