Earnings call transcript: Nederman Q1 2025 reports flat sales, stock drops

Nederman Holding AB (NMAN) reported its Q1 2025 earnings, revealing steady sales amid challenging market conditions. The company’s stock fell by 7.31% on the day of the announcement, reflecting investor concerns over declining profitability and increased net debt. Earnings per share (EPS) dropped to SEK 1.69 from SEK 2.57 a year ago, while sales remained flat at SEK 1,406,000,000. According to InvestingPro data, the company maintains a healthy current ratio of 1.56, indicating strong short-term liquidity despite recent challenges. The stock is currently trading near its 52-week low, one of several key insights available through InvestingPro’s comprehensive analysis tools.

Key Takeaways

• EPS decreased significantly compared to the same quarter last year.
• Sales remained unchanged year-over-year at SEK 1,406,000,000.
• The stock price fell by 7.31% following the earnings announcement.
• The company inaugurated a new innovation center and completed an automated warehouse.
• Market conditions remain volatile, particularly in process technology.

Company Performance

Nederman’s performance in Q1 2025 indicated stability in sales but highlighted challenges in maintaining profitability. The company received total orders worth SEK 1,500,000,000, yet EBITDA fell sharply to SEK 43,000,000 from SEK 174,000,000 in the previous year. Despite these challenges, Nederman continues to lead in the industrial air filtration market, capitalizing on competitors’ market exits.

Financial Highlights

• Revenue: SEK 1,406,000,000 (0% change year-over-year)
• Earnings per share: SEK 1.69 (down from SEK 2.57 last year)
• EBITDA: SEK 43,000,000 (down from SEK 174,000,000 last year)
• Cash flow from operations: Positive SEK 15,000,000
• Net debt increased by approximately SEK 130,000,000

Market Reaction

Nederman’s stock price experienced a notable decline of 7.31%, closing at SEK 169.8, as investors reacted to the earnings report. This movement places the stock closer to its 52-week low of SEK 165.4. The market’s response underscores concerns over reduced profitability and increasing debt levels, despite the company’s stable sales figures.

Outlook & Guidance

Looking ahead, Nederman remains cautiously optimistic about the latter part of the year, anticipating continued market uncertainty. The company plans to focus on its core business and service offerings, with hopes for an order rebound in process technology. A proposed dividend distribution is scheduled for May 7. InvestingPro data shows the company maintains profitability with a gross margin of 39.4% and positive free cash flow yield of 7%. Additional ProTips and detailed financial metrics are available to InvestingPro subscribers, helping investors make more informed decisions about Nederman’s future prospects.

Executive Commentary

Sven Kristensen, CEO of Nederman, emphasized the company’s resilience, stating, "Despite the turbulence, we are continuing to strengthen our position as the market leader." He also highlighted the company’s strong offering in challenging conditions, adding, "We have a strong offering enabling us to advance our position even in this challenging macro environment."

Risks and Challenges

• Volatile market conditions, especially in process technology, could impact future orders.
• Increased net debt may constrain financial flexibility.
• Profitability challenges in extraction and filtration could persist.
• Global macroeconomic pressures might affect investment decisions in key markets.
• Supply chain disruptions could hinder expansion and innovation efforts.

Q&A

During the earnings call, analysts inquired about order trends and market volatility. The company addressed profitability challenges in its extraction and filtration segments and explored new market opportunities in data centers and battery manufacturing.

Full transcript - Nederman Holding AB (NMAN) Q1 2025:

Sven Kristensen, CEO, Nederman Holding: Good morning. Second.

Matthew Kusick, CFO, Nederman Holding: They’ll they’ll should do the intro.

Sven Kristensen, CEO, Nederman Holding: Yeah. They are doing the intro. Yeah.

Conference Operator: The Nederman Holding q one twenty twenty five report presentation. For the first part of the presentation, participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by dialing 5 on their telephone keypad. I will hand the conference over to speakers’ CEO, Sven Kristensen and CFO, Matthew Kusick.

