Indutrade AB
STO:INDT
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
224.1423
322.8
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q3-2023 Analysis
Indutrade AB
Indutrade reported a robust third quarter in 2023 with several key highlights, including a strong demand across various sectors leading to an 11% rise in order intake. The increase was buoyed by significant contributions from the medtech and pharmaceuticals segment, as well as positive developments in water and wastewater. There was a notable decline in infrastructure, construction, and general engineering, identifying a shift in sectoral demand patterns. Revenue growth was solid at 17%, with organic growth contributing 3%, acquisitions adding 7%, and currency effects accounting for 7%. The company's EBITDA margin remained high at 15.2% and operational cash flow reached a new peak, evidencing their effective operational management and the capability to convert revenues into profit.
Performance across regions varied, with Norway and Denmark experiencing strong growth, driven by significant demand in the medtech sector and the energy industry in Norway. Challenges were faced in Germany and the UK, with declines in construction-related demand and difficulties in the medtech and pharma sectors. However, the company mitigated these regional imbalances by completing strategic acquisitions, including Noby in Norway, Powerpoint Engineering in Ireland, and TSE Troller in Switzerland, showcasing Indutrade's commitment to growth and diversity in its portfolio.
The profitability of Indutrade has held strong, with an EBITA increase of 15% and a minimal decrease in EBITA margin from 15.4% to 15.2%, attributable to one-off items in the previous year. Acquisitions continue to be a strategic lever for growth, although with more caution exercised in the uncertain market climate. The company completed fewer acquisitions than the target pace, mostly because of a strategic decision to prolong ongoing acquisition processes amidst increased market uncertainty.
Indutrade's financial health remains robust, with a solid return on capital employed at 21% and an all-time high operational cash flow surpassing SEK 1.2 billion. A disciplined approach to working capital management led to inventory reductions and improved cash flow performance. Earnings per share slightly declined by 2% from SEK 1.9 to SEK 1.87, influenced by increased finance net and higher tax costs. Nonetheless, the long-term earnings per share growth rates over the past three and five years show promising figures at 20% and 19%, respectively. The company's debt profile improved during the quarter, with net debt to EBITDA sitting comfortably at 1.7x, indicating a financially stable position and room for investment.
A diversified portfolio of approximately 200 companies affords Indutrade a competitive edge, enhancing flexibility and resilience against market fluctuations. Areas showing structural growth, such as those benefiting from the green transition, have been particular strongholds for the company. With a clear strategic focus, Indutrade is poised for sustained growth, marked by continued strong demand, robust margins, and a strong cash flow. Looking ahead, the company has a promising pipeline of acquisition prospects and a solid platform for continued sustainable, profitable growth.
Welcome to the Indutrade Q3 presentation for 2023. [Operator Instructions]Now I will hand the conference over to CEO, Bo Annvik; and CFO, Patrik Johnson. Please go ahead.
Welcome and good morning on our behalf as well. We are happy about the quarter 3 report and would like to start with some overall highlights as we usually do. And continued high demand. Order intake up 11% in total, of which minus 2% organically and the strongest order development in medtech and pharmaceuticals, but also water and wastewater; a little bit weaker demand in infrastructure, construction and general engineering. Strong sales with a growth of 17%, of which 3% was organic. We had a continued high EBITDA margin at 15.2% and a new all-time high operational cash flow. And inventories continued to decrease sequentially. We had 1 acquisition completed in quarter 3 and 2 so far in quarter 4 and the inflow of interesting companies to acquire remains good.If we then turn to order intake a bit more specifically. Continued high demand, as I said, against challenging references. And 11% in total whereof minus 2% organic, plus 7% from acquisitions and plus 6% from currency. We see variation between companies, segments and countries and almost half of the companies grew in the quarter order intake-wise. As you probably know, it was 1 working day less this quarter compared to a year ago. Book-to-bill below 1 mainly, I would say, due to seasonality and increased invoicing pace; but also an indication of slightly lower demand in general. We see destocking at some end customers and in the value chain, which has some dampening effect on the order development, but difficult to assess the overall impact. To mention some segments, which were sort of stronger this quarter; I would say that medtech and pharma stood out positively and also water and wastewater.And just to give you a flavor of those companies and products, I would say that we have a leading position in terms of insulin pumps and dosing equipment in the Nordic markets. We have several companies working with flow related products like pumps and valves for pharmaceutical production. There is also several companies working with wastewater investments in different cities around Europe. So those segments stood out. I would say also the process industry and the energy segments were stable, in some geographies increasing and maybe in some slightly decreasing. So overall aggregated a stable situation for us. And infrastructure and construction and general engineering was the weakest this quarter and again here there are some engineering companies, which are doing well and there are some who have more of a difficult situation maybe more linked a bit to Germany and the U.K.If we speak about construction, I would say that our exposure to small house buildings are very low. So our construction business is more linked to commercial houses and residential large houses