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

Welcome to the Nederman Holding Q2 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to speakers, CEO, Sven Kristensson, and CFO, Matthew Cusick. Please go ahead.

Good morning, everyone, and thank you for joining us today, taking the time not sitting in the fabulous sunshine in this -- at least in this part of Sweden. The second quarter was encouraging for Nederman and our owners. We saw a clear increase in customer activity and a strong order intake across all 4 divisions. This confirms the positive trend we saw at the end of the first quarter. You remember the first part of the first quarter wasn't that great. Market uncertainty persists, but we continue to see customers investing in areas that are important for their operations. It's also encouraging that the investments we have made in innovation, operations over the -- and operations over the recent years are creating results. This is strengthening our competitiveness, and it's also helping us gain market share in traditional and new industries. During Q2, orders received increased in all 4 divisions. Extraction & Filtration Technology, which is the biggest division, had record order intake. Monitoring & Control Technology and Duct & Filter Technology had the highest quarterly order intake since Q1 last year. We also see continued growth in our service business. That's a focus area, and it's very important for recurring revenue and long-term value creation. We continue to advance our innovation agenda through new product development and releases that address our customers' need for cleaner production, improved productivity and safer work environment. At our Helsingborg Innovation Center, we are building unique dust analysis capabilities, which will improve both our products and our customer safety. This initiative is generating interest in the market and has also been highlighted on Swedish National Television and Radio. As part of our agenda for market leadership and focus on Australia, we acquired the business of our distributor, Fume & Dust Control. We now have a clear presence in Queensland, and this acquisition confirms our ambition to grow in a market with significant future potential. Profitability in Q2 was affected negatively by the lower order intake at the start of the year, as mentioned before, but our operational focus remains strong. We have continued to improve efficiency throughout the organization and maintained a high level of cash generation. Overall, the quarter reinforces our confidence in the direction of the company. We are well positioned to elevate our market-leading position and continue creating value for the shareholders. With that, I hand over to Matthew, who will take you through the financial performance in more detail.