Sven Kristensen, CEO, Nederman Holding: Good morning, and welcome to this session where we are presenting the Nerman interim report for q one twenty twenty five. If we start with some summaries, we can say we had very strong orders received. Three or four divisions had solid order intake, and two of them actually had record quarters in a very turbulent time. We continue to advance our positions in a number of areas. Have an extremely challenging macro environment.

We have finalized and are still building on some further investment in operational efficiency. We do have very high level in the newly inaugurated innovation center in Helsingborg, and we do have much better presence in structurally growing industries, which has been important in order to, get a good order intake. And we also, during last quarter, finalized the acquisition of EuroClip in Spain. And a few year few words about Euroquip. Did we do it?

It strengthened Nirman’s process technology division in foundry, metal recycling market, and as we say, hot air applications. It’s a strong market position. They are selling equipment to foundries, metal recycling, and especially aluminum smelting markets. Neroman and EuroKeep has a very long working relation where we have incorporated for decades. It gives us a sales structure and a support structure, in the Iberian Peninsula and parts of Latin America.

They have a headquarter in Lesama, in North part of Spain, Basque Country, and we paid about €50,000,000 for a company that has a turnover of €22,000,000 last year.

Matthew Kusick, CFO, Nederman Holding: If I move on to some key financials for the Nederaman Group for the quarter then. As Sven mentioned already, orders received was, rather strong, just over SEK 1,500,000,000.0, a very small reduction versus a strong quarter one last year as well. It is the first quarter since Q1 last year where we’ve been over SEK 1,500,000,000.0 in order intake for the group. So we’re generally satisfied, and this is with, with, obviously, only three of the four divisions having a strong position. Currency neutral, we were down slightly, still 1.8% versus q one last year, organically minus 3%.

Then if we move on to the sales, currency neutral, I had to check my calculations to correct, but it was exactly 0% change, versus last year. 1,406,000,000.000 versus SEK 1,397,000,000.000 in the same quarter last year. That’s obviously lower as we were flagging already during after Q4 that we were entering the year with a lower order backlog than we had twelve months previously. What is positive for us, of course, is we’ve built up a backlog of approximately SEK 95,000,000 in the quarter. So that bodes slightly better looking forwards.

When it comes to profitability, ultimately, EBITDA was down by NOK31 million to and 43,000,000 versus DKK 174,000,000 last year. There are some one off effects that impact the result quite significantly that we ought to flag there. We mentioned already in Q1 last year, there was a comparative figure boost. Q one last year was boosted by 11,000,000, which was a pure accounting booking relating to a subsidiary liquidation that we did, if we completed in quarter one last year. The impact of strengthening Swedish krona as well and the rapid depreciation of the U.

S. Dollar, particularly at the end of the quarter, also made a big impact. So approximately 20,000,000 of impact that hits comparability. We also, a little bit further down the income statement, have, obviously some acquisition expenses. We did a full thorough due diligence in relation to Euro equip, that’s been expensed now.

So that has nothing we apologize for, although it does ultimately impact earnings per share. Earnings per share in the end ended up at NOK1.69 versus NOK2.57 per share in the very strong quarter one last year. Moving on to the cash flow and net debt. EuroEquip, obviously, an acquisition for almost SEK 150,000,000 has an impact on cash flow. We bought we acquired them just prior to the end of the quarter.

So we have the debt on the balance sheet, but very little income from them yet. That will obviously change going forwards. Cash flow from operations in the quarter was positive, GBP 15,000,000 is down significantly versus last year. The main reason behind that is, the reduced order intake in process technology. Large orders in the process technology division on receipt of them, they’re typically we typically see large down payments from customers as well.

A lack of those has impacted the cash flow from operations somewhat. Other working capital has remained rather constant in terms of inventory and receivables and such. When we move on to net debt, I’ve given the figures including you see the chart including and excluding IFRS 16, the impact of these two the leases on these two premises that we entered into last year is quite significant. You see the turquoise on the charts there. But net debt, nevertheless, excluding IFRS 16, has increased by approximately DKK 130,000,000, 1 hundred and 40 million versus twelve months previously.

