Earnings call transcript: Nederman’s Q4 2024 shows solid growth

Nederman Holding AB reported its fourth-quarter 2024 earnings, revealing a robust performance with total sales reaching SEK 1,620 million, marking a 7.6% currency-neutral growth. The earnings per share (EPS) rose to SEK 2.49, up from SEK 2.20 in the previous year. Following the earnings release, Nederman’s stock saw a modest increase of 1.15%, reflecting investor confidence in the company’s strategic direction and financial health. According to InvestingPro data, the company has maintained profitability over the last twelve months with a healthy 14% return on equity and trades at a P/E ratio of 23x.

Key Takeaways

• Nederman reported strong revenue growth of 7.6% in Q4 2024.
• EPS increased to SEK 2.49, showing improved profitability.
• The company launched several innovative products, including a new filter system with nanofiber technology.
• Expansion efforts included opening new facilities in Detroit and China.
• The stock price rose by 1.15% post-earnings announcement.

Company Performance

Nederman demonstrated solid performance in the fourth quarter of 2024, driven by strategic expansions and product innovations. The company maintained its leadership in industrial air filtration and expanded its capabilities in emerging sectors like EV batteries. Despite a challenging macroeconomic environment, Nederman’s focus on aftermarket services and structural growth industries contributed to its resilience. InvestingPro analysis shows the company maintains a GOOD overall Financial Health Score, operating with a moderate debt level and a comfortable current ratio of 1.23.

Financial Highlights

• Revenue: SEK 1,620 million, a 7.6% currency-neutral growth.
• Full-year sales: SEK 5,900 million.
• Adjusted EBIT for Q4: SEK 185 million, with an 11.4% margin.
• Profit after tax: SEK 87 million.
• Earnings per share: SEK 2.49, up from SEK 2.20.
• Positive cash flow of SEK 245 million in Q4.

Outlook & Guidance

Looking ahead, Nederman maintains a cautiously optimistic outlook for 2025. The company anticipates turbulence in the first two quarters, with a lower order backlog compared to the previous year. However, a strong pipeline of potential projects and continued focus on operational improvements are expected to support future growth. Based on InvestingPro’s Fair Value analysis, the stock currently appears fairly valued. InvestingPro subscribers have access to 12 additional key insights about Nederman, including detailed valuation metrics and growth forecasts.

Executive Commentary

CEO Sven Christensen expressed cautious optimism about the future, stating, "We are still cautiously optimistic because we see that our new offers... we are launching new products." CFO Matthew Cusick highlighted the company’s financial strategy, saying, "We don’t pay dividends out of percentages, you pay out of money."

Risks and Challenges

• Macroeconomic uncertainties and geopolitical tensions could impact investment decisions.
• A slowdown in cyclical industries may affect revenue growth.
• The lower order backlog poses a challenge for the initial quarters of 2025.
• Margin pressures from operational investments need careful management.
• The company must navigate potential supply chain disruptions.

Q&A

During the earnings call, analysts raised questions about market uncertainties and decision-making delays. Executives addressed concerns about margin pressures and highlighted growth potential in EV battery and measurement technologies. Strong performance in China and APAC markets was also emphasized, reinforcing the company’s strategic focus on expanding its global footprint. For deeper insights into Nederman’s financial health and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which includes detailed analysis of the company’s market position, financial metrics, and growth trajectory among 1,400+ top stocks.

Full transcript - Nederman Holding AB (NMAN) Q4 2024:

Conference Operator: Be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing 5 on their telephone keypad. Now I will hand the conference over to speakers CEO, Sven Christensen and CFO, Matthew Cusick. Please go ahead.

Sven Christensen, CEO, NERMAN Group: Thank you very much, and good morning, everybody. Welcome to this conference call on NERMAN Group’s Q4 results. Concluding that we had a solid profitability and a very strong cash flow during the last year, we have also strengthened our position in a very uncertain macro environment. We have improved our market position in what we can call structurally growing industry, food, batteries, other different technologies. We have made significant investments in manufacturing and logistics.

