Nederman Holding AB (publ) (NMAN) Earnings Call Transcript & Summary

Good morning, and welcome to Nederman Group's Q2 2025 report. We start with some headlines, and we can say that we have continued good orders received. We have growth and strengthened market leadership in a number of areas. Q2 in short, we have a very uncertain world. We all know that. We continue to advance our positions. We have shown organic and currency-neutral growth in orders received and sales. Particularly strong has the development been in Extraction & Filtration Technology division. We have a focused investment in innovation and in operational efficiency, and we have also strengthened the position as a leading player in industrial air filtration. Over to some key financials.

Exactly. So if we look at the orders received for the quarter, as Sven mentioned, currency-neutral growth, organic growth as well in orders received in the quarter. Currency neutral 8.4%, of which 3.7% was organically. That took us to SEK 1.425 billion in orders received for the quarter. The chart at the bottom of the slide that you can see right now do demonstrate there is obviously a significant negative currency impact -- that's almost exclusively down to the depreciation in the value of the U.S. dollar. Nevertheless, the growth that we've generated ourselves via acquisitions and organically did compensate for that on an orders received perspective. On to sales for the quarter, particularly strong development, the largest division, Extraction & Filtration Technology had the best development of the 4 divisions in the quarter. We were -- for the group as a whole, we were at SEK 1.439 billion. That is slightly behind the SEK 1.467 billion that we saw in quarter 2 last year that is in its entirety, that reduction isn't down to currency. Currency-neutral growth, we were 5.3% up and organically 0.7% up not much more to say on sales. It is particularly pleasing with Extraction & Filtration Technology, which we'll come back to there. Profitability. Adjusted EBITA was SEK 159 million. That was down from an extremely high at SEK 188 million in the same quarter last year. That gave us a margin of 11% for the quarter this year, 12.8% last year. There are a couple of items that we need to highlight when trying to help you analyze that decrease. If those of you who were following us last year will remember, we actually made a profit on the sale of a premises down in Germany of between SEK 6 million and SEK 7 million. That was reported and included in the profit of SEK 188 million for Q2 last year. The second factor is the rapid depreciation in the value of the U.S. dollar has impacted us negatively by SEK 18 million on an EBITDA level in the quarter. That is rather extreme, particularly considering our flows into the U.S. from abroad are relatively limited. Profit after tax was SEK 69 million SEK 97 million last year, and that means earnings per share SEK 1.97 versus SEK 2.77 last year. Adjusted EBITA up a little bit from quarter 1, as you can see in the chart at the bottom there. Moving on to the cash flow and net debt. We had a good cash flow from operations in the quarter. Q1 was relatively slow from a cash flow perspective. When looking at cash flow, you must always remember, it depends on where the starting point is your cash flow in any year is based on the working capital position at the end of the previous year. So on a rolling 4 basis, we're still over SEK 500 million in cash flow -- positive cash flow from operations. The quarter was SEK 59 million positive. When we're looking at net debt, it looks like we can see there's quite an increase there, SEK 1.589 billion was where we were at the end of Q2 last year. Now we're over SEK 2 billion. The acquisition of Euro-Equip, obviously, that was approximately SEK 135 million, and we paid a dividend of SEK 140 million plus in the quarter as well. Then the final element of the increase in net debt is our favorite international financial reporting standard, IFRS 16 relating to leasing, which the growth in the turquoise bar on the part of the bar on the bottom right of this slide, that's versus quarter 2 last year. That's related to the new lease for the premises here in Helsingborg, where we are now sitting. But nevertheless, net debt has increased somewhat. We'll come back to some of the investments that we have been making that obviously are connected to that debt. If you go division by division, Sven, then Extraction & Filtration Technology.