During that time, we have acquired EuroEquip, DuoAir and Olycema as well in Denmark. So three acquisitions there obviously making an impact on the net debt. That’s a brief summary of the financials for the group as a whole. If we move then on to the divisions, Sven, and start with extraction and filtration technology first.

Sven Kristensen, CEO, Nederman Holding: Yeah. Extraction and filtration technology. During the quarter, we saw the strongest ever orders received, which is a good thing. It was boosted by, in in major orders, and it was particularly strong in America in contrary to what we will see in process technology. We also have been working.

We’ve been highlighting that for a long time, the aftermarket and service. And we have here in the quarter double digit growth also for the service segment, which is, important. We did have a much lower order backlog moving into this year end. And that means that sales are lagging behind the comparative quarter. Eight out of 10 major orders were in US.

As I mentioned before, they are doing well in welding, wood, defense, and green energy, EV batteries, etcetera. We are now also further negotiating to exchange some Asian filter supply to EV batteries in US, when they realized that they are not compliant and not working very well. We’ll see how that comes out. EMEA saw stable order flow during the quarter, and there was a solid base business. APAC noted a slight slowdown, but we grew a little bit versus, last year’s q one.

And if we talk about the attitudes, it’s quite interesting. It seems like Germany are getting more they’re getting a backbone now and starting to talk about future instead of being overly depressed. So we’ll see what that will lead to during the rest of the year. The key activities, relocation of production in Helsingborg was completing, and we had February 11 full inauguration. We have also seen that from when we look at the tariffs and so on, division has a very significant manufacturing presence in US.

The vast majority of materials are sourced in, US, and, we will, of course, continue to monitor effect of the changing tariffs. But roughly 85% of, the content is America origin for this division in US, of course.

Matthew Kusick, CFO, Nederman Holding: For, on the financials for extraction and filtration technology, orders received obviously a strong increase 10.7% versus last year up to DKK $684,000,000 versus DKK $615,000,000, sorry, last year. Sales, 50,000,000 lower than the order intake. So DKK $635,000,000 was almost in line with the same quarter last year. And with the acquisition of DuraAir, that they have a cost increase that means that, that is that results with the sales being flat, reduction in profitability. I can’t blame the fuller beta reduction on the DuraAir, it must be pointed out.

Big positive here, 11% increase in order intake. Quite clearly very strong for the division. Process technology then, Svend.

Sven Kristensen, CEO, Nederman Holding: Yes. Process technology, we had low order intake in the quarter. There’s a lack of major orders in the first quarter here comparative to a slightly better q one twenty twenty four. We have seen that there has been a hesitancy to sign the final papers for large orders, especially in US. And we’ve seen a few orders that we expected in the pipeline to maybe be materialized to orders during this quarter that has been pushed forward.

So we also had a lower order backlog when we moved into 2025. And then, again, of course, since this is long term and long cycles, we have lower sales as well in q one. And as mentioned, there is a very caution customer base, especially in US. And it’s not so much the tariffs in itself. It’s more the uncertainty that the that is spread.

We do have a very strong quotation pipeline, and it’s also so that we are entering into negotiations with lost orders or orders that we walked away from due to the fact that competitors have filed for chapter 11. They have not been able to finalize the project, etcetera. So there are a few that we are coming back to again. So we are cautiously optimistic that we will see some change during late latter part of the year as long as the fog is lifting from this, turmoil around tariffs and and so on. If we look at textile and fiber, there’s a continued overcapacity in spinning, and we can see that has an impact.

However, sales were in line with q one twenty twenty four. We are taking market share. There are competitors that are leaving us. Foundry and Smelters, Euroquip acquired and is a very good strengthening on market areas or especially geographical areas where we haven’t been as strong. Low orders low orders received, but the profitability is still solid.

