CEO´S COMMENTS

SECOND QUARTER – FOCUSING ON EFFICIENCY AND FINISHING STRONGLY

The second quarter outcome was somewhat better than we had feared, mainly attributable to the month of September being very strong. Sales fell by 7 percent, of which the organic decline was 10 percent compared with the corresponding period last year. Although Covid-19 affected several to us important market segments during the quarter, a significant part of the organic effect is related to the sale of solutions for scrubber installations. Sales within this area have decreased gradually since the fourth quarter of the previous financial year and have further strongly negatively been impacted by the Covid-19 pandemic. Our focused efforts to adjust our operating costs to lower business volumes in our companies within the affected market segments resulted in about 200 employees unfortunately being laid off during the first six months. These measures, combined with the effects of short-term cost reductions and favourable contributions from acquisitions, resulted in an EBITA margin of 11.2 percent, which was good given the tough comparison with a very strong quarter last year. Our liquidity remains favourable and the cash flow is stable.

The business situation varied between different geographical markets, customer segments and product niches. Sales of production components for the mechanical industry and special vehicles were weak and, although we experienced a recovery in demand at the end of the quarter, we are seeing caution among customers, resulting in weaker visibility than usual. The increased demand in medical technology that we experienced at the beginning of the pandemic abated over the quarter. The market situation was strong in the forest industry, wind power and infrastructure products for national and regional grids, and sales in the electronics and defence segments were stable.

In terms of our geographical presence, our recovery was strongest in the second quarter in Denmark and in other European countries outside the Nordic region, although the latter progressed from very low levels. The business situation developed stably in Sweden, while the trend in Finland and Norway was strongly negative, attributable largely to the decrease in scrubber business. The underlying sentiment is that the market situation in Finland was stable and in Norway it remained stagnant.

ACQUISITIONS

Acquisitions of successful and market-leading companies are an important element in our growth strategy and our ambition is to implement well-considered acquisitions, even during periods of greater difficulty. During the quarter, we completed four acquisitions and we completed two more in early October. Since the beginning of the financial year, we have acquired nine companies, whose combined annual sales are approximately SEK 775 million. We continue to have several projects in progress, at various phases and in different geographical markets.

OUTLOOK - CONTINUED ADAPTATION TO THE NEW NORMAL

The stabilising trend in demand that we experienced in September has continued into October but the pandemic’s impact on demand trends will remain uncertain. Over the upcoming period, we also expect low activity levels to persist in the market for scrubber installations. We are monitoring developments closely and are continuing to implement our cost-adjustment programme while focusing on safeguarding our long-term profitable growth.

Our increased focus on sustainability, which we initiated during the preceding financial year, is continuing unabated. Our experiences from the cyber attack have been of great help in the transition towards increased digitalisation, which has been accelerated by the pandemic.

Overall, I have great confidence in our growth strategies, scalable business model and strong, entrepreneurial corporate culture. I would again like to take this opportunity to thank all Addtech employees for your amazing commitment and efforts.

Niklas Stenberg
President and CEO