: To

Sven Christensen, CEO, NERMAN Group: enhance efficiency, we have opened a complete new facility for Robovent in US in Detroit. We have extended significantly the capacity at Thomasville for dark and filter. We have increased our capacity also in MCT and we are continuously doing so. We have had the inauguration of Helsingborg’s new facility, which gives us very good distribution logistics and manufacturing capability, but above all, an innovation center that could be the center for 14 local hubs with competence centers around the world. So we have accelerated our innovation.

And that means that we have also accelerated the pace of product releases and upgrades. So relatively small but strategically important acquisition of Olisem that will further strengthen our MCT division with the capability of, in an efficient way, help our customers with them, collecting the information and sorting it and being able to, in an efficient way, use the information as well as create reports for different authorities, etcetera. When it comes to shareholders’ favorite subject, dividend, we have had the highest ever net profit. So the Board of Directors proposed a dividend of Swedish krona of 4 compared to $3.95 last year.

Matthew Cusick, CFO, NERMAN Group: If I move on to some of the key financials for the quarter and the full year, if we start with orders received, it was a little bit of a varied scenario between the divisions. We will come back to the divisions in detail a little bit later. The full for the consolidated group, the quarter for order intake was just over 1,400,000,000.0 Swedish which is a decrease of around 4.8% currency neutral versus quarter four of twenty twenty three. You can see from the charts on the slide number four that the large chunk of the decline is organic. Currency is having lit much less effect during 2024 overall than in the prior year.

Orders received, yeah, 1,400,000,000.0 for the quarter. It is what, the lowest quarter we’ve had for some time and that we’ll come back to the backlog being a little lower going into 2025 than it was into 2024. Full year, incoming orders were 5,780,000,000.00 Swedish krona versus very slightly over 6,000,000,000 Swedish krona for the full year of 2023. That’s a currency neutral decrease of 3.3%. When it comes to sales, this was a very strong quarter for NARE demand.

It was our second highest sales quarter ever. All four divisions increased versus the same quarter in 2023. In in total, we we did 1,620,000,000.00 in sales in quarter four versus 1,501,000,000.000 in 2023 Q4. That’s a currency neutral growth of 7.6%. For the full year, we achieved exactly SEK 5,900,000,000.0.

These numbers have been audited, so it isn’t us just looking at decimal points. We get to 6.1 that’s versus 6.188 last year. So it is a clear reduction. If we see the organic reduction is GBP $319,000,000, if you look at the chart on the bottom right of Slide five. Of course, anyone who’s deeply into the number sees the vast majority of the decrease is in the much more volatile Process Technology division, which we will come back to later on as well.

When it comes to profitability, it’s no longer a teaser, but we had our best profit after tax effort. But if we start a little bit higher up and look at our adjusted EBIT, that was a hundred and 85,000,000 in quarter four, a 85,000,000 in quarter four of the of ’20 ’20 ’4, up from a hundred and 72,000,000, which gave us an margin of 11.4%, which was exactly in line with q four last year. Profit after tax, SEK 10,000,000 higher at SEK 87,000,000, and earnings per share in the quarter SEK 2.49 versus 2.2 in q four twenty twenty three. For the full year, we were up at SEK $7.00 8,000,000. That’s very slightly down from 2023.

Margin up 12% now versus SEK 11.6 in 2023. And earnings per share now for the full year 9.83% versus 9.71%. So we’re pleased to continue the upwards trend there. And Sven already mentioned that following that increase in earnings per share, the board has proposed a dividend increase to SEK four. Sven also mentioned the cash flow was very, very strong.

We’ve had a very good year overall and quarter four in particular was very good. We’ve continued our focus on managing cash flow. It doesn’t just happen on its own. We remain managing our accounts receivable very well and we have had projects in subdivisions to try and maintain the org and actually decrease the levels in inventory held. So among other things, those are contributors to the fact that we had a 245,000,000 positive cash flow from operations in q four up from 212,000,000, which was very strong already in 2023.