When it come to customized solutions, we had low orders received and sale. And this segment is particularly reliant on major capital investment. So it’s a clear risk of continued dampening demand in this segment. Key activities, of course, integration of Eurocrip. And as mentioned, The US tariffs have not had any material impact on the division’s product flow, but we will continue to look at it.

Where it has the impact is the uncertainty that it creates.

Matthew Kusick, CFO, Nederman Holding: Financials for the process technology division then. Order intake, hundred and 44,000,000 versus 486. So that’s that’s down currency neutral nearly 30%. That is they must be pointed out Q1 twenty twenty four was the strongest quarter, I think, in the last two years. So it’s tough comparatives, but nevertheless, $3.44 is low for this division in order intake.

Sales, GBP $354,000,000 versus GBP $392,000,000. Again, we were flagging for this, but with the backlog going into the year was low. This is the lowest sales quarter for since almost since pandemic pre pandemic times. Adjusted EBITDA still at 6.8%, twenty four point one million, but that’s clearly down versus the GBP 31,500,000.0 and eight percent that we did in the quarter one of last year. And a little look on the top the chart on the top right of the process technology slide, you can see the backlog has is lower than it has been for quite some time, but nevertheless, there is still a backlog there.

If we move on to duct and filter technology, Sven.

Sven Kristensen, CEO, Nederman Holding: Yeah. Duct and filter technology for q one, again, strong orders received, and it was in many areas, but mainly driven by NorthHub US. We had a continuous flow of major orders from manufacturers, even batteries. We have sharply improved sales. We have a solid backlog, continued positive trend in the quarter?

So if we go to especially the Northrend, where orders received and sales in The US grew sharply versus the comparative q one twenty twenty four, and we have strong profitability. We had new record order intake for ducting to the EV battery segment. Orders and sales grew in EMEA versus a modest comparative quarter. And there are still clear fluctuations orders and say between quarters in APAC. Positive in Australia, a new laser welder, installed in Thailand to improve efficiency and quality.

Menarda’s orders received increased well versus, in q one twenty twenty four, and our rapid delivery capabilities have resulted in several new orders during the quarter. We are a niche player, and we focus to support our own business. And when we are close to the market manufacturing is mainly in US, we can supply on short notice. Key activities is the expansion, of the facility for larger dimension ducting. And we have, as you possibly remember, already earlier last year inaugurated a completely new addition to the facility where we do the traditional, QF duct.

Now we are expanding also where we do the large dimension ducting. Yeah. We have also, during the quarter inaugurated the completely automated warehouse in Thomasville, which is another efficiency booster, which you can see drives also up profitability. At present, the impact of tariffs is very limited and most of the manufacturing is local for the market where we are operating.

Matthew Kusick, CFO, Nederman Holding: If I run some through some very strong financials for Duct and Filter then, GBP $224,000,000 in external order intake is up from GBP 184,000,000, up 19%. Sales at GBP $240,000,000 versus GBP $2.00 7,000,000 last year is 14% growth. And then the EBITDA increases from 43,000,000 to 53,000,000 kroner and a margin a EBITDA margin for the first quarter of the year of 22.1%, which we are obviously very happy with. If we move on to monitoring and control technology then.

Sven Kristensen, CEO, Nederman Holding: Yep. Again, strong orders received. And again, divisions that had a new record order intake for a single quarter. January was very slow, but Mhmm. Picked up in February and especially in March.

Neo monitor is starting to benefit from increased production capacity and efficiency. We are continuing to shape up that manufacturing site in Oslo, Norway. Profitability clearly up versus q one last year. EMEA, we have seen order intake growth. We do have a strategy to grow in service business and that is developing well.

We started when we started and we acquired these companies. It was a very low portion that was repeat business and service. We have gradually increased that, and we also incorporate our digital solutions that enhance the capability of doing remote service, remote calibration, etcetera. Collaboration between the business unit is increasing further, and we have an ongoing adaptation of urban filter sense product line for Europe. We have also a full test setup in the new innovation center here in Helsingborg, where they have a long term test capability we didn’t have a year ago to do in house.

