Lindab’s Interim Report January – June 2023: Ventilation shows strength and expands in Europe
During the second quarter, Lindab reported its highest sales ever. Sales increased by 6 percent, mainly due to completed acquisitions and organic growth in region Western Europe. The operating margin was strengthened compared to the first quarter and amounted to 9.0 percent in the second quarter. Business area Ventilation Systems, which represents approximately 75 percent of sales, delivered its highest operating profit ever for a single quarter. Profile Systems was affected by weaker demand and did not reach the expected level of profitability. Cash flow from operating activities remained strong in the quarter.
Second quarter 2023
- Net sales increased by 6 percent to SEK 3,365 m (3,171). Organic sales growth was negative by 13 percent. Structural changes contributed positively by 14 percent.
- Adjusted1) operating profit amounted to SEK 302 m (402).
- Operating profit amounted to SEK 302 m (402).
- Adjusted1) operating margin amounted to 9.0 percent (12.7).
- Operating margin amounted to 9.0 percent (12.7).
- Profit for the period amounted to SEK 240 m (300).
- Earnings per share before dilution amounted to SEK 3.14 (3.92) and after dilution to SEK 3.13 (3.91).
- Cash flow from operating activities increased to SEK 323 m (161).
- During the quarter Lindab acquired the British company Firmac Ltd. and the Czech business Ventilace EU, with total annual sales of approximately SEK 80 m.
January – June 2023
- Net sales increased by 12 percent to SEK 6,589 m (5,904). Organic sales growth was negative by 9 percent. Structural changes contributed positively by 17 percent.
- Adjusted1) operating profit amounted to SEK 566 m (742).
- Operating profit amounted to SEK 566 m (723).
- Adjusted1) operating margin amounted to 8.6 percent (12.6).
- Operating margin amounted to 8.6 percent (12.2).
- Profit for the period amounted to SEK 420 m (536).
- Earnings per share before dilution amounted to SEK 5.49 (7.01) and after dilution to SEK 5.48 (6.99).
- Cash flow from operating activities increased to SEK 678 m (-52).
1) Adjusted operating profit/operating margin does not include significant one-off items and restructuring costs.
Lindab’s President and CEO, Ola Ringdahl, comments:
“Lindab’s sales and earnings developed well during the second quarter even though the economic climate was challenging. The assessment is that demand in the ventilation market has stabilised. Sales within Ventilation Systems continued to grow and the operating margin for the segment exceeded the Group target of 10 percent. Profile Systems was affected by lower demand, which led to lower profitability than desired.
Stable demand for ventilation systems
The market in Western Europe has had a strong development, while demand in the Nordic region has been weaker. Increased demand for energy-efficient solutions has partly offset the negative effects of high inflation and higher interest rates, and we plan for a continued stable ventilation market at current levels for the rest of the year.
New construction has fallen significantly, especially in the Nordic region. This has a direct impact on the demand for Profile Systems’ products. We expect new construction to remain low over the next 12-18 months.
Ventilation Systems expands in Europe
Ventilation Systems continues to grow its share of total sales and accounted for approximately 75 percent of sales during the quarter. Western Europe has developed particularly well and accounted for more than half of the of the business area’s sales during the quarter. Operating profit also increased during the second quarter and Ventilation Systems achieved an operating margin of 10.2 percent thanks to cost control and increased geographical diversification. The raw material effects that had previously had a negative impact on operating profit diminished at the end of the quarter.
Challenging market for Business area Profile Systems
Business area Profile Systems has high exposure to the Swedish market and to residential construction, which are areas where construction activity is slowing down. Significantly reduced demand led to a lower operating result than desired. Activities to strengthen profitability in Profile Systems began in the second quarter and the operating margin of 6.9 percent has developed in a positive direction compared to the first quarter. With current raw material prices, the raw material factors that have put pressure on the gross margin for several quarters will diminish in the third quarter.
Continued acquisition of ventilation companies
Lindab continues to acquire well-managed quality companies. During the second quarter we welcomed Firmac Ltd. in the UK and Ventilace EU in the Czech Republic to the Lindab Group. Firmac is the European leader in machines for manufacturing of rectangular ventilation ducts. Lindab has for many years been a leader in machines for manufacturing of circular ventilation ducts. Ventilace specialises in the production and sale of rectangular ventilation ducts, mainly on the Czech market.
Acquisitions are an important part of our strategy and we see good opportunities to complete attractive acquisitions also in the future. The companies we acquired in recent years have developed well as part of Lindab.
Focus on cost savings and profitability
Lindab operates in a market with positive prospects, although there are challenges in the short-term. During the second quarter, Lindab has initiated cost savings in all parts of the Group to strengthen earnings. In total, approximately 200 positions are affected, with a particular focus on Profile Systems. During the second quarter the cost for these measures amounted to SEK 4 m and is estimated to be slightly lower in the third quarter. These costs are taken on an ongoing basis and are not recognised as one-off items. The measures are expected to have full effect from October.
In recent years, Lindab has implemented actions to increase profitability and reduce sensitivity to market fluctuations. In challenging times, it becomes clear which parts of the Group that are able to fulfil our profitability requirements and where we need to make targeted measures. In addition to the cost-saving programmes being implemented in the near term, we will review the need for structural measures to become an even more stable company in the long-term.
Demand for energy efficiency benefits Lindab
We notice an increased demand for sustainable and energy-efficient products. This is beneficial to Lindab, which has a competitive offering in this area.
Ventilation Systems already has an operating margin of over 10 percent. For Profile Systems, the situation is more challenging and the construction market needs to improve during the second half of the year for the business area to reach over 10 percent. However, the financial targets remain unchanged. Lindab’s ambition is to deliver an operating margin of at least 10 percent and we will work actively with both revenues and costs to achieve this target even in a weaker economy.
Lindab has an experienced and motivated organisation, strong customer relationships throughout Europe and a stable supply chain. We have good preconditions to continue developing the business in a positive direction going forward.”
Press and analyst meeting:
A live webcast will be held at 10:00 am (CEST) on July 21. The Interim Report will be presented by Ola Ringdahl, President and CEO, and Lars Ynner CFO.
If you wish to participate via webcast please use the link below.
If you wish to participate via teleconference please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.
This disclosure contains information that Lindab is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014) and the Swedish Securities Markets Act (2007:528). The information was submitted for publication, through the agency of the contact person, on 21-07-2023 07:40 CET.
President and CEO
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Lindab in brief
Lindab is a leading ventilation company in Europe. Lindab develops, manufactures, markets and distributes products and systems for energy-efficient ventilation and a healthy indoor climate. The products are characterised by high quality, ease of installation and environmental thinking.
The Group had sales of SEK 12,366 m in 2022 and is established in 20 countries with approximately 5,000 employees. The Nordic region accounted for 53 percent of sales in 2022, Western Europe for 34 percent, Central Europe for 12 percent and Other markets for 1 percent.
The share is listed on the Nasdaq Stockholm, Large Cap, under the ticker symbol LIAB.