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

Welcome to the Nederman Holding Q3 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to speakers CEO, Sven Kristensson; and CFO, Matthew Cusick.

Good morning, everyone, and thank you for joining us today. We are here to present the Q3 report and hopefully, we can give you some meat to a bone of that report. The positive order momentum we saw in the second quarter continued and was even strengthened during Q3. Order intake increased by roughly 12% currency-neutral, supported by strong inflows, small and medium-sized orders as well as a few larger strategic projects across all 4 divisions. This development is particularly encouraging as it reflects the work we do to broaden our position in new industry and potential new growth segments. Process Technology had a particularly strong quarter with order intake up almost 32% currency neutral. It's a big bounce back from a period with low order intake. Dan filter technology also continued its positive development with higher order intake, sales and profitability. In Extraction & Filtration Technology, order intake increased, supported by a stronger base business and also several larger orders. We're also seeing results from the investments we have made to strengthen our operational platform. We have invested significantly in manufacturing logistics in recent years, and we have a strong platform for improved margin as volume increase. The ongoing expansion and modernization of facility in Charlotte further strengthen our position in the North American market. Sales and profitability remained below last year, reflecting the weaker order intake at the very beginning of the year, but both improved compared with previous quarter, at the same time, cash flow was strong. During the quarter, we saw a clear result from our continued efforts to expand into new industries and markets. That comes from defense, pharmaceuticals in Europe to metal recycling in the U.S. and semiconductors in Asia. Strategic orders showing how we use proven and acquired competence and technologies to enter new markets and creating growth opportunities. Overall, Q3 strengthens my confidence in the direction of the company. With the order growth seen in recent quarters, a solid order backlog and a pipeline that continues to look promising we see good prospects for volumes and consequently, profitability to increase as the year draws to a close. With that, I hand over to Matthew.

Thank you, Sven. And if we go through now a few of the key financials. Orders received, as Sven mentioned, a strong order orders received quarter in quarter 3, 11.8% up organically, currency neutral versus the same quarter last year. Those of you that can see the slides that are being presented, there's a chart in the middle of this current slide where you can see definitely an upward the upwards trend is there nice organic growth, SEK 147 million in organic growth in this quarter alone. Year-to-date now, currency neutral positive 3.4% is also pleasing. And there definitely seems to be a momentum on the market after this very slow January and February, we saw at the start of the year. We've had 7 basically very good months of order intake now. Highest quarterly sales so far this year as well in Q3, 1.7% currency-neutral behind the same quarter last year. And again, as I mentioned, that's a result of the order intake largely as a result of the order intake being slow in the first quarter of the year. But definitely an upward tick, you can see on -- again, the chart in the middle, it's heading in the right direction. And given the order intake that we had in this current quarter 3, we're rather confident that, that will continue the upward trend in the fourth quarter as well. Moving on to profitability. It's the most profitable quarter of the year so far, it's still behind -- we're still SEK 131 million EBITDA is behind a very strong Q3 last year of SEK 166 million and not yet where we want to be, it's 9.2%. Operating profit is SEK 104 million and earnings per share SEK 1.68 in the quarter, not where we want to be. But again, expectation for the fourth quarter is sort of sales and therefore, profitability will clearly increase. Again, and with the momentum -- the order momentum that we have right now, we are reasonably confident going into next year that were not -- although it's that is less clear how the forecasting there is less clear. Cash flow and net debt, extremely good cash flow from operations in this quarter 3. We have a tendency in the demand grits just with the nature of our business that the cash flow picks up throughout the year, but -- and it's very crazing to see that the cash flow from operations has gone up. At the same time, we don't see that quite so much on this slide, but level of investments that we've seen in the last 2 years, 2.5 years of fixed assets has reduced somewhat. We're still finishing up some investments in the Charlotte for premises and the facility there. But there will be not at the same levels as we've seen in the last couple of years that we have fixed asset investments that will generate cash and reduce the net debt. We see the net debt has ticked down a little bit in the third quarter already here, which is clearly positive. But further cash generation should be -- or is a clear target of ours and with the volume growth that we anticipate that will clearly happen. We can go through the 4 divisions now and Sven start with Extraction & Filtration Technology.

Yes. If we're starting with the largest division, extraction and filtration technology, we start to dive into the third quarter. Actually, the orders increased, and there was a stronger base business in both EMEA and APAC, and we had some larger orders coming back into the Americas region. We actually had the highest sales quarter for the year-to-date, but it's still behind Q3. And that comes from below, I would say, extremely low order intake in January, February, and that has impacted sales service and product sales are growing and especially our focus on service business and building the continuous relation is pleasing to see that, that continue to work well. In EMEA, the underlying base business has been positive, and we have seen some increase in the sales. If we go overseas to Americas and APAC, we can see that America's order increased, while APAC orders rose sharply. And that was especially Australia and China. China is fairly small for us in the division, but we got some orders here. If we continue to, what are the key activities. One, of course, is the integration of human dust control in Australia, that will strengthen the position in certain growth industries. And we are also going to move the Brisbane office to a one consolidated office preferably with the snake farm in the garden. New technologies were shown at the International Woodworking fare in Atlanta, and we have had he have had focus on smart air flow control, energy efficiency and dust management and it was well received, and we booked more than 25 orders in the fat, which was also encouraging, some more positive momentum in U.S. expansion and modernization of the manufacturing facility, charities. Ongoing and it's nearing completion. That will mean that we will continue in-sourcing more, and we will have a much more stable supply chain here, especially for our -- in this first period for our business in RoboVet Detroit, but also in -- continue with our Woodworking business.