Yes. Extraction & Filtration Technology, we have some short comments on the development during the quarter. It's the second consecutive quarter with record order intake, which is quite pleasing. We are taking a good position in the market. We had strong base business. There were some larger orders roughly in line with Q2 last year. There has been a significant growth of midsized solutions orders and increased sales has, of course, followed by the good order intake in the first quarter of the year. We have had good EBITA despite the very negative currency effect we've seen. We have also seen growing order backlog and that support the sales for the coming quarter here. We start with the different regions. In Europe, EMEA, we saw orders received and sales grow higher orders mainly from a solid base business, it's not a lot of large orders. There was one in Holland, a major European defense order. Americas saw record high orders received. There was a number of major orders booked and a strong base business continue. What is interesting here is that we have been able to direct some of our sales forces and our activities to call it new industries. It's not completely new. It's the same technology, it's the same, but we have entered more into food-related, energy, et cetera, with the same technology as we have thereby compensated for the very slow demand, for instance, in the automotive industry, welding, et cetera. In Asia, we had a slight decrease, but Australia continues to develop well with orders secured in, for example, defense. But also here, we go outside the normal part there welding, wood, et cetera, and been able to use our knowledge as the clean air company. The key activities has been Partner Royal event in Helsingborg. We are now using the facility here, showing the innovation center, showing the experience center. We had 90 global partners present here in Helsingborg in our own premises. And I would say it was a very good event, boding well for the future and the enthusiasm that we could beat up with these some new but very many traditional old partners for us. We also launched the Fume Eliminator GoMax. It's a new highly effective welding fume extractor and we also presented the flow of new products that are in the pipeline. Common for all of these is that there is a focus not only on efficiency, et cetera, it is very much better energy usage, which is important in these days. We have also launched a streamlined modular hood system for containment capture weld fumes and dust. We also participated in the Ligna trade fair in Hanover. We had a full range of dust collection systems and energy saving technology and especially the digital system that Nederman [ say there ] got appreciation and headlines for our ability to save energy in our systems.

So financials for Extraction & Filtration Technology. Orders received up to SEK 706 million from SEK 673 million Q2 last year. That's currency-neutral growth of 12%. The division are 11.3% positive currency neutral for the year-to-date as well. So SEK 1.39 billion versus SEK 1.29 billion is very pleasing. Sales for the quarter, SEK 673 million versus SEK 652 million last year. That's up 9.8%, and that gave us an EBITA of SEK 101 million, 15% adjusted EBITA margin. And that is like Sven mentioned, despite some negative currency effects, this division is the one division that has right now the biggest individual exposure to U.S. dollar. Year-to-date, division up to SEK 175 million now which is 13.4%. Obviously, now with this good order intake for 2 quarters in a row, the backlog has increased and like you mentioned, Sven, that bodes well for the upcoming quarter's sales figures. Moving on then to Process Technology.

Yes. For Process Technology, we have short comments on the development during the quarter. There is a continued hesitancy in customers committing to major capital investments. And for this division, we are very much linked to larger investment where we are a significantly smaller portion of the investment compared to the rest of furnaces, et cetera, in a foundry or a smelter or whatever. Orders and sales positively impacted by the acquisition of Euro-Equip and we continue to get new orders in the South America where they're active and mainly on the [ Iberian ] Peninsula. We had one major order in green steel. New steel has been an important part before, but there was a new technology here. Strong service business and good efficiency in project implementation gave a solid EBITA exceeding 8%, which is in this type of project business okay. If we go to the different parts of the division, textile and fibers orders to sales growth was negative there. The textile segment is still characterized by continued overcapacity in spinning mills, and we do not see a quick turn here. However, positive is that we are selling a lot of upgrades. We have sold close to 1,000 fans, the special fan that reduce the energy use in these mills. So we continue to develop the aftermarket waiting for the large new orders to come, keeping a good relation with our customers with new innovation and helping them be more efficient. If we look into foundry and smelters, orders received increased during the quarter. Acquisition of Euro-Equip boosted this growth. Green steel orders secured and strong underlying recycling trend is positive. We have one more major aluminum recycling order booked. There's a large pipeline. But again, as we've said, there are turbulence in the market questioning so when they will be signed that we don't know, but we have a very strong pipeline. In customised solutions, we had growth in both orders received and sales, and we will continue. The key activities for the division has been, of course, the integration of Euro-Equip and it goes according to plan. We have also increased focus on R&D and sales of new energy-efficient solutions.

