We are growing profitably and continue to shape the future for clean air
Nederman’s journey of success continues. During a particularly challenging year, we further strengthened our record-level order backlog and reported a strong increase in both sales and earnings. Investments to increase production efficiency were combined with a continued high pace of product development. Three acquisitions were completed that strengthen Nederman in various ways, including the establishment of a leading position in the welding segment in North America. The outlook for 2023 is uncertain, but we have a high level of readiness to adapt and adjust our operations and to continue to strengthen our global position in industrial air filtration.
On Monday, 30 May, I had the honour of opening the photo exhibition, The Breath, in Helsingborg, a collaboration between Nederman and Dunkers Cultural Centre. Together with one of the participating photographers, Olof Jarlbro, we talked a little about some of the images displayed in the park outside the cultural centre. Images in which the photographers were free to interpret “the breath.” It was fascinating and occasionally eye-opening to regard these observations of one of the most important things for humans – clean air. What could be found in several of the images, and something that we often highlight in our own communications, is how few people in the world actually have access to clean air on a daily basis.
According to the WHO’s new estimates, as much as 99 percent of the Earth’s population breathes polluted air every day. Of course, the situation is worst in many of the densely populated and rapidly growing developing countries, but Europe and North America also have a problem with poor air quality. Industrialisation throughout the world is, naturally, a reason for the poorer air quality, primarily if manufacturing processes and transport are based on fossil energy, and in many countries, regulation and supervision of pollution are far from optimal. At the same time, the trend cannot be stopped, the world evolves and more people take the step into the welfare society. But this is also accompanied by heightened awareness of health and well-being, which in turn, drives change. This is actually occurring most rapidly in industry, with initiatives including better utilisation of resources and reduced energy consumption. New technical solutions, the possibility to digitalise processes and monitoring, and not least the introduction of smart systems for analysis and optimisation, also further strengthen the prerequisites for clean air in our industrial environments. And at the forefront of this development is the environmental technology company Nederman.
At the end of the January 2023, I attended another inauguration. Once again in Helsingborg, but at another venue and something completely different, but just as important. Together with representatives from the municipality and construction company, I put the first spade in the ground for Nederman’s new, ultra-modern facility, which will be the new Nederman head office, manufacturing and logistics unit for one of our divisions, but also a group-wide innovation and experience centre for the air filtration solutions of today and the future. This demonstrates our ambitions in the area and displays our strong focus on increasing awareness of the importance of breathing clean air, in all types of environments, not least in industry. As the market leader, we are resolute in driving development in industrial air filtration globally, as The Clean Air Company. This is a long-term effort that builds on a close dialogue with customers in a number of different industries to find the most effective and profitable solutions. Every industry and customer is unique. With their particular challenges.
At the same time, there are shared challenges that we all need to address and these have been plentiful in recent years. The pandemic resulted in huge complications for global transport and supply chains, with accompanying component shortages. Before we could find a solution to this, a war on European soil grabbed the world’s focus. With major consequences for energy supply, inflation and security policy. Unfortunately, we are forced to recognise that the world has changed. Globalisation and free trade have been replaced by regionalism and protectionism. At the same time, we need to continue to address challenges related to the climate and the environment. On a global scale.
In our own operations, we have naturally placed major focus on managing all of the challenges. Nederman is a global company that needs to address and adapt to various local conditions, at the same time as we develop solutions that can be implemented throughout the world in a number of industries. During 2022, our four divisions successfully managed component problems and rising raw materials and transport costs. We improved efficiency and adapted, even in product development, to be able to keep our promises, namely, deliver. In certain instances, such as in China, where we already have significant production and many customer relationships, the challenges have sometimes been of a slightly different nature and difficult to address for an international company such as Nederman. We have done what we can, but have also initiated a review of our operations in the country to strengthen our position.