The net debt, as we can see on the right side of slide number seven, that is now at SEK1.332 billion versus SEK1.332 million 12 months previously. Must be pointed out that that increase is completely connected to one of my one of my least favorite international financial reporting standards, IFRS 16, which relates to leasing. We we as you can see on the charts, the proportion of debt related to leasing increased significantly in q three when we went into the new premises in Helsingborg and and Robovent’s Detroit site as well. But we can see a clear decrease in debt. We’ve we’ve had a very good cash flow, and that’s meant that we’ve decreased debt versus twelve months ago.

If we now move on to the division, so we start with Extraction and Filtration Technology.

Sven Christensen, CEO, NERMAN Group: Yes. Extraction and Filtration Technology, as you probably remember, is our largest division and typical customers are wood, welding, compositing manufacturing, general dust application. Here, we have seen, as well as in PT, we come to that, the large orders has been fewer in the quarter. And we attribute that all to the uncertainty in the market. That’s a good pipeline, but there is a hesitation to take decision.

When it comes to upgrade, aftermarket product sales or mid site solution, which is more business as usual, we can see that we have an increase and we see here that we take market share. The backlog was good when we went into Q4, so we had a good invoicing in the quarter. So it was the highest sales ever for a single quarter, which is important. Again, which I mentioned, the aftermarket continued to perform strong. It’s been a focus over the last few years to further enhance and build our aftermarket organization.

If you look at the different regions, it was only US that had any large orders. One was from the newly acquired Dewire and the others was Robovent. It was welding and EV battery. When it comes to European side, we had a stable order intake and it was a solid base business. And mentioned before, none, no really large order.

We’ve seen wood related to mainly the construction industry and the automotive. We’ve seen uncertainty in the decision making. We’ve seen a bit lower demand in some markets and especially, I would say, not only including, but especially Germany. They are not we can see all the indicators industrial indicators that they are a bit depressed in the German market. We’ll see.

It went up slightly the last month, so we’ll see. We increased our order intake in Asia, APAC. Not big orders, but mid sized orders, defense, food, automotive, the normal suspects. Suspects. We do saw also that our activities in building a stronger sales organization in Southeast Asia is paying off a little bit here now.

We have also seen some activities in the division in India where we actually landed a significant order to a leading aircraft equipment supplier. So again, the key activities, relocation of offices and warehouse to new facilities in Helsingborg and installation start of new warehouse management system. It’s gone extremely well and we have now a fully modern operational manufacturing and distribution center. We did launch some new filters. Well, the model of filter system MFS with nano fiber, significant improvement in performance.

We have launched six upgraded versions of mobile Hi Vac and ATEX models that are used. The ATEX is something that you are using special in combustible dust environments. And we also launched a new Pac M Vacuum unit in North America. So there’s been activities all around for innovation, manufacturing moving forward.

Matthew Cusick, CFO, NERMAN Group: Going further financials for extraction and filtration technology, the order intake decreased currency neutrally by 1.5%, six forty three million was where they ended the quarter. Total (EPA:TTEF) sales, as we mentioned, record quarter over 724,000,000 is 5% higher than a very strong quarter four of, of 2023. Adjusted EBITDA also up accordingly. 12.7% is 92,000,000 Swedish krona. And for the full year, organic growth on order intake, very slightly negative, but currency neutral 1.4% up.

Total sales 3% currency neutral increased to 2,646,000,000 and the highest ever adjusted a beat to follow the division, SEK $352,000,000 is 13.3%. Then we move on to process technology, Sven.

Sven Christensen, CEO, NERMAN Group: Yeah. Here, as you know, we are working we are world leader in textile. We are world leader in smelters for recycling of material like lead, like aluminum, like steel, etcetera. And it’s mainly large orders, large supplies. And we’ve seen few major orders.

There’s been a continuing uncertainty in the market, so and a slowdown in some of the cyclical industries. We did have fewer orders received this Q4 than the very strong Q4 in 2023. We did have an increased sales, so invoicing because we delivered a final delivery of several major projects. If we go to the three different customer categories, starting with textile and fiber, let’s say continuous overcapacity in spinning wheel and there has been a low demand. So we were behind Q4 twenty twenty three.

