Lindab Q1 2020 slides: Stable performance amid early COVID-19 impact

Introduction & Market Context

Lindab International AB (STO:LIAB) presented its first quarter 2020 results on April 29, 2020, revealing a relatively stable performance despite the emerging COVID-19 pandemic that began affecting operations in mid-March. The ventilation and building products manufacturer reported sales of 2,332 million SEK, representing a 1% increase compared to the same period last year, though organic growth declined by 1%.

The company experienced varying impacts across its geographic regions, with the Nordic countries showing resilience while Western European markets faced more significant challenges as lockdown measures were implemented. With 98% of Lindab’s sales concentrated in Europe, the company’s geographic diversity provided some buffer against the initial pandemic disruptions.

Quarterly Performance Highlights

Lindab maintained an operating margin of 7.9% in Q1 2020, down slightly from 8.3% in the comparable period, as COVID-19 began affecting sales in the second half of March. Net profit decreased by 4% to 136 million SEK, with earnings per share declining to 1.78 SEK from 1.85 SEK in Q1 2019.

The company continued its strategic investment program during the quarter, with investments reaching 133 million SEK, significantly higher than the 44 million SEK invested in the same period last year. These investments impacted free cash flow, which turned negative at -107 million SEK compared to a positive 35 million SEK in Q1 2019.

As shown in the following chart detailing Lindab’s quarterly performance trends, the company maintained relatively stable sales and profitability compared to previous first quarters:

Detailed Financial Analysis

Lindab’s performance varied significantly across its three business segments. The Ventilation Systems segment, which represents the largest portion of the company’s business, maintained stable sales at 1,510 million SEK while improving its operating margin to 10.0% from 9.8% in the previous year, demonstrating effective cost control despite pandemic challenges.

The segment’s financial performance over recent years is illustrated in this chart:

The Profile Systems segment delivered the strongest performance with 13% organic growth, reaching sales of 587 million SEK. This growth was primarily driven by large industrial project deliveries in Sweden. However, operating margin declined slightly to 7.5% from 8.2% due to changes in product and customer mix.

The segment’s five-year quarterly performance trend is shown below:

In contrast, the Building Systems segment experienced the most significant pandemic impact, with sales declining organically by 18% to 235 million SEK. Operating profit fell to 2 million SEK from 9 million SEK in the previous year, resulting in a margin reduction to 0.9%. The segment also reported declining order intake and a reduced order backlog compared to the previous year.

The Building Systems segment’s performance history is illustrated here:

Lindab’s cash flow from operating activities reached 26 million SEK in Q1 2020. However, the significant increase in strategic investments resulted in a negative free cash flow before M&A of -107 million SEK. Despite this, the company reduced its net debt to 2,093 million SEK from 2,130 million SEK, improving its net debt/equity ratio to 0.4 from 0.5.

The company’s cash flow trends are detailed in this chart:

Strategic Initiatives

Lindab emphasized its robust supply chain with 30 production facilities located close to customers as a strategic advantage during the pandemic. The company initiated cost reduction measures and implemented short-term work programs to address the anticipated impact of COVID-19 in the second quarter.

For 2020, Lindab outlined four key focus areas: decentralization with clear accountability, sustainable profitability in line with financial targets, customer satisfaction through delivery excellence, and continued investment in efficiency, capacity, and digital support.

The geographic revenue distribution provided some resilience against market disruptions, with 43% of sales coming from Nordic countries, 35% from Western Europe, 21% from Central and Eastern Europe/CIS, and 1% from other markets.

Forward-Looking Statements

While Lindab reported limited COVID-19 impact on Q1 results, management clearly indicated that revenues would be more significantly affected in Q2 2020. The company noted that markets under lockdown were experiencing declining sales, though the extent varied by country and segment.

The implementation of cost reduction measures and short-term work programs reflected management’s proactive approach to addressing the anticipated challenges. Despite the uncertain environment, Lindab maintained its commitment to strategic investments aimed at long-term efficiency and capacity improvements.

Lindab’s focus on maintaining a strong balance sheet, as evidenced by the improved debt/equity ratio, positioned the company to navigate the challenging market conditions while continuing to pursue its strategic objectives for sustainable long-term growth.

Full presentation:

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