Financials for Process Technology then, SEK 388 million in order intake for the quarter was 18.4% growth versus the same quarter last year. Year-to-date, still 9.5% lower currency neutral. Sales for the quarter, just over the SEK 400 million mark, SEK 401 million versus SEK 410 million last year, growth again, 4.7% currency neutral. EBITA, SEK 33.5 million versus SEK 54.4 million last quarter -- same quarter last year, 8.4% EBITA margin for this quarter, which Sven mentioned, was actually reasonably pleasing. They must be pointed out that you're comparing to an extreme quarter last year for profitability. There was SEK 6.5 million of -- you could say, free profit from the sale of the building down in Germany. The margin after that was actually 11%. And there were some projects finished with -- in the same quarter last year, we concluded a couple of projects with very favorable margins there. But 8.4% is where they end up for the quarter, 7.6% year-to-date, SEK 57.6 million is below where we were last year, and it's largely down to this top line, the sales figures. And as you mentioned, with this hesitancy on committing to -- customers committing to large capital investments. The chart you see on the top right side of the slide here, it does demonstrate the backlog for the division. And those of you who've got your Excel files, you've probably seen this work this out already, but the backlog is -- the order backlog is approximately in line with where we were 12 months ago despite this rather turbulent macroeconomic environment. Duct & Filter Technology then.

Yes. For Duct & Filter, we have some short comments on the development during the quarter. There was negative -- we have reduced the orders received in all 3 regions. Unfortunately, that has been an increased market uncertainty with fewer large orders received across various industries, and that has been the negative impact. The normal base business have been conducted in a more normal way. It's a lack of large investment orders. We have got new orders in the EV battery production, but fewer than previous quarters. And as mentioned here later, we have not been able to compensate that with other larger installation for foundries, smelters, large textile, et cetera. So we will continue to work on that. Again, we have won in Nordfab'’s EV batteries orders, although lower level. Few large orders, base business, very solid problems, cross-border sales to Canada from U.S. diminished due to tariffs and also to Mexico but that has been a smaller market. U.S. production efficiency is boosting profitability. We have fully automated warehouse. We have Nordfab Now. We have the [ ADVs ] in full operation. So we have a very efficient manufacturing. EMEA orders and sales declined after a strong Q1. Nordfab, Denmark and U.K. coordination continue to give positive profitability impact. New Thai reseller made a positive contribution to orders while sales in Australia remained at the improved level. Mena orders -- orders received decreased in U.S. but 2 new orders were received from steel manufacturers that are coming back and investing in U.S. probably because of the tariffs making more profitable in U.S. Sales increased in EMEA, mainly due to operation only comprising service and aftermarket with customers in noncyclical segments. What key activities have we had in this division? Well, we have launched the laser-welded ducting system in Australia from plant in Thailand. We are adding the 2,500 square meters of production and warehouse space of Nordfab U.S., and that will be completed in Q4. And this is to be able to also conduct the Nordfab Now concept for larger sized duct works. We have continued to roll out the BIM Object at trade fairs and then part of training sessions, they have what they call lunch and learn where they invite users for lunch and they train them to use this everything to do easier to do business with Nederman and Nordfab here. And we see a large interest in continuing developing the relation with us. We are now just waiting for the large project to come.

Financials for Duct & Filter, external orders received SEK 166 million in the quarter versus SEK 205 million. Currency neutral, we're down 10% there. Year-to-date, it must be pointed out, still 3.8% positive currency-neutral/organic growth. Sales, SEK 205 million in the quarter versus SEK 236 million last year. There is a currency impact there, but currency neutral, it is, however, still down 4.3%. Year-to-date, positive 4.3% still -- adjusted EBITA SEK 37.4 million, down from SEK 49.4 million. The margin 18.2%. It might be lower than 20.9% in the quarter last year, but we're still above -- we're at 20.3% for the year-to-date, and that is very strong historically for this division still. Moving on to Monitoring & Control Technology, Sven.

Yes. Monitoring & Control development during the quarters. Orders received slowed with the exception of Americas. Profitability negatively affected by lower sales volumes and unfavorable product mix. Increased market uncertainty led to some delays on large investment decision. If we go to the European scene, Nederman's had particularly strong sales. Gasmet saw a reduction in order intake. Olicem that we acquired in November is collaborating with Gasmet to build up a pipeline of potential projects in emission analysis. If you remember the acquisition of Olicem or part of the Olicem is to make a more complete statement of the clean air company. We are now helping customers doing analyzing of the emissions that they are creating, both internal R&D, but also for reporting to legislative authorities. In Americas, NEO Monitors had very good growth in orders. Energy sector was particularly strong with NEO Monitors booking 2 large orders. The higher tariffs at the start of Q2 between U.S. and China essentially resulted in sales to China coming to a complete halt. It has a negative effect for the division. In APAC, Gasmet saw order intake growth in the quarter, while NEO Monitors had a slight decline. Focus on leveraging the technology center in Shanghai and Singapore sales office is going on. What we have is the key activities. We continued investments and activities to strengthen production capacity and above all efficiency in the NEO Monitors Norwegian hub. Continued development of and preparation for the launch of the next generation of Insight products. Auburn FilterSense have been rebranded to Auburn or we have shortened it, making it easier, and that is the original name. The expansion of Auburn's production has commenced, and it's not only the capabilities, it's also a matter of efficiency. They've been extremely crowded, which is not generating enough efficiency in the small factory.