We have a long term positive outlook. We have a market leading we have a definitely market leading offer with our digitalization, new products and also where we have started to get a strong position in the related nonwoven area. So we continue to take market position And we’ve seen the energy saving new fan system that we launched at ITMA twenty twenty three has now sold more than 200 units. So we are making the world a little bit better in the textile industry by saving energy. In foundry and smelters, there’s an underlying recycling trend and that is very positive.

We need to recycle more aluminum, lead, etcetera, and that will have a long term positive impact. However, the orders received decreased when only very large orders was one very large order a year ago was launched. We have had very strong project execution, and that means that we have a solid increase and solid profitability. Customized solutions, orders received increased, including orders from The US chemical sector. Sales were lower than same quarter last year.

Again, key activity, launching new sets of packages and digital analyze tools for filtration system that improves the possibility to optimize operation and extend the equipment service life. We have intensified development of remote monitoring and IoT based business models. And by that, unlocking new revenue streams from the service and aftermarket. Very important in this turbulent time where we have a steady flow of orders in upgrades and service to existing equipment. We have invested new sandblasting paint line in the German plant and that is giving increased production capacity and lower manufacturing costs, increasing our capability of being competitive in this market.

Matthew Cusick, CFO, NERMAN Group: As Sven mentioned, orders received were lower in the quarter, so 23% lower currency neutral than the same quarter last year is 368,000,000 Swedish krona. Sales, however, slightly higher than the same quarter last year, 3.4% up, which was four took us to 452,000,000, and a beta then increased in the quarter four versus the same quarter twelve months ago, 50,000,000. And a beta is 11.1%, which is very, very strong for that division. What you can see on the chart on the top right hand side is, maybe for those of you who don’t fill in a spreadsheet every time we release any financials, you can it makes it a little easier to follow how the backlog has developed for the for the division. And we can see it is a little lower than that.

It’s lower than it’s been for any time in the last couple of years. However, it is still well over the SEK800 million mark. For the full year, the financials for the division 18 sorry, 19% reduction in order intake and a 22 reduction in sales. They are significantly down profitability. The margin increased, however, to 11% from 9.7% and the DKK182 million in adjusted EBITDA for that this division in these economic conditions is still something that they can be proud of.

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

Sven Christensen, CEO, NERMAN Group: Yes. Duct and filter here, we supply ducts and filter media. And the development during the quarter has been very good. There has been a strong improvement in orders received. We received several large orders from manufacturer of EV batteries in The U.

S. Market. But we also in EMEA and APAC had higher orders received compared to the same quarter 2023. The sales the invoice sales increased also very well and full year 2024 saw new records in orders received, sales and profitability. So if we go to Nuva, the duct and manufacturing, orders and sales in The U.

S. Grew strongly compared with the other quarter that we compare with in 2023. We had three very large orders to battery manufacturing. Northam Now with delivery within twenty four hours continued to drive orders volumes in US. We have installed new pipe cutter in Thomasville.

Robots for the warehouse optimization are being configured and go live during February. And in Menarda, we had a slightly lower order intake, but we had sales on a solid level and again, very good profitability. Other activities, Beam objects, we have introduced that and it was presented at the Battery Trade Show in Barcelona. And we have so far already got 7,000 downloads since the launch in May. Several projects have been initiated based on this.

So again, digitalization working together with other suppliers is a way forward for us and a way working we have embraced over the last few years. Project is underway for a 2,400 square meter extension of the production and warehouse facility for Ducting in Thomasville. Construction is scheduled to commence in February 2025. And then, if you remember, we have already increased one part and that’s where we are now introducing the robot in the distribution center. But we’re now also extending the capabilities when it comes to large size ductwork, especially for EV batteries, but also for special like smelters, foundries, etcetera.

So we are becoming more and more a complete supplier of ductwork for demanding environment.

