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Nordic Waterproofing reported a 12% organic decrease in net sales for the fourth quarter, totaling SEK 1,480 million, amid challenging market conditions. The company’s EBITDA also declined, reflecting the ongoing softness in the market. Despite these challenges, the company maintained its market share and is eyeing potential acquisition opportunities through its partnership with Kingspan. According to InvestingPro data, the company’s stock has shown remarkable resilience, delivering a 100% return over the past year and trading near its 52-week high of $10.96.
Key Takeaways
- Net sales decreased by 12% organically in Q4.
- EBITDA fell from SEK 89 million to SEK 71 million.
- Kingspan has made a cash offer to acquire remaining shares.
- Market conditions remain challenging, particularly in Finland.
Company Performance
Nordic Waterproofing’s performance in the fourth quarter was marked by a notable decline in net sales, largely attributable to soft markets and a slowdown in commercial newbuilds due to higher interest rates. The company, however, managed to maintain its market share across its key geographies. Despite the decline in sales, the full-year EBITDA margin improved slightly to 10.6% from 10.4% the previous year, indicating some operational resilience. InvestingPro analysis reveals the company maintains a healthy P/E ratio of 8.14, with two analysts recently revising their earnings expectations upward for the upcoming period. For deeper insights into Nordic Waterproofing’s valuation and future prospects, subscribers can access the comprehensive Pro Research Report, part of InvestingPro’s coverage of over 1,400 US equities.
Financial Highlights
- Revenue: SEK 1,480 million in Q4, a 12% organic decrease.
- Full-year turnover: SEK 4,100 million.
- EBITDA: SEK 71 million in Q4, down from SEK 89 million.
- EBITDA margin: 7.6% in Q4, compared to 8.5% the previous year.
- Gross margin: 24.2%, slightly down from 24.6%.
Outlook & Guidance
Looking ahead, Nordic Waterproofing expects demand to remain at current levels in early 2025, with potential improvements in its main markets later in the year. However, no significant recovery is anticipated in Finland, which remains the most challenging market. The company has proposed a dividend of SEK 4 per share. InvestingPro data shows the company maintains a GREAT financial health score of 3.32, suggesting strong fundamentals despite current market challenges. Additional ProTips and detailed financial metrics are available to InvestingPro subscribers, offering valuable insights for investment decision-making.
Executive Commentary
CEO Martin Ellis noted, "Soft markets continue basically and we’ve had a bit of a profit erosion as a consequence." He also highlighted the strategic move with Kingspan, stating, "KingSpan this morning announced a cash offer to the shareholders of our company."
Risks and Challenges
- Continued market softness, particularly in Finland.
- Potential impact of higher interest rates on commercial newbuilds.
- Ongoing deflation in input material costs could pressure margins.
- The success of the Prefab Elements business turnaround remains uncertain.
Nordic Waterproofing’s strategic partnership with Kingspan, which has made a cash offer of SEK 182.5 per share, is a key development, with the board unanimously recommending acceptance. The offer period ends on March 6, and Kingspan already holds 87.4% of the shares, indicating strong support for the acquisition.
Full transcript - Natwest Group PLC (NYSE:NWG) Q4 2024:
Conference Moderator, Nordic Waterproofing: good morning everybody and welcome to the Nordic Waterproofing earnings conference call for the Q4 2024 here. Let me start by pointing out that this meeting is being recorded and that the participants’ names are visible for everyone. But having said that, let me then introduce our CEO and President Martin Ellis to start the presentation. Welcome
Martin Ellis, CEO and President, Nordic Waterproofing: Martin. Yeah. Thank you very much, Parekh. Can you hear me okay?
Conference Moderator, Nordic Waterproofing: Yes, I hear it loud and clear. Very good. Thanks.
Martin Ellis, CEO and President, Nordic Waterproofing: Yeah. So welcome all. Thanks for participating. Maybe our last quarterly conference call, but who knows? So, the headline is soft markets continue basically and we’ve had a bit of a profit erosion as a consequence of that, but we have also managed to keep our return on capital employed stable.
