First quarter - a good start to the new year
Over all, the new financial year is off to a good start, particularly taking into account the strong comparison figures from the preceding year and this year’s Easter in April. Good organic growth of 12 percent generated excellent earnings growth and stronger margins. All of the business areas hold favourable positions and continue to experience good market conditions. In particular, we have succeeded to take good positions in segments with continuously very good growth. In some areas, however, we are now experiencing that the strong tailwind has abated.
Market development – varying circumstances
The business climate has been favourable in most customer segments and geographies, while the circumstances in the market have more clearly begun to vary. In particular, demand for production components for the mechanical industry has shown signs of evening out at a high level, as has demand in the special vehicles segment. A partial explanation for this is the long lead times previously occurring for certain components. These leadtimes were reduced in early 2019, resulting in decreased demand during the quarter, despite of continued high production rate.
The marine segment has continued to grow strongly, and accounts for just over half of the Group’s organic growth in the first quarter. Demand for our products and services regarding environmental improvement solutions, has been very strong and is now expected to remain at this high level for at least the remainder of the financial year.
From a geographical perspective, our best market situation was in Norway and Finland. Our sales in Sweden and Denmark were stable and our operations outside the Nordic region continued to perform well. However, our units in the UK continue to experience some uncertainty due to Brexit.
We acquired five companies during the quarter, together contributing annual sales of about SEK 530 million. With our sound finances and strong pipeline with a favourable spread in terms of both on geography and segments, we see good opportunities for further acquisitions.
Outlook – continued focus on development areas
Our business model, with a mix of trade products, customised products and solutions and proprietary brands, represents a very important part of our success. This mix affords us flexibility with regard to customers’ needs and decreases our risks. In recent years, we have seen a shift in this mix. As shown in the model presented in our recently published annual report for the 2018/2019 financial year, our proprietary products and customised solutions now account for approximately 65 percent of our business, while 35 percent consists of trade products. Trade products will always be an important part of our business. At the same time, the trend confirms that we are really succeeding in adding increasing value for our customers and that our investments in proprietary products and brands have been successful.
Looking ahead, we generally expect demand to persist, although evening out at a high level. External uncertainty affects us as it does everyone else, although, in the longer-term perspective, we still perceive many business opportunities within structurally
driven areas of development such as the environment and climate,
infrastructure and Industry 4.0.
President and CEO