Matthew Cusick, CFO, NERMAN Group: When it comes to financials for this division, as Svein has already hinted at, they were very good into fourth quarter, ’15 percent currency neutral growth in order intake to $211,000,000 Swedish krona, 13 percent increase in sales took us to $229,000,000 krona and that led to an adjusted EBITDA of 38,000,000 Swedish krona versus 35 in a strong Q4 last year. 38,000,000 gave us 16.5% EBITDA margin. For the full year, 5.7% growth in order intake and 6.8% growth in sales, $893,000,000 krona in revenue for the full year, up from $8.39 in 2023. And the adjusted EBITDA for the year that’s just finished was 175,000,000 Swedish krona or 19.6%. Monitoring and control technology, Sven?

Sven Christensen, CEO, NERMAN Group: Yes. We increased the orders received and especially adjustment saw a strong demand in Asia Pacific, especially in China. We have a large opening order backlog that contributed to record sales for a single quarter. If we go to the regions, EMEA, we had a slight increase in orders received and EMEA was the strongest region in terms of sales due in part to the improved production capacity in Neo Monitors. In Asia, orders received increased sharply in Asia.

We had a strong development for GASMINT. A large number of orders were booked, as I said, mainly in China. Sales in APAC grew as a result of GasMed’s successful deliveries. A lot of the new developed products have gone into the market. In Americas, orders received decreased somewhat due mainly to timing of major orders.

2023, we had one extremely big for the division big order and that was not fully compensated for in 2024. But there are high performance on all three business units and we have had increased sales for the quarter. The key activities for the quarter has been, among others, the acquisition of Olisem and that specialize in measuring emission reporting. So we’re not only measuring, we are now able to help our customers do a good reporting out of collected information. We have inaugurated the China Technical Center in Sichu with product, service, and sales training.

But it also gives us the possibility not having to send all products back to Norway or to Helsinki when there’s service and upgrades having to be done. We believe that will further enhance our sales in the Chinese market. We have continued our investment to increase the Neue Monitor’s manufacturing capacity and it’s still ongoing and will be so for the coming two quarters. We are preparing the launch of next generation of InSight product from our Operations Technology Center and we are also preparing to increase our capabilities and manufacturing sites in our AFS, part of the business located in Boston.

Matthew Cusick, CFO, NERMAN Group: Financials for Monitoring and Control Technology. Order intake grew strongly 10.5% versus Q4 twenty twenty three. It took us to SEK187 million and sales 19.3% up. Sven mentioned it was the strongest the record quarter a record quarter $241,000,000 in sales led to an adjusted EBITDA of DKK 47,000,000 or 19.5%. For the full year, currency neutral growth in orders 10.7%, sales even increased even more 13.2%, sales of $824,000,000 led to an adjusted EBITDA of 144,000,000, which is 17.4% for the year.

So the outlook, Sven.

Sven Christensen, CEO, NERMAN Group: Yes. As I said before, it’s not easy in these times. It’s never easy to have an idea on the future, especially not in these times. But if we take it short term, our order backlog is going into 2025 with a solid, strong backlog, but it’s lower than twelve months ago. If we look at the external factors, including geopolitical and economic uncertainty, increased protectionist, it is impacting customers’ investment decisions and we will probably have some turbulence the coming two quarters.

But even if the performance of our divisions is largely positive, there is a risk that these external factors will continue to impact customers’ investment decision in the coming quarters. If we look at the long term, our base business and strong digital range enable us to assert ourselves well in the current market. We’ve seen that we are taking market share. Nirmal have shown a clear ability to increase sales in industry with solid structural growth. Even if industrial investment level could be temporarily dampened, the long term potential remains.

And in a world with growing insight into the damage that poor air does to people. NERMA, with its leading industrial air filtration rank, has a key role to play and good possibilities for continued growth.

Matthew Cusick, CFO, NERMAN Group: Just very briefly, the financial calendar for upcoming quarters. The annual report will be released on the March 18 year, so the 2024 annual report released on the March 18. The quarter one report for 2025 will be released on the April 25, ’4 days before the annual general meeting, which is on the April 29 here at our new housing board premises. The interim report for quarter two will be released on the July 15, and the quarter three report will come out on the 10/23/2025. And with that, I think we can now open up for any questions that people listening may have.