in cities, but perhaps the infrastructure business is considerably larger than the construction part I would say. If we look at business areas, Fluids & Mechanical Solutions and Industrial Components had a very good development and again it was to some extent driven by medtech customers. But also we have a niche segment linked to the automotive aftermarket, which also have been doing well. And in terms of the weakest development, I would say that business area Measurement & Sensor Technology DACH and U.K. stood out. And U.K., I think it's a little bit more linked to the country and market as such.DACH had difficult comparables. And business area Measurement & Sensor Technology, they have some of their business related to an end market which is retail oriented in the U.S., which this quarter has been a bit weaker. If we then turn to net sales, I would say that it's a continued good sales growth in total plus 17% whereof plus 3% organic, 7% from acquisitions and 7% currency related. And good to sort of underline that the rolling 12-month sales trend now is slightly more than SEK 31 billion, which is a good level obviously for Indutrade. And 6 out of the 8 business areas grew organically in the quarter. We should also say that supply chains are now more and more normalized and most companies have no significant issues linked to that anymore.If we then look at sales in a geographic perspective, you see the slide with plus and minus signs on. And strong here is Norway and also Denmark and both those countries had good medtech growth in the quarter. In Norway, we also saw good demand from the energy sector. You also see that Finland and Germany have some minor signs and weak demand unfortunately in several companies there. As a segment, Infrastructure & Construction and General Engineering stood out. In Germany we also had, I would say, more challenging references in the medtech and pharma sector. And Finland is mostly built up of a lot of base industry so they are usually lower early in the cycle, but also will increase earlier than other markets. So that's more of a general situation in Finland right now. U.K., Ireland, they are mixed together on the slide here, but actually 2 separate situation.I would say that the U.K. is declining and have more of a difficult demand situation. But Ireland is on the other hand more positive and still larger greenfield buildups in the country in different segments and also quite a lot of CapEx investments in several areas in Ireland. If we then take Holland and Belgium, we saw strong sales development in Belgium and that's predominantly mostly export business from our Dutch companies. And Switzerland, Austria declining mostly because of challenging references, as I said before, and then we had very good sales, I would say, to the Swiss pharma and chemical industries. Last, Asia and North America impacted a bit by more volatile export project business. This quarter good project sales to the energy and engineering customer segments in North America and tough references from last year in Asia where we had good energy project sales there.If we look at the organic sales trend over time here, it's comforting to see that we had organic sales growth now for 12 consecutive quarters and again now driven by improved supply chains and good order backlog to sort of build upon in the quarter. A majority of the companies continue to show good growth in the quarter and 6 out of 8 business areas did that as well. Rolling 5 years average organic growth now on 6%, which is highly prioritized as you know from us. This is of course slightly impacted by high inflation in the last year, but still a good number I would say. The order backlog is now after the quarter basically normalized with approximately 2 to 3 months of annual sales in the backlog on average. EBITA continued, I would say, solid high profitability in absolute terms close to SEK 1.2 billion and a growth of 15%; 2% organic, 6% from acquisitions and 7% from currency.And the EBITA margin was 15.2%. And last year, we actually had positive oneoffs contributing with 0.2%. So if we if we sort of take that away, we were basically exactly at the same level as last year excluding these oneoffs. So comforting stable high EBITA margin level. If we then turn to the business areas and start with the overall sales situation. As I've said, organic sales growth in 6 out of 8 areas and also in the majority of around 200 companies. Benelux, strong development in for example valves for power generation where we have a larger company, but tough references in some companies with customers in the medtech and pharma dampens the growth in that business area. DACH strong sales last year, as I said earlier, to the Swiss pharma industry and some chemical industries. Finland, weaker development in most companies, again base industry fairly early in the cycle.Flow, several customer segments contribute; for instance medtech, pharma where we provide production equipment like valves and pumps and instruments to measure flow. We have some niche-oriented companies in the marine segment which are doing really well, process industry in general and also the energy sector. So quite broad-based in the segments perspective from flow. Fluids & Mechanical Solutions primarily driven by medtech and pharma this quarter and also the automotive aftermarket where we have a few companies. Industrial Components really stands out in terms of a medtech perspective not only from 1 company, several companies, but that's the area standing out. And Measurement & Sensor Technology, sales growth in majority of the companies with strong development in for instance companies with customers in the marine, engineering and HVAC segments.Last, U.K., good contribution from energy, aerospace and defense; but dampened primarily by the marine segment where we have a larger company in the U.K. business area, but I would say also a bit in general a more difficult geography to deal with currently. If we then turn to profitability and EBITA margin by business area. Improved situation in 4 areas out of 8; DACH, Flow Technology, Fluids & Mechanical Solutions and Industrial Components; and largest improvement in Fluids & Mechanical Solutions again driven by medtech