Interim Report January—September 2023: New record result in continued mixed market

The third quarter

• Order intake decreased to 514 MSEK (621).
• Net sales increased by 9 percent to 619 MSEK (567).
• EBIT increased to 89.2 MSEK (69.4).
• EBIT margin increased to 14.4 percent (12.2).
• Profit after tax amounted to 52.5 MSEK (51.3).
• Earnings per share amounted to 1.81 SEK (1.77).
• Westermo signed a three-year framework agreement in the energy segment worth at least 100 MSEK.
• Cost reduction package in Beijer Electronics lowers costs by 20 MSEK on an annual basis.
• Westermo inaugurated a new site in Dublin for continued expansion in wireless data communication.
   

Nine months

• Order intake decreased to 1,829 MSEK (1,949).
• Net sales increased by 22 percent to 1,881 MSEK (1,540).
• EBIT increased to 260.2 MSEK (138.4).
• EBIT margin increased to 13.8 percent (9.0).
• Profit after tax rose to 166.2 MSEK (95.4).
• Earnings per share increased to 5.75 SEK (3.29).
   

COMMENTS FROM THE CEO, JENNY SJÖDAHL

”The third quarter of 2023 offered a more mixed picture than previous quarters, with weaker order intake while the result reached a new record level. Ependion’s order intake decreased to 514 MSEK and the order backlog at the end of the period amounted to 1,399 MSEK. Both business entities noted reduced order intake.

Westermo booked 292 MSEK in new orders in the third quarter, which is slightly lower than for the corresponding period last year despite a continued high level of activity in all focus segments. The decrease is related to the train segment, which had a strong first half of the year, driven by an extended order horizon from a major customer. After seven quarters of rising order intake, the normalization gives the business entity the opportunity to decrease the still large order backlog, which amounted to 1,045 MSEK at the end of the quarter. During the period, Westermo signed a three-year framework agreement worth at least 100 MSEK in the important and growing energy segment. An initial order of 28 MSEK was booked in the quarter.

For Beijer Electronics, the development followed the same pattern as in the previous quarter of the year, where a normalization of order patterns combined with a weakened industrial economy led to weaker order intake of 223 MSEK. Compared to the second quarter of 2023, the order booking rate increased by approximately ten percent. Europe and North America show a stable level of activity, while Asia continues to develop weakly. During the period, the order backlog was reviewed and adjusted down by 34 MSEK regarding uncertain orders in China.

The Group’s sales increased to 619 MSEK and were stable above 600 MSEK for the third quarter in a row. Westermo set a new sales record with 380 MSEK. It partly reflects a continued strong demand, and partly that the business entity has essentially put the supply problems behind it and has thus been able to reduce the backlog of orders. During the period, Westermo inaugurated a new site in Dublin which supports the growth strategy by ensuring that the business entity can continue to expand.

For Beijer Electronics, sales decreased to 241 MSEK, which was expected given the lower rate of order bookings in recent quarters. The integration of Smart HMI is proceeding according to plan and the software WebIQ is attracting great interest among customers. The new unit in Malmö for the assembly of HMIs is almost ready. Series production will begin in the first quarter of 2024.

The continued stable sales in combination with high costefficiency and active work with the pricing of the Group’s products contributed to new records for both profit and margin. Ependion’s EBIT increased to 89 MSEK with an operating margin of 14.4 percent, which means that the Group for the third quarter in a row performed close to the Group’s EBIT margin target of 15 percent. Our inventories decreased during the period, albeit from high levels, and free cash flow amounted to 18 MSEK. We are of course not satisfied with the weak cash flow development during the year, which is mainly due to increased inventory levels in the wake of the component crisis. Both business entities have a strong focus on reducing tied up capital.

Westermo reached new record levels with an EBIT margin of 17.6 percent and an EBIT of 67 MSEK, which shows the business entity’s profitability potential when volumes grow. Extensive change work is underway in Westermo with the aim of building a more robust and efficient supply chain that can handle increasing volumes. For Beijer Electronics, the period’s operating margin of 12.7 percent and an operating profit of 31 MSEK provided further evidence of the ability to maintain good profitability despite lower volumes. During the period, Beijer Electronics initiated a cost reduction package with a focus on Asia, which lowers the business entity’s costs by 20 MSEK on an annual basis. The restructuring cost of 3 MSEK has been charged to the third quarter. The ongoing review of the business entity’s strategy will be completed before the end of the year.

Within the area of sustainability, great focus has been placed on strengthening competence and involving our employees in the improvement work. Circular economy has been an important component and here are several examples of how our operations contribute by taking a holistic approach that partly includes our offer to customers, partly addresses our internal processes and impact. The organization is preparing to meet the requirements linked to the EU’s new sustainability reporting directive, CSRD, and is working to integrate the sustainability aspect into the strategic work.

Ependion continues to work in line with the Group’s overall strategy to reach our financial goals. This also includes that we continuously evaluate the possibilities for complementary acquisitions.

In the medium and long term, we see very good growth in the markets and in the segments where we operate. We see a great willingness in most of the world’s countries to invest in socially important infrastructure such as trains, railways and energy production and electricity distribution, which benefits the Group. At the same time, high inflation and interest rates continue to affect the global economy, which has a negative impact on demand, especially in the manufacturing industry. The mixed picture we have seen for some time is thereforeexpected to persist.

I can happily state that when the third quarter of 2023 is summed up, this year’s accumulated EBIT already exceeds the level of the full year 2022, which means that Ependion is heading towards new records for both sales and profit on a full-year basis.”
 

INVITATION TO PRESENTATION OF THE REPORT

Today a conference call will be held for press and analysts, where President and CEO Jenny Sjödahl and CFO Joakim Laurén present the company and comment on the report.

Time: Tuesday, October 24, 13:30 CEST

To participate in the conference please dial:

From SE: +46(0)200899189
From UK: +44(0)8006522435

To access the presentation please use this link: http://momentum.adobeconnect.com/ependion/
  
The report and the presentation will be available at the company’s website www.ependion.com. A recording of the conference call will also be available here after the event.

Welcome to join!

    

This disclosure contains information that Ependion AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 24-10-2023 13:00 CET.