Conference Operator: If you wish to ask a question, please dial 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad. The next question comes from Johnny Jin from CB. Please go ahead.

: Yes. Thank you and good morning, Sven and Matthew. Thank you for taking my question. I want to start a little bit on the demand side of of things. And you mentioned that Europe and EMEA is on the softer side.

I can just wondering if you could elaborate here how the demand looked during the quarter? How was the situation in October, November and then December? And then also if you could say something about how January was. Was it a normal January, so to say, or was it anything that stood out? Can you comment something around that?

Matthew Cusick, CFO, NERMAN Group: In the fourth quarter, it was I don’t think we can say that there was a big change throughout the quarter. It was a little slow that we December was December December perhaps was one behind expectations where we end and we ended at 1,400,000,000.0 in order intake. We would have liked to have been a few tens of millions Swedish krona higher higher than that. And and that so that did slow down. When it comes to January, we don’t want to talk too much about what’s happening in the future.

But I I think our our take on January is probably very similar to what you’re hearing everywhere else around the world. Anything to add on January, Sven?

Sven Christensen, CEO, NERMAN Group: It’s more normal and more expected. What you can see is that the turbulence that is created by all kinds of games played, of course, create an uncertainty and that will have an impact. And you see in that that the large orders are you have a prolonged discussion and decision period, whereas the other business is going as normal, I would say.

Matthew Cusick, CFO, NERMAN Group: I think that’s the most important comment here. The underlying business is still reasonably solid. It’s the larger orders that are are dragging at the moment.

: Okay. Thank you. That was helpful. And then going into sales a little bit, the growth is obviously strong here in the quarter. But looking at the EBITDA margin, it’s flat.

So could you comment something around that? And also going into 2025, I understand that outlook is uncertain. But in a scenario where volumes come back, can we expect an upside on the margin from here? Or is that fair to assume, would you say?

Matthew Cusick, CFO, NERMAN Group: If I comment on the quarter, what we can say is there was a clear shift. Yes, it was a very good revenue quarter. And you’re right in terms of absolute margin, it wasn’t in in percentage terms margin, it wasn’t a big increase. That is to do with it. It’s always the easiest answer, but it is a mix.

We did in in and we were flagging for this a little in extraction and filtration technology. They had more solutions business, which has a slightly lower margin. We were also still, if we take for example the Helsingborg site, we were moving from one site to another, so we were with the two level, two two fixed, two premises, and all of the costs that are associated with that. And when it comes to looking forwards and if you see an uptick in revenue, then the answer to your question is yes, you ought to see an increase in margin very clearly from, we work with customer pricing, of course, but the main thing is our efficiency in our own operations ought to be clearly better. And we can see this already.

We have a better flow through the factory in Henson Ball (NYSE:BALL), the one in Thomas within The US for ducting, and then in Robovent up in Detroit as well. There’s clear synergies from example, Robovent was three sites that was moved on to one and with a good solid production flow. It makes things

Sven Christensen, CEO, NERMAN Group: In Helton, there was two production

Matthew Cusick, CFO, NERMAN Group: sites. We were driving back and forth across the road with trucks and we were working in a site that was perhaps not optimal given that it had a given that it had roots from eighty years ago. Now we have a new brand new site designed in the way that we want it to with the layout that we want. So yes, you ought to see improvements in profitability there.

Sven Christensen, CEO, NERMAN Group: I think it’s fair also to say that with all the activities, both Thomas Bill Heltenboy, U. S, there has been some extra cost. Also, you have near monitors, not relocation, but the extension and so on. So we have invested in efficiency during the last six months.

: Thank you. That was clear. And then just one final one from my side and I want to zoom in a little bit on the Duct and Filter segment. Looks like the EBITA margin there took a step down here in the quarter both year on year and sequentially. Can you elaborate a little bit there to help us understand, so to speak, this a little bit better?

And then how we should view the deductive filter margin going forward? I also noticed that you mentioned some large orders on the battery side there. And if you could say something about the margin profile on those orders as well, it would be helpful. Thank you.

