Harsh weather and weak residential new build demand lead to drop versus strong Q1 2022
FIRST QUARTER OF 2023
- Consolidated net sales flat at SEK 911 m (912), of which organic development amounted to -10 percent, acquisitions 7 percent and currency effects 3 percent.
- Net sales in Product & Solutions amounted to SEK 701 m (773) and in Installation Services to SEK 239 m (171)
- Gross profit decreased to SEK 201 m (237), Gross margin decreased to 22.1% (26.0%)
- EBITDA decreased to SEK 30 m (91), EBITDA margin decreased to 3.3% (10.0%)
- Operating profit (EBIT) decreased to SEK -11 m (56), EBIT margin decreased to -1.3% (6.1%).
- Two operational entities terminated in the quarter had a negative impact of SEK -18 m.
- ROCE amounted to 13.1 percent (16.1)
- Cash flow from operating activities amounted to SEK -58 m (-15)
- Earnings per share before and after dilution were SEK -0.84 (1.65) and SEK -0.83 (1.64), respectively
MESSAGE FROM THE CEO
Harsh weather and weak residential new build demand lead to drop versus strong Q1 2022
Consolidated net sales in the first quarter was flat at SEK 911 million compared to SEK 912 million last year. Organic development was -10 percent of which 9 percent were sales price increases and volume development was -20 percent, the impact from acquisitions was 7 percent and currency translation effects were 3 percent. Organic development was -14 percent in Products & Solutions and 6 percent in Installation Services.
Weather conditions were unusually harsh in the quarter in all Nordic countries with late snowfall in Finland and Sweden and historic record number of rainy days in Denmark in March. We see continued weakness in new residential building in all our markets.
EBIT for the first quarter amounted to SEK -11 million, compared to SEK 56 million last year. The negative development in gross profit and operating profit is mainly explained by the SEK -18 m impact from the termination of two entities, lower volumes and decreasing margins for our synthetic rubber waterproofing and prefabricated wooden element businesses, as well as the harsh weather conditions in the quarter for our bitumen-based waterproofing businesses.
Our ROCE at 13.1 percent (16.1) remains above the threshold of 13 percent. Cash flow from operating activities amounted to SEK -58 M (-15), the negative development is mainly explained by the lower operating profit.
We have seen continued slightly deflated costs for our input materials. Our expectation for residential new build development on our main markets is negative in the short-term, while demand for renovation short-term seems to remain stable. The macro economic situation continues to present more uncertainties for the future than normally. Contingency measures are being implemented in our operations to mitigate the consequences of the negative development.
The Products & Solutions operating segment decreased by -9 percent (37). Organic development was -14 percent (30) of which 8 percent were related to sales price increases and volume development was -22 percent, the impact from acquisitions was 2 percent and currency translation effects were 2 percent.
The Bitumen-based waterproofing businesses were on the same level as last year in Sweden and Norway while we had decreases in Denmark and Finland. SealEco, our synthetic rubber waterproofing business, had a decline in sales in most markets.
In our prefabricated wooden elements business, Taasinge group had a decline in sales in Denmark, Norway had a positive sales development while Seikat in Finland saw a decline in sales. Order books are on good levels in all three markets, however somewhat lower than previous quarters.
Sales development of our green infrastructure businesses, sold under the brands Veg Tech and Urban Green, had a very strong growth compared to the first quarter 2022.
The Installation Services operating segment grew by 40 percent (12) to SEK 239 M. Organic growth was 6 percent (-6), of which 12 percent was sales price increases and volume development was -6 percent, the impact from acquisitions was 30 percent and currency translation effects were 5 percent.
The majority of this business within Installation Services is conducted in Finland where we saw growth in Net Sales and margin improvement for our roofing business.
Our roofing business in Norway had double-digit growth in Net Sales with somewhat weaker margins.
Our Danish franchisees had an EBIT contribution in the quarter above last year.
We continue to focus on growth (organic and selective acquisitions), profitability and sustainability. Our balance sheet is strong, and we continue to have the capacity to carry out acquisitions. We have a strategic focus to promote sustainable building solutions and enhance our service and product portfolio.
Helsingborg, 25 April 2023
Martin Ellis,
President and CEO
Conference call
A conference call for investors, analysts and media will be held today, 25 April 2023, at 10:00 a.m. CET and can be joined online at https://events.teams.microsoft.com/. Presentation materials will be available on https://www.nordicwaterproofing.com one hour before the call.
To participate from computer, use link above.
To participate via phone, please use conference id 936 000 017# on any of below numbers:
From Sweden: +46 8 502 428 90
From Denmark: +45 32 72 66 61
From United Kingdom: +44 20 7660 8326
From Finland: +358 9 85 626 548