Briefly on financials, then on Extraction & Filtration Technology. As Sven mentioned, very good order intake, a 4.5% up versus the same quarter last year. Sales 2.8% down, currency neutral versus the same quarter last year, which resulted in an EBITDA margin of 11.3%, we expect the fourth quarter to be significantly stronger for this division, given the order momentum that they have right now. Moving on then spent to process technology?

Yes. For process development, we have, as mentioned before, the highest order intake quarter this year and is actually 32% increase versus last year. and it was supported, especially with one big order, but also a number of midsized good orders. The aftermarket business continued its positive trend. We continue to grow massively. We are building our capabilities, and we are also supporting with newly developed product exchange product that can increase the efficiency in existing installation well received by the market. . Strong order intake in Americas and in India. India performed very well as growth of both fiber textile and foundry and smelters -- and here, we have introduced and taking, if I may say, German technology to India manufacturing locally and handled by our very strong management team from Liva supporting. We are also supporting them as sort of country lead here. The profitability, unfortunate damped versus Q3 2025 due to sales mix and lower sales volumes, mainly the latter. Order backlog continued to grow, providing a solid base for future sales growth and that we are very happy for. The key activities is a continued focus to grow the service business, including the digital portfolio. Ongoing improvements of product lines and update to test centers, we are continuing to use our data we have collected. We are using our innovation center, testing different dust material, et cetera. And we are using that knowledge to improve our product range.

Financial for Process Technology then, orders received very strong 32% up SEK 45 million higher than the sales figure, which is sales of 5.6%, down currency neutral versus last year. But of course, the division has been built SEK 45 million in backlog, which we can see on the chart on this slide, which bodes well looking forward as well. Sven mentioned mix briefly a little bit more on that and why the profitability is down. There is, of course, lower sales that doesn't help when it comes to mix, we've got a positive mix effect here through more service business, but we have a negative mix effect in terms of the solutions that have been sold with more fiber and textile proportionally than the foundry and smelters business inside Europe foundry and smelters in Europe has traditionally been one of the more profitable parts of this business. We see good potential for growing that in the -- particularly in the U.S. in the coming months. But -- and we've seen orders received already to support that. But at adjusted 7.4 % EBITDA is where we were. On deductive builder technologies fan. .

Yes. For Ducan filter, we can say that orders received increased, driven by Norab U.S. and also the a bit smaller in North Hub EMEA. Very good base business development, and it was then boosted with topping up the icon cake was a number of reasonably large order here. Sales volume increased and profitability improved, supported by the recent efficiency investments in manufacturing and logistics. And that goes for both our North America and European business. . U.S. and EMEA improved both order sales and profitability Menardi some decline in order intake in the use while MinardEMEA group. Overall, profitability increased. Key activities for this division is the development that is ongoing of a new generation of North fabs a it's only Enercan have such fabulous name on a tool that is crucial to make it easy to do business with Neremanand upcoming introduction of ATVs at the new X deducting facility and Thomas Well, that will be a move towards a fully automated warehouse that will be finalized in the end of Q2 next year, the AGVs orders, the layout of that, and that will make also the XT, which means large engine manufacturing highly efficient. We had -- we mentioned for some in Brisbane, we had portion of snakes in the office and in Bank, we had flooding. So that's good excuses for a lot of things. But we were lucky, even if there were a few days when we had no personnel in the factory due to impossibilities to get that. We had no damages.

Financials for duct and filter are very strong as everyone's understood 8.1% organic growth sales at SEK 219 million in the quarter, which is 7.6% up versus Q3 last year, giving an adjusted EBITDA of SEK 43.6 million, 19.9% is very strong in the -- this division now up at 19.3% for the year-to-date, like you mentioned, spend these are investments in the manufacturing and logistics cities, among other reasons why we are so strong here.

Monitoring & Control Technology.