and automotive aftermarket. In general I would say that all our companies have done a great job in terms of price management and as you can see in the report, we are having improving gross margins which we are very happy about. However, we see higher expense levels. There has been step-by-step higher activity levels in companies. So this have a little bit dampening effect on the margin development.The largest decline is in BA Finland due to top line decline and also somewhat higher expense levels, but I would say that Finland with a level of 16.3% is still a very good level. Continued dampened margin in the U.K. There we have slightly larger exposure to infrastructure and construction as a business area and also a slightly larger cost inflation in general in the U.K. than the other European countries we operate in and also a bit higher energy prices. So as I said before, little bit more difficult situation to deal with. The EBITA margin in the Benelux also falling behind slightly. The main reason is a weak development in a couple of larger companies with customers in infrastructure and construction and also tough references in the medtech and pharma sector.If we then turn to acquisitions. We were able to complete 1 acquisition in quarter 3, a Norwegian technical trading company by the name Noby. They offer premium security products and systems and fire alarm systems on the Norwegian B2B market. And also now in quarter 4 we have been able to acquire 2 companies, Powerpoint Engineering in Ireland and also TSE Troller in Switzerland. Powerpoint Engineering is a technical trading company focusing on electrical safety and test equipment for use in high and medium voltage applications basically to protect operators from electrical hazards. And as I said before, we are very optimistic about the market outlook for that segment and this company, lot of investments also in the grid in Ireland. TSE Troller, a very niche-oriented company. They develop, manufacture and distribute high quality coating dies, quite large dies made of stainless steel for really high precision coating layers in various industries.And for example, they use these coating dies when they produce batteries for automotive applications. Our ambition since a while now is to gradually increase the number of acquisitions per year. However, given increased market uncertainty we have seen in the last quarters, we have been a bit more cautious this year and prolonged some of the acquisition processes. The competition has somewhat decreased and our pipeline and inflow of interesting prospects is still strong and we have a number of projects in different phases. So all in all quite optimistic about the acquisition situation. If we then look at the performance from our acquisitions, we have the view that we would argue that you should follow acquisitions over a longer time period because they can basically be done in chunks.We don't particularly manage and drive acquisitions on a quarterly basis or a monthly basis or anything like that. When they are ready, they are ready and then we launch them and present them. And our goal is still firm to make 2 to 3 acquisitions per business area per year. And last year we finalized 16 acquisitions. The 3-year average is currently at 15. And if we look at the financial effects or the bridge effects from acquisitions the last 12 months, I can say that the main reason for the slightly weaker development the last quarter is sales decline and weak result in 1 of the bigger acquisitions with exposure to infrastructure and construction. So that now stands out a bit. Otherwise, a clear majority of the acquisitions are actually accretive and having good performance.By that, I turn the word over to Patrik to comment more on the financials.
Thanks, Bo. So let's dive into the financials a little bit more. Total growth for orders and sales was 11% and 17%, respectively, in the quarter and accumulated we are at 12% and 21% up. Orders 8% lower than sales in the quarter partly because of seasonality I would say. Orders are normally in many of our companies stronger in the beginning of the year. Customers place orders during the spring for summer shutdowns and partly also because of increasing sales pace and of course also slight indication of a lower demand situation. Continued good price work from our companies resulted in an improved gross margin, 34.8% versus 34.2% last year. Year-to-date we're basically on par with last year. EBITA grew with 15% in the quarter and 20% year-to-date. The EBITA margin was then 15.2% versus 15.4% last year so slight decline.But as we already said, last year we had a few positive oneoffs impacting primarily related to earnouts and that corresponded to plus 0.2 percentage points then. So the underlying EBITA margin is therefore in line with each other between the years. Year-to-date EBITA margin is at 15.1% versus 15.2% last year. Going further down in the P&L. The higher interest rates and also the higher debt level compared to a year ago continued to impact the finance net. So for the quarter, it was now SEK 134 million and SEK 354 million then year-to-date. Tax cost also increased then with 21% in the quarter and that's slightly higher than profit. The main drivers are an increased tax rate in the U.K. and also last year I talked about oneoffs and some of that then nontaxable, which meant that last year's tax rate was a bit pushed down. And then EPS declined slightly in the quarter, but it's up 8% then year-to-date and I will elaborate on that a little bit more on 1 of the next slides.Return on capital employed continued, I would say, on a good level; 21% above our target, but slightly lower than last year mainly driven by increased working capital and the high acquisition pace that we've had in the last year. Operational cash flow all-time high, above SEK 1.2 billion, good performance driven mostly by a more favorable working capital development than last year. And then lastly, the net debt to EBITDA declined sequentially from Q2 down to 1.7x versus then compared to last year when it was at 1.6x. Okay. So moving on and looking a little bit more in detail on cash flow. And as I said, the record operational cash flow for the quarter at slightly above SEK 1.2 