So orders received for Monitoring & Control were SEK 165 million in the quarter versus SEK 185 million in Q2 last year, that's 3% negative. For the year-to-date, they are still plus 2.4% currency neutral despite this lacking of larger orders that you referred to, Sven. Sales for the quarter, SEK 190 million versus SEK 206 million last year. There were a couple of delays on customers just delayed the deliveries over the quarter end, which impacted negatively. It's up to SEK 10 million that was lost in sales. That does then have an impact in the EBITA in any individual quarter. So SEK 28.3 million EBITA is 14.9%. That's not as high as we would like to be, SEK 38.9 million was last year, 18.9%. For the year-to-date now, the EBITA is SEK 64 million versus SEK 67 million at the same point last year, 16.5% EBITA, slightly down from the 17% for the year-to-date 2024. Talk a little bit about the outlook, Sven.

Yes. Demand continues to be slightly slower, but our solid base business, growing service business and strong digital range enable us to assert ourselves well in the current market. Our performance is largely positive, though there is a risk that the very uncertain market environment will continue to impact customers' investment decisions in the quarters ahead. Our orders received are healthy. Our order backlog remains solid, and we are investing continuously improving our range all of which means that we will be able to continue advancing our positions even in this challenging macro environment. In a world with growing insight into the damage that poor does to people, Nederman with its leading industrial air filtration rate has a key role to play and good possibilities for continued growth.

Just a quick look at the financial calendar, then interim report for quarter 3 will be released on the 23rd of October this year and then the year-end report for 2025 will be released on the 12th of February 2026. And with that, I think we can open up for any questions that listeners might have.

[Operator Instructions] The next question comes from Hanna Grimborg from Handelsbanken.

Hanna here. So I have 2 questions. To start with on M&A. Maybe you can tell us a bit more about how the M&A market has been impacted by the increased uncertainty. I mean is it only processes becoming longer or has something changed when it comes to price expectations and so on? So I can start there.

Okay. Let's say there's a flood of people running for the door at the moment. So there is a long list of potential M&A candidates. However, I think there is still a discrepancy between what is a reasonable multiple for a number of them considering the capabilities going forward. Having said that, we are continuously analyzing all the time here. But as you have seen, we have tried to be quite picky when we go in and not spend shareholders' money on something that we do not believe that we can turn into meeting our profitability goals within a 3-year period.

I think you could say as well, Sven, that compared to 12 months ago, the price expectations are a little bit more realistic. We will still not be paying more than the companies are worth, of course, but it is looking slightly more favorable from a buyer perspective than 12 months ago.

That's a fair comment.

All right. All right. And then just -- I think maybe you mentioned this a bit, but then maybe you can repeat it. But if you look at the different divisions, did you notice any shift in demand during the quarter for any of them, either positive or negative towards the end of the quarter?

I think most of them were doing better in the latter part of -- I would say that June was better than April and May in all divisions. So what that means in reality, it's hard to say. And what we've seen is a number of issues like we mentioned, especially MCT has been hit by the fact that you cannot sell from U.S. to China or to Canada for that sake, which has been -- so the mining industry and that has hampered some of the sales. And we have also had some other issues and that very much related to the hesitancy that not lost any large project, but they are postponed week by week, and we don't know when they will come. But we have a very healthy pipeline. We see that we have a strong position in the market at the moment.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you for having taken your time listening to our presentation. We can summarize that we have an interesting and challenging environment where we see that we have moved forward and we are reasonably confident that the coming quarters will have more positive signs since we see that there are some clearance in some of the macroeconomic issues going forward. So looking forward to the coming quarters, and thank you for once again for having taken the time. Have a good summer vacation for those who are into that.