Continued good profitability in challenging markets
The risks we saw in the Americas and Asia came true this year with a marked slowdown in industrial investment. There was increased political unrest in various parts of the world in parallel with this development. Our profitability in 2016 was on par with 2015 despite this unfavourble investment climate.
Stable development in Europe
Europe was the market with the most stable development in 2016. Despite continued low industrial investments, we were able to further strenghten our profitability in this market area thanks to continued efforts to make the business more efficient and less dependent on project sales. The improvement work includes the digitisation of marketing and sales as well as the modernisation of production.
The improvements in recent years have meant that the EMEA operating segment has created a stable platform that has made the organisation less sensetive to fluctuations in the investment climate and that profitability has been established on a good and sustainable level. The improvement work has also meant that Nederman strengthened its position in the market significantly and is well positioned for the future.
Fewer major project in the USA
The US market was characterised in 2016 by declining industrial production, which meant that many investments were postponed. For Nederman the low investment levels meant that sales of large projects in the US market fell compared with 2015. During the last two quarters, we saw a positive development in some industrial segments with increased sales of consumeroriented and fast-moving products.
Subdued development in ASIA
In the long term, there is a lot going for Nederman in Asia. The stricter environmental laws in China will lead over time to an increased demand for efficient environmental technologies. One example is China's own regulations for hazardous environments, showing how seriously the Chinese authorities view this issue. Currently sales of environmental technology are limitied by China's industrial overcapacity. In a difficult economic situation, environmental investments tend to be postponed.
At the same time, there is much Nederman can do internally to streamline operations, and we are currently conducting a strategic and organisational review to build a stronger platform for future expansion.
Strategy for growth
Nederman’s strategy for growth focuses on developing the Company’s organic growth and carrying out additional aquistions that strengthen our offering. Organic growth will be achieved mainly through investments in selected markets with good development potential. We will also continue our work to strengthen current product sales and develop our service offering. In the long term, we see an increased interest in environmental technology, not least in the terms of our configured system solutions that are not as cyclical as the larger installations. The demand for environmental technology is also driven by the fact that in several markets the authorities control compliance with applicable environmental legislation stricter than before.
We will also continue the strategic work to streamline our sales and distribution. The focus of this work is to establish digital channels which increase demand for our products and solutions while positioning Nederman as the market's absolute knowledge leader. In 2016, we conducted a further step in Nederman's digital transformation with cloud-based solutions linked to the Company's products. The system collects and analyses value-creating information in order to help customers monitor system performance, plan service needs and monitor compliance with laws and regulations.
Nederman has taken decisive steps in recent years within sustainability. Among other things, we have implemented our Code of Conduct within the whole Group and developed Nederman Operations System, which controls how our manufacturing units work and report. The most important steps in our sustainability efforts in 2015 and 2016, however, were when we conducted extensive analytical and strategic work to fully integrate sustainability into our business strategy. This work will now pass into a more concrete phase, which includes the development of business plans in various parts of the Company, definition of central and local indicators, and the development of a clear brand identity. When all the work is completed sometime in 2018/2019, the ambition is that Nederman will be a company which, by having integrated sustainability in its strategy, is the obvious choice for all the Company's stakeholders.
In parallel with improving Nederman's growth, we are also working to strengthen the Group´s profitability and in 2016 we have been able to establish that the efficiency program for our sales and service processes in EMEA has continued to deliver.
We are also continuing the gradual regionalisation of manufacturing and purchasing, leading to lower costs and more efficient distribution while coming closer to our customers. We also expect that the new products currently in development will not only give our customers added value, but also make production and distribution more cost effective.
It is difficult to evaluate the development of the world economy in 2017. Nederman's basic assumption is that 2017 will largely be similar to 2016 with subdued willingness to invest in many markets. Despite the challenging market situation, we expect to achieve improvements in 2017 by continuing efforts to strengthen Nederman's position in several key areas.
Sustainability issues are becoming increasingly important, especially for large international companies. Nederman has a stated ambition to grow through partnerships and to develop with the Group's major customers. Nederman's continued success will be based on the implementation of new technology to make the business operations more efficient, and more effective communication of the values that Nederman offers its customers.
With its long experience and strong offering in environmental technology, Nederman is well-positioned to continue to grow. I would like to thank Nederman’s employees, customers and shareholders for this.
President and CEO