Yes, during the quarter, orders increased with Americas the strongest region and positive performance across all business units. The highest sales quarter so far this year, and the order intake also grew versus last year's Q3. Arbor and Gasmet was positive, while NEO declined slightly due to lower order backlog in EMEA -- we had the highest quarterly EBITDA so far this year, and we continue to have good order intake in Americas, APAC secured the first direct semiconductor industry order. And that was very encouraging. We have spent lot of resources, manpower money to build up a service organization, to finalize the test unit both in Korea, Singapore and in China, and we have now finally seen the first result, the first commercial order actually in Korea, but we also followed up this quarter beginning of this quarter with the second one going into China to the same customer. So we are pleased to be able to announce it. When it comes to EMEA, orders received was lower than Q3 2025. There were some larger orders that was not repeated this year. If we go to key activities, we had a breakthrough as mentioned in the semiconductor industry. We had a very strong start of the GT7000 Tellus with several orders received following the launch in late Q2. So again, new product that has been on the market that has been well received. Service business has been strengthened with targeted activities aiming to the installed base already existing installed base. We are using our measurement and also adding the Alison systems here. We continue to invest in digital solutions, product development and upgraded service workshop, as mentioned, in Singapore, it's actually also in Sol and we updated the one in Houston as well.

Financials and Monitoring & Control Technology, order intake increased approximately SEK 5 million currency neutral, that's exactly flat versus Q3 last year. sales, as we mentioned, our sales and profitability, the highest quarter so far this year, 1.6% higher sales than 12 months ago and the adjusted EBITDA was SEK 26 million, which is a 14% EBITDA margin. It must be pointed out that -- this division is weighed a little bit down in the quarter with the subcost establishment in the APAC region, particularly in the setting up the Korean and Singapore in offices further. So 14% is definitely heading in the right direction, but we expect further improvements there, particularly with the order intake momentum that they've had in the past 7 months or so -- very briefly, financial calendar. These information is available in the report, but the year-end report will be released on the 12th of February, where you'll get a chance to speak to us there. Interim report for Q1 is on the 23rd of April, and the AGM is on the 27th of April following that interim reports 2 and 3. I'll let you put those dates in the diary yourselves. And with that Sven, I think we can open up for any questions that listeners may have for us.

Absolutely.

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

Two questions from my side, please. Starting with orders, we're now seeing 2 consecutive quarters of improving order momentum with organic growth here, reaching almost 12% in Q3. Can you talk a little bit about the underlying activity you're seeing and whether you see enough in the pipeline to sustain this going into 2027.

Well, if I understand right, we've seen that we have and we have had, for some time, a very strong pipeline, a low pipeline where we get increased interest from our newly launched system product, et cetera. And we hope that this momentum will continue in. We see a number of assets still a strong pipeline. We have an increased activity among customers and potential customers. But it's very difficult to say because every morning, there is on not Twitter, but something else. -- some new fall is going on that can have a short-term impact. But when we look long term, we see we are taking market share. We see that with all of our quality digitalization, not only offering but also the way we are using our digitalization to make it easier to do business with that is having a growing interest. We also see that our capability around the EPCs, mainly engineering companies with different tools, including what's it called now, yes, the difference makes new more interesting partner going forward. So I will not promise but I sincerely hope and think that there will be a momentum also after this quarter.

What the numbers guy here could also add is if you compare -- if you -- August, if you're looking compared to 12 months ago, and how we were feeling in terms of market momentum, it is definitely stronger now than -- you've understood we're rather confident about but there is definitely more market momentum. But whether that continues or not, we'll see. But we're more confident than 12 months ago. .

All right. Perfect. And on the service and aftermarket then, which continues to grow quite nicely here in the quarter and now accounted for around 23% of group sales in I know you mentioned this a little bit before, Matthew, but how should we think about this number going forward? And what are the key initiatives you're taking to drive that growth further. I mean, -- you mentioned building relationships, et cetera. But is there any other things to point to because the trend is, yes, clearly heading towards a positive direction here.

Yes, if I answer the numbers and then Sven can give more meat on the bones in terms of activities, the 23% is good. And of course, we want to grow over a sustained period of time, we want to grow the aftermarket faster than the solutions business. But -- that -- this 23%, that if we're a little bit self-critical is because our solutions sales are not at the level we would like them to be right now. . We expect and we think that we will be able to grow this over time faster than the rest of the business. It is clearly the most profitable part of the business. And then there are activities that's going on to back that up and make it happen then.

Yes, and we do not measure the percentage units is not so interesting. We measure how much in dollars, euros and kroners that were growing for each business because it can be skewed as mentioned by Matthew by low order intake in solutions sales and of course, the percentage of aftermarket is higher. But we are continuing to work on we'll kind of retrofit kits, and that has been one of the suggested offerings that has been giving us growth we are working with different both products and systems to lower energy use. It's like Nederman save, the monitoring capabilities here. That gives us a good confidence and we will continue. And we are also adding manpower resources. And one of the key elements being able to sell into the semiconductor industry as well as to the oil and gas and petrochemical industry in U.S. has been that we have invested heavily in manpower on site with capabilities to do it. So -- and we continue to do that. So I'm confident that, that portion will continue to grow.

The next question comes from Anna Lagerla from DNB Carnegie.