Okay. Thank you. So moving on to the key financials and starting with orders received. Orders received, as we mentioned, picked up at the end of Q1, and this has continued throughout the second quarter. Strong inflow of orders across all divisions, particularly small and midsized orders, no huge mega orders in Process Technology division, but growth in all 4 divisions, nonetheless. Total order intake for the quarter was SEK 1.48 billion versus up from SEK 1.425 billion last year. That's currency-neutral and organic growth of 6.3%. What more can we say there? The currency effects are becoming less now. We've seen at least at the moment, a relative stabilization of the U.S. dollar and the euro against the Swedish krona. I did say relative there. Orders received, if you see on the presentation, the chart in the middle, you can see that this is the second best order intake quarter since Q1 of 2024, and that's at prevailing rates. I was playing around a little yesterday with looking at currency neutral, and this is the best quarter of order intake since this chart started back earlier in 2023. So very pleasing with that order intake level. If we move on to the next slide and look at sales, of course, we have the weaker order intake, particularly in January and February, and this has affected sales in this quarter. We're lacking some volume. And sales were 3.7% down currency neutral. It's SEK 77 million lower than the same quarter last year. So that does impact a bit on profitability. So on the profitability side, we ended up with an adjusted EBITA of SEK 114 million, which is 8.3%. Earnings per share for the quarter, SEK 1.54 versus SEK 1.97 last year. More positively, it was cash flow. We had a good operating cash flow in the quarter, SEK 69 million positive in Q2 versus SEK 59 million in the same quarter last year. We see on the net debt that we have an increase Q2 versus Q1. That's typical in Nederman when we pay our dividend during the second quarter, it was paid right at the end of April this time. So that was SEK 140 million alone, and that does make some difference on the net debt. We expect this positive cash flow to continue into Q3 and Q4 now. A little bit on the divisions then. I'll keep this a bit more brief than we have traditionally shown so we can -- Sven has already told us a lot about the key activities. But if we take Extraction & Filtration Technology first, the largest division, record order intake, as Sven already mentioned, the highest quarterly order intake ever. Profitability, on the other hand, was lower, lower sales volumes related to the order intake. That has the knock-on effect that capacity utilization in our factories is down. We have got very efficient factories, and that's something that we ought to see an increase in utilization going forward given the excess of orders over sales that we saw in this quarter. Basically, we've grown backlog in all 3 regions, which is pleasing as well. Orders received SEK 716 million is over SEK 100 million more than the sales of SEK 611 million. Adjusted EBITDA is only 11% in this division. You can yourselves do the math. If we have a sales of SEK 715 million, I think we can see a rapid pickup in the EBITDA margin going forward. The key activities for E&FT were the acquisition of Fume & Dust Control in Australia. We're continuing to invest in -- it's in North America, actually, the major investments now in the facility in Charlotte, North Carolina. And we also held a Partner Royale event here in Helsingborg. We had over 50 European partners visiting us there. Process Technology, development in the quarter, some currency-neutral growth in order intake in Process Technology, that's 1%. There are some markets now that are showing signs of stabilization. If we take the fiber and textile market, we actually saw growth in the quarter, which was pleasing. If we take India, for example, we also, on the foundry smelter side, do see the Indian business growing there. We've invested a bit of time and money in that, and that's starting to reap rewards. The service business continues to grow as well, which is very, very important for this division. It has the better margins there. Some larger orders were booked, but it was still on a relatively modest level. Orders SEK 380 million; sales, SEK 390 million, which is SEK 10 million lower than last year in sales. But despite that, we actually had a slightly higher margin. EBITDA margin is at 8.9%. This shows the importance of continuing to grow the service business. The mix effect of having more service in there is clearly positive for profitability. Key activities in Process Technology, still focusing on product development. There's -- we're upgrading a test center at the moment, and the digital range is fundamental for this, not least in order to connect it to the service side of things where we see this good profitability development. Moving on to Duct & Filter Technology. Extremely strong order intake in the second quarter here. They picked up -- the order intake picked up in March continued throughout the quarter. Sales increased marginally, but it's not really a backlog business, but despite that, there is a bit of a backlog buildup. Very good profitability, good operational efficiency. These investments that we've made in, for example, in Thomasville in the U.S. and also the plant in Assens in Denmark, are seeing increases in margins in the factories. If we talk about the numbers, external orders received SEK 194 million, total sales, SEK 203 million and then an EBITDA margin is 19%, which is very pleasing. What must be pointed out is that this division also have built backlog in the quarter. The external orders received SEK 194 million. On top of that, they typically sell for around SEK 20 million to SEK 25 million to the other divisions in the Nederman Group. So we ought to see a pickup in sales in the third quarter as well here. Key activities, BIM Toolbar has been launched in Europe. It's been very successful in helping us get larger orders in the U.S., and we're aiming for the same here. Marketing activities have been quite important right now. We've tripled the production capacity for our heavy gauge ducting in the U.S. and that business is developing well. It also brings in regular ducting business, and we're highlighting that. We also have now a remote warehouse in Dallas as part of our ambition to improve the fast, friendly, reliable Nordfab Now concept a little bit further west in the U.S. An interesting thing here as well, the solar panel system in Thomasville, which we've expanded further is now exceeding 1 gigawatt of electricity production annually, which is actually helping with some decimal points on the EBITDA margin. It's a very good business case with solar panels in that part of the world. Monitoring & Control Technology, the positive here was a significant pickup in order intake in the second quarter, particularly in APAC, both Gasmet and NEO Monitors performed strongly in APAC there. As probably expected, the sales did decline following the low order intake in Q1. Order backlog has therefore increased, which bodes well for the upcoming quarters. We see some clear indications that the market is stabilizing. Nevertheless, orders received were SEK 192 million, which is very good. That's 17% growth. Sales were down at SEK 178 million from SEK 190 million last year. The EBITDA margin is then 7.2%, which is a big drop from 14.9% last year. As well as a drop in sales, we had a somewhat negative mix effect here with Gasmet portable units. We had fewer of those in the sales mix in the quarter, which leads nicely on to key activities actually because we've -- Gasmet have launched the new GT7000 Tellus, and we've received the first orders for that one. That will help margins once we start getting that up to significant volumes. The Insight digital platform is being continued to be -- is continuing to be developed. We'll have a new commercial release later -- coming later in the year. We continue in this division to develop in product development. It's extremely important to do so, includes digital solutions. We even opened up as well something that's positive, a modernized service workshop in Houston, Texas, serving the U.S. market. We've improved that further there, which should help the aftermarket business. What we've done also in -- that's not actually mentioned on this slide, Monitoring & Control Technology now have launched their offices in both Korea and Singapore, which will continue to support this growth that we're seeing in the APAC region. There is definite potential for this division over there. Sven might talk about that a little later. So that's a crash course through what the divisions have been doing in the quarter. Financial calendar, next time we speak to you in this forum will be on the 21st of October when we'll talk about Q3 and the year-end report is released on the 12th of February. But with that, I think we can open up for any questions that listeners may have for us.

