Lindab’s Interim Report Jan – Sep 2023: Operating margin exceeded 10 percent in a challenging market

Lindab reported its highest third quarter in terms of sales. Ventilation Systems increased sales due to completed acquisitions. For Profile Systems, the demand has stabilised. The operating margin has gradually improved during the year and exceeded 10 percent for the Group and for both business areas. Cash flow remained strong as a result of targeted efforts to reduce working capital.

Third quarter 2023
 

• Net sales increased to SEK 3,251 m (3,239), a change of 0 percent. Organic sales growth was negative by 11 percent while structural changes contributed positively by 4 percent.
• Adjusted1) operating profit amounted to SEK 351 m (361).
• Operating profit amounted to SEK 351 m (358).
• Adjusted1) operating margin amounted to 10.8 percent (11.1).
• Operating margin amounted to 10.8 percent (11.1).
• Profit for the period amounted to SEK 239 m (267).
• Earnings per share before dilution amounted to SEK 3.13 (3.48) and after dilution to SEK 3.11 (3.47).
• Cash flow from operating activities increased to SEK 444 m (216).

 

January – September 2023

 

• Net sales increased by 8 percent to SEK 9,840 m (9,143). Organic sales growth was negative by 10 percent while structural changes contributed positively by 13 percent.
• Adjusted1) operating profit amounted to SEK 917 m (1,103).
• Operating profit amounted to SEK 917 m (1,081).
• Adjusted1) operating margin amounted to 9.3 percent (12.1).
• Operating margin amounted to 9.3 percent (11.8).
• Profit for the period amounted to SEK 659 m (803).
• Earnings per share before dilution amounted to SEK 8.62 (10.49) and after dilution to SEK 8.59 (10.46).
• Cash flow from operating activities increased to SEK 1,122 m (164).

 

1) Adjusted operating profit/operating margin does not include significant one-off items and restructuring costs.

 

 

Lindab’s President and CEO, Ola Ringdahl, comments:

“Lindab delivered a strong operating profit in the third quarter. The operating margin for the Group and both business areas exceeded 10 percent despite challenging market conditions. The cost program follows the plan, cash flow was strong and inventory levels normalised.

 

Strengthened profitability for Ventilation Systems

Sales of ventilation products were high in the quarter thanks to completed acquisitions. The markets in West- and South Europe were stable while the Nordics was weaker. Increased demand for energy-efficient solutions has partly offset fewer newly started projects. The Ventilation Systems business area has prepared well for a weaker economy and improved its operating margin to 11.2 percent during the quarter.

 

Actions within Profile Systems yield results

The decline in new construction in the Nordic region has a direct impact on the demand for Profile Systems’ products. It is primarily the project business and residential sales that have slowed down significantly.

 

After some tough quarters with negative inventory effects and reduced sales, the situation is beginning to stabilise and the gross margin is strengthening. Our capacity has been adjusted to the current market situation and the implemented cost program will reach full effect from October. Profitability has gradually improved during the year and the operating margin exceeded 10 percent in the quarter.

 

Lindab – a leading European ventilation company

Lindab is developing at a rapid pace. In recent years, businesses with weak profitability have been restructured or divested. After implementing the largest investment program in Lindab’s history, our operations are now efficient and have the capacity to handle our growth ambitions. Thanks to improved profitability and a strong balance sheet, we have been able to complete 22 acquisitions since 2020. The development of these acquisitions has been positive.

 

The focus is now on 2027, when the goal is to achieve sales of SEK 20 billion with at least a 10 percent operating margin. Growth will take place in Ventilation Systems, in a combination of organic and acquired growth. The core of Profile Systems will be further developed, especially in Scandinavia where our businesses share significant synergies. Product areas and geographies that do not meet our high standards of organic growth and stable profitability will be evaluated.

 

Acquisitions play a significant role in Lindab’s growth journey and we will continue to maintain a high pace of acquisitions within ventilation. Inventory levels have decreased and the investment program is coming to an end. The strong cash flow is freeing up resources for more acquisitions. We see a strong correlation between market position and profitability. We are adding on the product side to optimize the product portfolio. We are densifying on the distribution side to have powerful geographical coverage in each prioritised country. A good example of the latter is the acquisition in October of British HAS-Vent, a very well-managed and profitable ventilation company with sales of SEK 280 million and ten locations in the UK, one of Europe’s most important ventilation markets.

 

Well-prepared for short-term challenges

Our assessment is that the European installation market will remain weak over the next 12 months. We adapt our resources to the current demand and the workforce has been reduced by 7 percent compared to a year ago.

 

We continue to see increased demand for sustainable and energyefficient products. This favours Lindab, which has a competitive offering in this area. As the first company in the world, Lindab can already offer ventilation ducts in recycled or fossil-free steel.

 

Lindab has an experienced and motivated organisation, strong European customer relations and a stable supply chain. We are now entering the next phase of the company’s development and aiming for an even larger and more profitable ventilation company in 2027. Although the market situation is currently tough, Lindab has good conditions to continue developing the business in a positive direction for the future.”

 

 

Press and analyst meeting:

 

A live webcast will be held at 10:00 am (CEST) on October 26. The Interim Report will be presented by Ola Ringdahl, President and CEO, and Lars Ynner CFO.

 

If you wish to participate via webcast please use the link below.

Lindab Q3 Report 2023 (financialhearings.com)

 

If you wish to participate via teleconference please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.

Call Access (financialhearings.com)

This disclosure contains information that Lindab 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 26-10-2023 07:40 CET.