Nederman industrial air filtration solutions for clean air in production

Sven Kristensson CEO Nederman

Word from the CEO

Growing number of incoming orders and increased profitability

2017 has been a good year for Nederman. Incoming orders amounted to SEK 3,157.3 m (2,992.3), which corresponds to an organic increase of 4.6 percent following good market development in EMEA and APAC, while incoming orders in the Americas was uneven during the year and ended up being just slightly above 2016 figures. Net sales were at 2016 levels, while profitability increased during the year with an adjusted operating margin of 9.1 percent (8.1). Net profit was SEK 186.3 million (172.1).

ANOTHER STRONG YEAR FOR EMEA
2017 was a strong year for EMEA with continued profitability. As a result of a more stable economic climate, we also saw a positive development in both incoming orders and in net sales. The number of incoming orders increased organically by 4.5 percent and net sales increased organically by 4.2 percent.

The positive development in net sales and profits was a result of a project sale that was the best in four years, and a core business with sales of smaller systems and products that continued the positive trend from previous years. Digitalisation of the operating segment's activities with digital sales tools, digital marketing and the highly appreciated web shop for distributors was also crucial in 2017 to the high levels of efficiency and profitability.

INCREASED PROFITABILITY IN THE AMERICAS
In Americas, the adjusted operating margin increased to 11.1 percent (10.7) in spite of a weak market during the year. The demand for Nederman’s major systems was low in 2017. Incoming orders were at 2016 levels, while net sales decreased organically by 6,1 percent during the year. We nevertheless managed to raise our profitability thanks to a systematic and consistent effort to lower the organisation’s expenses. The organisation in Americas has also produced clear activity plans for improved distribution, more efficient sales of smaller systems and higher sales volumes within the after-market.

MORE POSITIVE SIGNS IN APAC
For APAC, 2017 was the year when the trend of reduced profitability was broken and losses were turned into profits. During the year, the adjusted operating profits increased by SEK 18.6 m from a figure of negative SEK 9.3 m to positive SEK 9.3 m in 2017. Incoming orders and sales also showed positive development with an organic growth of 19.4 percent and 6.0 percent respectively. The adjusted operating margin amounted to 2.3 percent (-2.5) for the entire year, and the ambition is gradually to raise profitability to a level in line with the Group’s financial goals. Markets such as China, India and Australia developed well during the year, while the trend in Southeast Asia was weaker.

In the long term, there is a lot going for Nederman in Asia. The increasing prosperity in the region leads to a clearer focus on environmental issues, which for example can be seen in the new environmental legislation in China. The potential for Nederman's system solutions is great, and in recent months, we have seen an increased level of activity within the environmental field.

NEW ORGANISATION FOR INCREASED GROWTH
The Nederman Group is currently undergoing a re-organisation of the operation with a goal of  increasing  both  growth and profitability through simple structures and a clear focus. In concrete terms, this means that Nederman will be organised with an operational main focus on four trademarks, but maintaining coordination in the operating segments of Americas, EMEA and APAC. With the new organisation, Nederman’s expertise will make a clear breakthrough on the global market. The new organisation will also further  strengthen Nederman’s work with the Group's key customers and expand the after-market business, which holds considerable opportunities for growth. The new organisation will gradually be implemented in 2018 and will be reflected in Nederman’s segment reporting effective 1 January 2019.

SUSTAINABILITY EVER MORE IMPORTANT FOR THE GROUP'S MAJOR CUSTOMERS
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 the Nederman Operations System, which controls how our manufacturing units work and report. In 2015 and 2016, we implemented a comprehensive strategic effort in order to fully integrate sustainability issues into our business strategy. This work has now transitioned into a more concrete phase that involves the development of business plans in various parts of the company. When all the work is completed 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.

Moreover, sustainability issues are becoming increasingly important for large international companies. Therefore in 2017, we created a dedicated key account function whose task was to develop long-term relations, at the correct level, with our most important customers.

OUTLOOK
The situation in Europe continues to improve with a positive development in both incoming orders and in sales. In the United States, we also see continued stable sales in the core business, while uncertainty concerning large projects is expected to remain for some time, even if we have seen a certain amount of improvement toward the end of the year. In Asia, several markets have developed positively; among such developments is an increased activity within the environmental field in China. 

Sven Kristensson
President and CEO