Matthew Cusick, CFO, NERMAN Group: Yes. What you can say is duct and fill, if you talk about we’re talking mainly about the ducting here is where the big change in margin is. We’ve seen an improvement on the filter side actually in margin despite revenues going down, we’ve driven margins up a little bit, and that’s to do with a little bit smaller improvements in operations. When it comes to duct and filter, there there is a finite amount of of what you could call base business smaller projects. Then you come up into these these very interesting areas like EV battery plants.

So these EV battery plants involve more different types of ducting, different sizes of ducting, some heavy gauge as well as the regular quick fit ducting. The overall projects and those in percentage terms are somewhat lower than other business that’s done by ducting. But clearly on the bottom line, I always like to say we don’t pay dividends out of percentages, you pay out of money, and we’re looking to increase the bottom line. Nevertheless, there are still things that we think we can do better in duct and filter. And this is why, for example, we’re investing it more into the factory there to be able to improve the efficiency in the production of is actually largely related to the heavy gauge ducting this time around.

Sven, anything to add to that?

Sven Christensen, CEO, NERMAN Group: No, I don’t think so.

Matthew Cusick, CFO, NERMAN Group: No. There’s more to come if we handle this successfully in the further development of the operations in Thomasville.

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

Lina Blum, Analyst, Handelsbanken: Yes. Lina Blum from Handelsbanken here. Thank you, Fern and Matthew for taking my questions as well. My first question is related to order intake that came in slightly below what was reported in Q4 last year. And you mentioned that the order backlog is somewhat lower in the beginning of twenty twenty five compared to the end of last year or beginning of twenty twenty four.

How should we interpret this in terms of sales development for the first half of twenty twenty five? And it is particularly in Process Technology where we might see lower sales development or maybe also in extraction and filtration technology?

Matthew Cusick, CFO, NERMAN Group: The majority of the if we talk backlog going into the new year here into 2025, the majority of the drop versus twelve months previously is process technology. That is the vast majority of that. In in terms of sales, that process technology is is a we have a good recurring business and we’ve grown the aftermarket business very nicely now. And you see that that’s what you see when you see the margins really going up is a more aftermarket business, sometimes more profitable projects. What we could say about the backlog going into this year, it’s a little bit different in nature in that the fiber and textile business typically has slightly lower margins than the other two business units in there.

And based on current backlog, our anticipation is that of the sales in the first part of the year, we will have probably a lower portion of fiber and textile. I’ll let you read into that what you what you think. Extraction and filtration technology, I don’t know if you want to add any more, Sven, but they were still they were lacking a few large orders. There are some quote lots of quotations out there, but they were still lacking some larger orders as well. But, you see, even if it was down versus quarter four of twenty twenty three, extraction and filtration technology was not not too bad on the on the on the order intake and quite a strong base business.

There is going to be some volatility and there is going to be some delays on decisions, but there are lots of interesting projects out there.

Sven Christensen, CEO, NERMAN Group: I would put it like this, that there is a very strong pipeline in in in the divisions. The turbulence makes it very difficult to say that it will happen this week, next week, or in three months’ time when the decision is taken. I doubt that there will be a situation where we will not see a continuous demand. But the geopolitical and macroeconomic situation, so it’s so volatile. People are so nervous and thinking about, should we do it now or should we wait?

It’s a little bit almost like, should I stay or should I go now? It’s what they are doing. So I can’t say, but we have a very strong pipeline. So having said that, I think we will have a roller coaster ride the coming two quarters.

Lina Blum, Analyst, Handelsbanken: Perfect. And a bit of a follow-up on the comment on the market volatility. Your outlook appears to be more cautious compared to previous quarters. I believe that you have had a cautiously optimistic outlook in the last couple of quarters compared to the short term uncertainty that was mentioned in today’s report. Should we interpret this as the outlook being currently not as good as it has been previously?

Or how should we interpret this?

Sven Christensen, CEO, NERMAN Group: No, I don’t think so. Maybe. We thought it quite boring to have the same sentence every quarter. We are still cautiously optimistic because we see that our new offers, as you have seen, we are launching new products. We are receiving interest from our customers.