billion. The improvement versus last year was mainly related to supported of course by good profit level, but pushed up then by favorable working capital development.Last year we had relatively high inventory buildup, but this year total working capital is declining during the quarter. We saw a continued inventory reduction in the quarter mainly driven by the good sales we have along with the better supply chains as Bo described. The inventory levels are, however, still high we think and we are continuing to work with that and we expect to see further inventory reductions in the coming quarters. Moving on to earnings per share and, as I said, that declined in the quarter with 2% from SEK 1.9 to SEK 1.87. The increase in EBITA was offset by the increased finance net and higher tax costs that I mentioned. Also impacting is higher amortization levels driven by the acquisition pace last year I would say. If you look at the earnings per share on a more long-term perspective, the last 3 and 5 years average, they were on 20% and 19% respectively, per year growth.And then lastly, looking at the debt situation. The interest-bearing debt net debt decreased sequentially from quarter 2 with more than SEK 750 million down to SEK 9.4 billion and mostly related to the strong cash flow that I talked about and also slightly fewer acquisitions during this year so far. The increase versus last year, that's mainly driven by the acquisition pace end of last year and beginning of this, which was very high and in combination also with the dampened cash flow that we saw last year. Net debt ratios declined slightly sequentially and are not high from a historical perspective I would say. Net debt to equity now on 66% and net debt to EBITDA, as I said, 1.7x and if you exclude earnouts, it's at 1.5x. To summarize, I think the financial position is strong, relatively stable low debt ratios and a balanced debt maturity profile with only a very small share short-term debt. And on top of that or in addition to that, we also have sufficient guaranteed unused credit facilities as backup.So by that, I say thank you and leave back to Bo.
Good, Patrik. Since we are experiencing a somewhat more difficult business climate in general, I think it's appropriate to just mention a few words about our group structure. One of our key characteristics is obviously the diversified portfolio of around 200 companies. And looking back, this has obviously proven to be a strength. We have performed relatively well compared to many larger integrated industrial companies in previous economic downturns. We are not dependent on any single end segment, any single product area or geographic market. Medical technology and pharmaceuticals, which have grown significantly for us during the last year, is sort of a strong factor in a more demanding business situation. And also we have a strong exposure in many companies to segments with structural growth driven by the green transition among other things.So already several years ago we were more resilient I would say and I think we have increased that resilience in the last years by growing the company in certain segments which are more stable. We also, as most of you know, have a bit more than 50% of our revenues linked to technical trading companies, which in general are capital and people light. The group in total are built up by smaller companies and they are per definition, I would say, more agile flexible than a large integrated industrial company. So all in all with our decentralized model and local decision making close to the customers, we have a well-diversified structure and are able to manage market fluctuations in a relatively better way than these larger industrials, which could be good to know.If we then summarize the key takeaways. As we have said, continued high demand situation although somewhat dampened. The uncertainty around the general state of the economy remains for the coming quarters. Several of our companies are well positioned in structurally growing market areas with good opportunities for continued growth. Solid EBITA margin and all-time high operational cash flow. 9 acquisitions so far in 2023 with combined annual sales of approximately SEK 1.2 billion and several ongoing projects in different phases and all in all a strong platform for continued sustainable profitable growth.So by that, we end the formal presentation.
[Operator Instructions] The next question comes from Robert Redin from Carnegie.
I just had a question on acquisitions. I mean you showed that slide with the 3-year average pace of acquisitions and the pace last year and you have that target of 2 to 3 acquisitions per business area. But I guess you're still a little bit below that year-to-date and I've heard you say that you want to prolong processes to see where the demand picture ends up and so on. Do you now feel that you have more visibility on where demand is ending up? Could you be accelerating your pace of M&A going forward now or is the picture still the same that you want to take your time in those M&A processes?
So I think all-in-all, a slightly better position and situation now than in the middle of the spring earlier this year. We have a better perspective in terms of market developments and we have also been able to demonstrate and deliver high operational cash flow. So I would say that we are a little bit more in a better comfort zone now than we were 6 months ago. So we haven't stopped projects, but we have prolonged some projects and the pipeline is good. So somewhat better situation now, Robert, than 6 months ago.
All right. So you're more call it confident. And what about the inflow of potential targets, is that drying up now that times are tougher or is there still a good inflow supply side [ policy ]?
It's actually a good inflow. Maybe the quality of the inflow has been somewhat weaker. But compared to earlier weaker cycles, I would say that the inflow is much better now than what it has been earlier. But maybe slightly weaker quality, but still enough good inflow in order for us to have a good acquisition pace going forward.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Then we say thank you for today. Thank you for listening, participating and we keep in touch.