So we are looking forward to see the capabilities here. And the result, we will also start selling in larger scale AFS products in Europe end of the year. In APAC, several major orders received especially in China, and, we have here an increased focus on direct sales, especially in the amount that has very well and with orders and sales going up. The local service grown for new hub in China. We have set up a small service hub in our factory in Sichu where we can do service, we can do calibration, And, instead of having to send and ship over to Oslo, we can now do the basic service in China, which has been received very well, among our customers.

In Americas, orders received increased sharply. All business units reported favorable growth. Urban filter sense delivered in line with its current capacity. So we come then continued key activities is, to increase Neomonitor’s production capacity. It also been taken decision, to increase the production capacity in Boston US, and, it will commence, in near time.

Production in US is in one site, and we have in Europe 2 sites. It’s, as I mentioned, Boston, and it’s Oslo and and Helsinki. There’s no major changes to product flow currently planned, and there are contingency plans in place for change in tariffs including for some component component sourcing if deemed favorable and necessary.

Matthew Kusick, CFO, Nederman Holding: Financials for the division then, orders external orders received 249,000,000, which is very strong for for them, up a record quarter, as Sven mentioned, up from, up 6.6% from a strong quarter one last year of 234,000,000. Total sales, clearly below, a long way below orders received almost or 50,000,000 below. 198,000,000 in sales versus 187,000,000 is still an increase of 5.8%. So, on sales of less than 200,000,000, the division has managed to do an 18% debater, which is 35,600,000.0 Swedish krona. The outlook going forward then, Sven, the the crystal They

Sven Kristensen, CEO, Nederman Holding: they absolutely interesting to to try to do. But demand continues to be slightly slower. Investments are a bit investors are a bit hesitant. But our base business, our growing service business, and the very strong digital range enable us to assert ourselves well in current market. We do take market share.

Even if the performance of divisions are largely positive, there’s a risk that current very uncertain market environment can continue to impact customer investment decisions in the quarters ahead. We don’t know. Some are doing very well, some are doing less well. And I think that we have to see, and we will see that pattern. Our order backlog remains good, and we have a strong offering enabling us to advance our position even in this challenging macro environment.

And, again, in a world with growing insight into damage and poor dust to people, Nirma, with leading industrial air filtration offering, has a key role to play and good possibilities for continued growth.

Matthew Kusick, CFO, Nederman Holding: The upcoming finance the financial calendar for the upcoming period then, the annual general meeting is next week on Tuesday, April at 4PM here in Helsingborg. The preliminary record date for the dividend that is proposed to the AGM is the May 2, and the distribution is scheduled for, the May 7. The interim report for quarter two will be released on the July 15, and the interim report for quarter three will be released on the October 23 this year. And, with that, I think we can open up for any questions that listeners may

Conference Operator: The next question comes from Lina Blum from Handelsbanken. Please go ahead.

Lina Blum, Analyst, Handelsbanken: Morning, San and Matthew, and thank you for taking my questions.

Sven Kristensen, CEO, Nederman Holding: Thank you. Good morning, Nick.

Lina Blum, Analyst, Handelsbanken: As you mentioned in the report, it is expected that the growing geopolitical uncertainty will have a negative effect on order intake in the coming quarters. But is it possible to say anything about the current order trend if you already at the end of the quarter or now in the beginning of Q2 have noticed lower activity?

Sven Kristensen, CEO, Nederman Holding: I I no. This is I think that it’s been a very increased q one. Started very slow. Turmoil in in February, very good bounce back in March when it comes to order intake. And you can see that because it came fairly fairly late.