A completely different trend was displayed by our operations in North America and it is on this continent that we have made the largest investments and progress during the year. Nederman Duct & Filter Technology has become an important supplier to the manufacturers of lithium ion batteries, a significant and rapidly growing segment in the US, and soon also in Europe. Nederman Monitoring & Control Technology has established good momentum for its process-related operations, driven by such factors as US investments to reduce dependence on imported energy. To date, Nederman Process & Technology has a limited portion of its operations in North America, but has begun to secure an increasing number of orders for customised solutions, including for metal recycling and in the energy sector. Nederman Extraction & Filtration Technology, our largest division, became even bigger in 2022 following the acquisition of RoboVent, a North American leader in industrial air filtration in the welding segment. The result is that Nederman is now the leader in the segment in both Europe and North America. During the year, we also strengthened our sales channel in Australia through the acquisition of Ezi-Duct Pty Ltd. To begin with, we will increase our presence in the country using our ducting systems under the Nordfab brand, part of Nederman Duct & Filter Technology. We also acquired Gasmet’s distributor in Switzerland, making it possible to come into direct contact with customers in this region and to accelerate the sale of Gasmet’s technology and solutions for the monitoring and control of gases.
The acquisitions are part of our long-term strategy to grow in prioritised markets and segments with the objective of becoming the largest or second largest. Sometimes this involves making a small acquisition that can contribute the know-how and technology that is perhaps required to accelerate growth in a particular industry. A good example of this is the acquisition we made at the end of 2021 of UK company Energy Save Systems. Close cooperation between this company and two of our divisions resulted in the launch of the Nederman SAVE energy-saving concept for filter systems during the year. We have always known that the issue of energy is important for our industrial customers and it has been one of our focus areas, but naturally, we could not have foreseen that it would attract such strong attention in 2022 in the wake of sharply rising energy prices and concerns about energy shortages. But it meant that our new system solution had a particularly good start. A digital and smart system that contributes to reducing energy consumption for air filtration by up to 70 percent. To begin with, we are offering the solution to customers in woodworking and the reception was very positive. Naturally, a system that generates considerably lower energy costs and clean air for employees is important to many people and demonstrates Nederman’s capacity for innovation and decisiveness.
The fact that Nederman SAVE is based on sensor technology and digital management is, of course, a natural result of developments and needs in the market, as well as Nederman’s focus on product development. For a number of years, we have raised the technology level for industrial air filtration and carried it into the future. Our digital SmartFilters will soon be a standard feature of many industries and we are constantly developing our digital offering based on our IoT platform, Nederman Insight. Digital subscription services such as myAir and MikroPul-Assist are increasingly in demand and we are continuing to make progress in our efforts to offer customers Clean Air as a Service. The technology and structures are there already, and we have contracts in place. The successive maturity and insight into the benefits among customers in most industries, and globally, mean that I am convinced that in the not-too-distant future, a large portion of our business will be based on fully digitally controlled air flows.
Our development of technology and new solutions cleans the air, protects employees and enhances production efficiency for our customers. Helping our customer industries to become more competitive is, of course, at our core, and includes receiving support and tools for analysis and reporting of various emissions data to meet regulations and requirements. Legislation is becoming increasingly strict, which is important if air quality is to improve in society, but at Nederman, we are impatient and can see that much more could be done more rapidly. However, I am certain that this will come, and then the demand for smart, connected and competitive solutions will gather additional momentum. Development will be, to some extent, similar to what has occurred in the area of climate in recent years. There are strict requirements for the collection and reporting of data which, by extension, will serve as support for a company in meeting the definition of a sustainable business, which is becoming increasingly important for investors and other financiers. At Nederman, we also have intense focus on these areas. Our sustainable business not only comprises our leading products, but also operations with high ambitions for energy-efficient production and logistics based on renewable energy and a strong focus on diversity and inclusion. We also stepped up our ambitions during the year. The investments made and in progress at new plants and warehouse premises are subject to strict requirements to minimise the environmental footprint. Something that is also gaining ground with us is the installation of solar panels to increase our green share of energy consumption and to secure our own energy supply to a greater degree. We were already far advanced in the area of energy and the target we established in 2019 to halve our direct climate impact not later than 2023 has already been achieved. We will now establish new ambitious goals for our sustainability work in line with our strategy.