So moving on to the next page, we can see that as you probably noticed, KingSpend this morning announced the cash offer to the shareholders of our company and the price is SEK182.5 per share. Our board has evaluated the offer and anonymously recommends that shareholders accept the offer. We have the board has also obtained a fairness opinion from Evli, according to which the offer from a financial perspective is fair to the shareholders of Nordic Broad Proving. That’s obviously the reason the board recommends accepting it. The offer period ends on March 6, and presently, Kingspan holds 87.4% of our shares already.
Moving on, talking about our quarterly results and business development. Our net sales decreased by 12% compared to the previous year in the quarter, and all of that is organic. No exchange effect, no acquisition effect. EBITDA decreased also to 71,000,000 compared to 89,000,000 last year. Operating profit, a similar decrease.
Cash flow from operating activities was positive as is quite normal in the quarter, but less so than last year. Last year, we had a very aggressive reduction of our working capital, which we obviously can’t repeat every year. And the result of that is that we reduced net debt again to SEK716 million compared to SEK749 million previously. And the board will propose a SEK4 million per share dividend. Moving on, a few comments on our business environment.
Demand is still impacted by a slowdown in commercial newbuild linked to higher interest rates. Renovation remains stable and residential newbuild continues to weak in almost the entire geography we cover. Bitumen based waterproofing solutions are stable in Sweden, Norway and Denmark. And the market situation continues to remain more challenging in Finland compared to the other countries. Sales of our EPDM products which is basically the European market are slightly below last year, but we have been able to improve our margins there.
Prefab Elements, which has a high exposure to residential new build, obviously, is badly impacted by the demand situation and had a negative development in sales. Profitability is still unsatisfactory, but we’ve put into place a number of turnaround options and plans, which are, I would say, starting to show results, especially in Norwegian operation and which we are confident will improve the situation throughout the year ’25. Green infrastructure had somewhat negative development in sales and operating results, but we don’t believe that we’ve lost any market share. So this is related demand related. Installation services for especially in roofing in Finland has decreased sales and weaker margins as a consequence.
But our operating results from the franchise units in Denmark, where we usually own about 40 percent on the same level. So very, very strong results there and also a good outlook. Order books for business units with installation are generally weaker compared to the same time last year. And again, Finland is the bigger factor in that business. A few more comments.
We have had a good control of the cost situation and we have slightly deflated cost price developments in most of our input materials. We have focused on our debt level, and as you have seen, we’ve been able to improve that. We obviously expect acquisition opportunities, especially now in in partnership with Kingspan in the future. The expectation for demand remain at the current level for the beginning of the year. And, we don’t see any significant pickup in residential new build, with the exception of Denmark.
We think that 25 might see an improvement in our main markets, but in Finland, there are so far no signs of any improvement. So the situation will probably remain unchanged in that country. With that, Pare, I turn it over to you.
Conference Moderator, Nordic Waterproofing: Yes. Thank you very much, Martin. Then let me go through some of the numbers here where we as we said, the net sales decreased in the quarter from EUR 1.48 billion to EUR 9.25 with an organic development of minus 12%, no impact from acquisitions and currency. On a yearly basis, we stand at SEK 4,100,000,000 in turnover here. EBITDA decreased to SEK 71,000,000 from SEK 89,000,000 and operating profit from SEK47 1,000,000 to SEK28 1,000,000.
The EBITDA margin decreased to 7.6 percent from SEK8.5 percent and the full year EBITDA margin is now at 10.6% versus SEK10.4 percent a year ago. Moving on to the next slide here and looking at the income statement, we can see the gross margin for the quarter was 24.2% versus 24.6% a year ago, mainly impacted I think with the decrease from structural changes within the prefabricated elements business. Net financial items were minus 1 where interest was minus 12 and then we had a positive impact from revaluation of the quarter was 3.1% versus 4.5% a year ago. And on the full year, we were at 6.8% currently. Looking then at the balance sheet on the next slide, we have a continued solid balance sheet that allows us to do selective acquisitions.