[Operator Instructions] The next question comes from August Flyning from Handelsbanken.

Two questions from my side, basically. If we start with orders and projects basically, you mentioned discussions around slightly larger projects, particularly in Process Technology, which you hope to realize in the coming quarter. Are these mainly delayed customer decisions for earlier quarters or more like new opportunities entering the pipeline?

I think it's -- Hi. Hello. Sven here. I think it's -- I don't think -- I know that it's both. We have a very strong pipeline. We have a growing interest for our solutions. We are proving over and over again that we are technology leaders here. The interest in the -- to get lower usage of energy, et cetera, is, of course, of importance. But we have and we have said that now for a year or more than a year that we -- it is a bit disappointing that we -- the very, very strong pipeline we have and that near sort of decisions within our customers, they are still hesitating. And of course, everybody knows the reason for that, and that is the macroeconomic, the uncertainties, and that's a situation we have. But there is a lot of potential where we see an increase and are moving forward from small or low numbers in the sense of foundries and smelters, that we have introduced local manufacturing, local sourcing, and we have had significant success here, and that continues. So yes, we are reasonably positive that we will get these orders. The question is when will the decisions be taken. And it's also so that we have to remember our portion of these big projects are fairly small. So it's bigger decisions that we are waiting for when it comes to new. Where we have a growing interest and some success is, of course, of refurbishment of other existing units.

Which incidentally has a higher -- usually has higher margins as well. So it's business that we very much like to get.

Sorry, did you...?

No, that was it. You had a second question, I believe.

That was it. Thanks. And on to margins then. We -- and I know, Matthew, you have talked about this a little bit before on Monitoring & Control specifically. I mean, margins came in clearly weak if we look at a year-over-year basis. But would you say you see this mainly as recovering with high volumes? Or should we expect mix in Asia investment to continue going forward?

The biggest single problem, we can't get away from the biggest single problem is the volume or was the volume in the quarter. I mean SEK 177 million in sales versus SEK 192 million in orders that you've got SEK 15 million -- if we had SEK 15 million more in sales, the margins on these are very good. So you would see a very quick uptick in the EBITDA. So that is the bigger issue. We also did take more -- we had better order intake for these, for example, portable units in Gasmet. Also Auburn in the U.S. as part of this division had a good quarter for order intake, and that's stronger than average margins for that division too. So it is a weak margin in the quarter. It's the weakest one for some time, I think. But going forward, we expect them to pick up quite clearly.

We're also -- I think it's fair to mention, we're also taking the investment of setting up sales and service organizations, both in Singapore and in Korea. And that is an important area. We have been quite focused on the Chinese market historically with offices in Hong Kong and in Suzhou. We also see now due to some of the Americans want us definitely to be outside the Chinese hemisphere, and that's the one reason. The other reason is that we are getting now permits to sell in especially the Korean market for, what do you call it?

Semiconductors.

Semiconductors market, which is an add-on to our existing. So that's the reason we have this disappointing low margin. We expect to be able to, during the year, increase that.

[Operator Instructions] The next question comes from Anna Widstrom from DNB Carnegie.

So firstly, I just want to clarify because it sounds like the pace of order activity gradually improved during the quarter. Is that your view as well? Or was it rather stable at a solid level throughout?

It was rather good throughout. It was a bit higher in June. It is quite often in our business, the case that the third month of the quarter is a little bit higher anyway. But it did pick up a little bit in June, but it was solid throughout. So we've -- it's been a much more comfortable quarter for me sitting here analyzing the numbers than Q1 was where we saw the big pickup in the third month.

I think it's fair to say that we saw it in the latter part of Q1, the last weeks in March, and then it continued through Q2.

Okay. Perfect. And given that the order intake seems to be mainly related to small and midsized orders, should we then think about that -- should we think about it as a majority of these will be converted to invoicing quicker than usual. So a majority seen already in Q3?

Inside this year, there's definitely more short-term visibility. But Q3, Q4, is with deliveries into Europe, a lot of Europe sort of half closes down. So I think it will stretch into Q4 as well.