It continues, but it’s very volatile. And the ones you see how good these specialties, MCT is doing, duct and filter is doing, and order intake also in EFT has been on a record level. Then, PT had suffered, or has suffered both in December and the first quarter that these mega large project where we are a small portion of has been pushed, forward, and we don’t know when they will start again. On the other hand, we are coming back to and are invited again towards where we clearly said to a customer or potential customer, we can’t do it this cheap. We cannot do it on on sort of this light model that has been because it just won’t work.

And, we have three actual cases where we are now reinvited because one doesn’t work. Two, the the supplier has gone bankrupt during the meantime. So we still stick to our price discipline, high quality supply, and we believe that, there will be rather a rebounds later on. But I the coming two quarters can be very, very volatile with the the ninety days of of tariffs and so on. Investors want to see or or the boardrooms want to see that we have the focus lifting.

We know what we can expect, in that. So it’s been very interesting period where we have growth in three divisions, record order intake in two of them, and one that has had a very, very weak order intake.

Lina Blum, Analyst, Handelsbanken: K. Perfect. Thank you for that. And then, in the extraction and nutrition division, you mentioned that profitability was dampened by fewer medium sized orders, which usually have higher margins. Is this a trend that you expect to continue like in the order trend?

Or is it usually something that can differ quarter to quarter?

Matthew Kusick, CFO, Nederman Holding: It’s, if you look at extraction and filtration technology, they did they grew their backlog by approximately 50,000,000 in the quarter. They were lacking these mid sized orders that were in the sweet spot, but the we have had the we’ve had a very good order intake this quarter. So we are expecting these will also these orders that we’ve received will also boost the utilization in our factories as well, and we fear I think there will be you’ll see some bounce back on the profitability going forwards. That is, of course, dependent on the continued order intake, which is the big question mark. But those midsize orders are nice to have, and we flagged already after Q4 that they were we were lacking a bit of backlog going into Q1.

This is I think this is quite low margins in the quarter, and you should not expect that level going forwards. Anything to add on that, Sven?

Sven Kristensen, CEO, Nederman Holding: No. But I think it’s the volatility. If you look on the last month of the quarter, the picture would have been significantly different if I put that one.

Lina Blum, Analyst, Handelsbanken: Perfect. That’s clear. And then just a last question for me. Also in extraction and filtration, you mentioned that orders were secured in data centers. Could you give some color on what your offering is to the data center industry?

And would you say that this is a growing industry for you as a share of sales?

Sven Kristensen, CEO, Nederman Holding: I wouldn’t say it’s a growing industry for us. We have some niche products that we are it but we we we again, we have high quality product that that can be in some, in in some areas for use there. The key, I would say, the the the key developments is rather that we are now getting into battery manufacturing where the normal Asian supply has not function as it should. It’s not fulfilling all the regulations. So that is an area.

We are also coming back into other areas where we have not been traditionally being present. As you know, we have been very strong and still is in welding, wood, composite, etcetera. We are now coming into more areas like, food, mixing stations, chemistry, and so on as an alternative to a weaker demand in the traditional industry like wood. You all know about the, the housing market, the, furniture market, windows, doors, etcetera, has not had a good demand. And we have altered that into a number of others and broaden our scope because it’s the same product.

It’s just a different application. And as we are always cautious, so when we go into new applications, we try and put the foot in the water and see can we handle this and how do we do it, how do we know and handle the processes. But, generally speaking, it’s the exactly the same product. It’s just how you build the system around it.

Lina Blum, Analyst, Handelsbanken: Perfect. Thank you for that. And that was all for me. So thank you for taking my questions.

Sven Kristensen, CEO, Nederman Holding: Thank you.

Conference Operator: You.

Sven Kristensen, CEO, Nederman Holding: Thank you very much. Thank you for taking the time listening. And, the takeaway from this is that it’s turmoil, uncertainties, but we are very, have a very strong order intake, and we are committed to continue to develop. And we see that, despite the, turbulence, we are continuing to strengthen our position as the market leader. And we therefore have a positive view for the rest, of the year.

However, the turbulence might make it a bit bumpy on the way. So thank you for taking time listening.

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