The interest bearing net debt decreased from SEK 724,000,000 to SEK 695,000,000 and the equity asset ratio now stands at almost 54%. Net debt to EBITDA ratio at 1.7 is well below the covenants we have in our financing agreement. And as you can see on the interest bearing net debt graph at the bottom right here, we have a seasonal pattern here, of course, on our net debt and cash flow. Moving then on to the next slide with ROSE. ROSE stands now at 10.1%, so that’s been basically unchanged since a year ago.
And we can see the capital employed development has decreased in recent quarters here. Cash flow from operations on a rolling 12 basis was at SEK 288,000,000 versus SEK503 a year ago. And as Martin said, we have very good changes in the working capital last year. We are among others, a significant decrease in our inventories. That’s hard to repeat.
Cash conversion at 67% versus 108% a year ago. And then we have our normal seasonal changes, as we mentioned, where we can see the other capital moves between the different quarters here. Again, in the environment we have we of course closely monitor our operating receivables. Then looking a bit deeper into our segment products and solutions where we can see a decrease of 8% in sales from SEK718,000,000 to SEK662,000,000. It’s all related to organic development.
No currency or acquisition impact. We can see in Denmark that the sales increased while we saw a decrease in the other 3 Nordic markets here. And on a rolling 12 basis or full year basis, we were at just above SEK 3,000,000,000 currently on sales. EBITDA decreased to SEK 57,000,000 from SEK 78,000,000 and operating profit from SEK 47,000,000 to SEK 26,000,000 as well as the margins then decreased the EBITDA margin from SEK 10.9 billion to SEK 8.7 So generally the business is maintained or improved margins with the exception of the prefabricated elements business where the restructuring initiatives had a significant impact in the quarter. For full year, EBITDA margin stands at 14% versus 13.1% a year ago.
Installation services, we saw a decrease in net sales of 20% and this is mainly related to Finland where the big largest chunk of this business is located. No impact from acquisitions or currency here either and then EBITDA decreased from 25 to 18 and operating profit from 16 to 9. And if we could say for the full year the margin is 4.1% on EBITDA level versus 6% a year ago. Challenging for the Finnish operations and somewhat improvement from the Norwegian entity, however, still unsatisfactory. And in Denmark, where we consolidate our share of the net result in our franchise network, we don’t consolidate sales there.
They maintain the result on a good level. Having said that, I mean, for the financial targets, I move it back to you, Martin.
Martin Ellis, CEO and President, Nordic Waterproofing: Yeah. Thank you very much, Pade. And that basically wraps up our presentation. So we think that we’ve definitely kept our market shares in terms of sales growth. We don’t have any regrets.
Profitability as you have seen is below albeit stable, but below our 13% ROCE threshold in a challenging market situation. Capital structure is solid, as Parekh described, and the dividend policy with a 4 SEK proposal obviously is, above 50% of net profit as usual. So now we’re looking forward to any questions.
Conference Moderator, Nordic Waterproofing: Yes. Thank you, Martin. Yeah. So if the for you in the meeting, if you want to ask a question here, please raise your hand in the meeting or you can send a question into the Q and A feed here or you can actually also email it to me directly. If you’re on the phone, press star 5 to raise your hand for a question And then I can I will unmute you?
So so yes, if you’re in the meeting, so please raise your hand if you want to ask a question. Okay, it seems that there are no questions from the audience here and I don’t have any questions in my email either. So I think that’s, we, yeah, Martin, you want to wrap up? Let me
Martin Ellis, CEO and President, Nordic Waterproofing: go ahead. Thank you all for participating and, yeah, we’ll see what what happens. It’s, quite likely that this is our last call. And, for those of you who’ve been here for a while, thank you very much for your interest.
Conference Moderator, Nordic Waterproofing: Thank you very much, everyone. Okay, and good day.
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