Another part of our strategy – which is also connected with the green transition that is under way globally – is to grow the share of our sales in the relatively new industrial segments that have emerged from a growing demand in society for environmental adaptation. For Nederman, this involves an expanded market, in which we have already noted sales successes with our technically advanced solutions. During 2022, we secured a large number of orders in waste management, battery production and green energy production. Energy is generated from the incineration of waste, but this is also a source of hazardous air pollution, such as flue gases that need to be managed in a safe manner. High-capacity batteries are completely necessary if we are to be able to transition to electrification, and the number of plants that manufacture them has multiplied many times over in recent years. The manufacturing process is energy-intense and requires the handling of metals, flue gases and heat that are a threat to health, and we have the best solutions for these. Finally, the investments must be accelerated in green and renewable energy sources, such as wind power, where the requirements for cleanliness and precision are extremely high and thus require effective systems that capture particles and gases from grinding, welding and metalworking. We serve all of these segments and this applies to all of our divisions, which also collaborate to be able to meet customer requirements in the most effective manner.
The acquisitions, innovations and successes of growing in new industries are among the reasons that Nederman was able to report a new record for sales and profit in 2022. Another reason is that our divisions have quite simply been effective at meeting customer needs, keeping their promises and being proactive and smart in tackling all challenges. We have captured market shares and have been able to benefit from our ability to grow in existing industries using new solutions or bringing existing solutions to adjacent segments and thereby growing our overall market – an initiative in addition to our sales successes in critical sectors for the green transition. For example, Nederman Process Technology was able to take know-how and solutions developed for its textile customers and apply these in nonwoven (hygiene products) and win orders and also contribute to better air in the production of these products. Another example is Nederman Extraction & Filtration Technology, which, with its broad product offering, successively increased its presence within such areas as the food industry and the defence industry. These types of initiatives and activities mean that we can grow more rapidly than the market and that we can drive the development of energy-efficient solutions for clean air for increasing numbers of industries and customers.
Behind all successes there are skilled people. This applies to our operations to the highest degree. It is all of our employees who have developed Nederman from a company with a concentrated product portfolio and regional focus to a position with the market’s most advanced product and service offering and representation in all key industrial markets. There is incredible talent within the group, with specialist knowledge in such fields as digitalisation, mechanics and air filtration, both as strategic resources and driven sales representatives who can quickly identify the customers’ needs and can adapt solutions for them. We want to continue to develop our talents and, at the same time, be able to attract new ones, and are working conscientiously to be able to create the best environment for them. Our new centre in Helsingborg is intended to be a state-of-the-art facility that enables employees of Nederman to learn more about what we can offer global industrial customers today and at the same time, continue to develop within, for example, innovation and sustainability. We have eleven other competence and product development centres throughout the world and new ones are being added, including in conjunction with acquisitions and establishment in new markets. It is clear that we intend to retain and strengthen our market leadership.
It is also important that we contribute to developing solutions that give people around the world the opportunity to breath clean air, also when they are at work. A human inhales approximately 10,000 litres of air each day and to reduce the probability of being affected by various respiratory diseases, dementia and the risk of dying prematurely, the world’s governments must place greater focus on the air quality in our communities. Greater awareness of health among people, the WHO’s new and alarming report and the competition for talent are some of the aspects that will turn air quality into an ever-more prioritised issue going forward. The best thing is that solutions for better air already exist, primarily in industry, and rapid technological development means that they are becoming accessible to more people, and are improving and becoming increasingly effective. Naturally, we at Nederman are playing a part in shaping this positive future for clean air. Our strategy stands firm and I look forward with confidence to the years ahead with all 2,400 employees who do their utmost every day to protect people, planet and production from the damaging effect of industrial processes. Take a deep breath and join us on our continued journey.
President and CEO