We are releasing products that are significantly saving energy in line with all the needs for the future. So we are optimistic in that sense. What is disturbing is, of course, the turmoil you see around the world. Are there going to be tariffs? Are they not?

The total effect is not going to be that significant anyway, but again, uncertainty creates a situation where we don’t know when decisions will come. So that’s what we mean. We are still very optimistic in our position in the market because we have the leading product. Although, if I can go back to the small acquisition of Olisem makes another statement, we are the only we are the full cleaner account. We’re the only one that can capture, filter, measure and also create the reports for our customers.

We are the cleaner company. We’ve seen a continuous growing interest for our strong offer, then timing is worse than ever, I would say, in what’s going to happen here. But we are very positive when it comes to the pipeline we have. So, yes, let’s if you want to put it that way, I would say we are cautiously optimistic for the future. It was a long answer, Linge.

That sounds good.

Lina Blum, Analyst, Handelsbanken: It was helpful to get some more color on that. Thanks. And then another question, you frequently mentioned EV batteries as a key growth area in this report. However, there has been some concerns about price pressure in that industry. Are you experiencing any increased competition in the e battery space?

And have you seen any indications of slowdown of demand in that space?

Sven Christensen, CEO, NERMAN Group: We are very late in that since it’s been mainly. It’s been in some of the manufacturing, but very much it’s the ductwork. We’ve supplied some filters. We haven’t seen it. It’s been mainly in The U.

S. We’ve been active here in Gulf D. And so far, we haven’t seen an enormous downturn, but there are some revision of Ford (NYSE:F) had that six months ago, revision of some of their investments, etcetera. But it’s not only EV batteries. Why we say it’s interesting, but what happened is that we have through the samples which are large plants, we have come into the specifiers and with Beam objects and with our solid performance in delivering, we had been considered a reliable partner for large installation.

So we believe, and we have already seen it, that that will also spill over to other areas like large smelters, large foundries, where we have a solid position with PT’s deliverance. And we see that we are now becoming more and more known in the specifiers side and that includes our own dimensioning tools that makes life easier. It includes linking up to B MobX, etcetera. So again, making it easier to do business with Neriman and we have, by being so successful in either batteries in US, shown that we can handle larger projects. Was that an understandable explanation?

Lina Blum, Analyst, Handelsbanken: Yes, perfect. Thank you very much. And then maybe if I may, one last question from me. Monitoring and Control Technologies saw strong order growth in APAC and particularly in China. Could you provide some details on demand dynamics in China and what is driving this growth?

Sven Christensen, CEO, NERMAN Group: There is a demand for measurement technology. There are rules, regulation. It goes from everything on measuring hydro content. It is about all kind of specific areas. And we are not the only but the very few that can measure to a level that some of the new requirements demand and there are not really Chinese competitors, but we have a situation where we are absolute technology leaders and that helps us.

So we have growth with our newly developed and newly launched, recently launched product, both in GASMITH and NAYO. And we are now helping and supporting that because one of the weaknesses we have and especially have had is that service is something that could be it takes time if you have to ship the equipment to Norway or to Finland for service. Now we have opened up the capabilities and we are continuing to train personnel and strengthen the position here in Sichuan. As we have done in The U. S.

Market where we two and a half years ago, opened up our service office in Houston, and they started one or two persons. They are now 12, I think. And that also pushes the capability and it also gives strength from our sort of we help you, we are there. And again, that drives sales not only of service, but it also drives sales because our customers are confident that we can support them. Sorry for the long hand, Roslyn.

Perfect.

Lina Blum, Analyst, Handelsbanken: No. It’s it’s perfectly fine. Thank you so much for taking my questions.

Matthew Cusick, CFO, NERMAN Group: Thank you. Thank you, Lina.

Conference Operator: Five on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Sven Christensen, CEO, NERMAN Group: Okay. Then we thank you for taking the time listening to us, and we hope you have a good continuation of the day. Thank you from Mattress and Sven here.

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