Interim Report January-December 2019
Improved profitability and strengthened cash flow
Improved profitability and strengthened cash flow
“In 2019, we created a leading engineering and design company in the Nordics, and in the fourth quarter, we delivered improved profitability and strong cash flow”, said Jonas Gustavsson, President and CEO.
Fourth quarter 2019
– Net sales amounted to SEK 5,447 million (3,957)
– EBITA, excl. items affecting comparability, was SEK 516 million (357)
– EBITA margin, excl. items affecting comparability, was 9.5 percent (9.0)
– EBITA totalled SEK 327 million (332)
– EBITA margin was 6.0 percent (8.4)
– EBIT (operating profit) amounted to SEK 298 million (328)
– Basic earnings per share: SEK 1.63 (2.85)
– Net sales amounted to SEK 19,792 million (13,975)
– EBITA, excl. items affecting comparability, was SEK 1,731 million (1,268)
– EBITA margin, excl. items affecting comparability, was 8.7 percent (9.1)
– EBITA amounted to SEK 1,368 million (1,243)
– EBITA margin was 6.9 percent (8.9)
– EBIT (operating profit) amounted to SEK 1,276 million (1,203)
– Basic earnings per share: SEK 8.07 (10.98)
– The Board of Directors proposes a dividend for 2019 of SEK 5.00 (5.00)
COMMENTS BY THE CEO
In 2019, we created a leading engineering and design company in the Nordics, and in the fourth quarter, we delivered improved profitability and a strengthened cash flow. I am pleased with the high-paced integration of Pöyry, which has achieved run-rate cost synergies of SEK 218 million, thus exceeding the target of SEK 180 million. This is reflected in our margin growth and will support our business moving forward.
In general, the market is stable in most of our segments and geographic regions. Compared to the same quarter last year we still face lower volumes in the automotive segment and its related supply structure. However, the volumes have stabilised compared to the previous quarter.
Combined net sales amounted to SEK 5,447 million (5,609) in the quarter, with total growth of -2.9 percent adjusted for calendar effects. The corresponding figure for full year 2019 ended at 5.3 percent, while the formal reported growth was 41.6 percent. In the quarter, both the Infrastructure and Process Industries Divisions delivered positive organic growth while Industrial & Digital Solutions had negative growth due to the lower volume in the automotive segment. The Energy Division had negative growth caused by the ongoing repositioning as well as one large EPC project reaching its final stage and generating less revenue compared to the previous year. The Management Consulting Division was negatively affected by normal volatility arising from success fees.
In the quarter, we delivered improved earnings with combined EBITA, excluding items affecting comparability, amounting to SEK 516 million (492) and the corresponding EBITA margin to 9.5 percent (8.8). The corresponding full-year number for EBITA was 1,809 (1,716) and the EBITA margin was 8.7 percent (8.7). Performance improved compared to the previous quarter in all divisions and there were strong contributions from the cost synergy program.
Continued focus on efficiency and cost optimisation
In 2019, the cost synergy program delivered SEK 218 million in run-rate savings, above our target of SEK 180 million. In 2020, we will continue to take cost optimisation and efficiency measures with a target of an additional SEK 120 million in run-rate savings. In parallel, we are driving an investment programme to improve our system platform, including implementing a new ERP system. Increased costs due to the investment programme is estimated to have a negative impact on profitability in 2020 by SEK 50-70 million.
The repositioning costs of the Energy Division amounted to SEK 105 million in the quarter, compared to the range of SEK 130-150 million that was announced earlier.
Focus on growth in all divisions
During the quarter, we signed several contracts. I wish to highlight the assignment with Oatley in the Netherlands to deliver two new process plants and the engineering assignment for a new renewable production unit for St1 in Sweden.
In Infrastructure, the general demand in our core markets continues to be solid. The quarter was affected by our transportation segment where some projects were closed with lower profitability than expected. Activity continues to be on a high level.
In Industrial & Digital Solutions, volumes were lower compared to the same quarter last year mainly driven by lower activity in the automotive segment. As a consequence, the division has focused on efficiency and ongoing cost measures. However, the volumes have stabilised compared to the previous quarter and we continue to see good demand in food & pharma as well as the defence industry.
The Process Industries Division continued to perform well in the quarter, supported by megatrends where bio-based material is replacing fossil-based materials. The overall market outlook for the division has been good although some slowness in taking decisions on large investments has been seen.
In the quarter, the Energy Division continued to integrate operations and focus on executing the repositioning as planned. Demand improved in the quarter, particularly in the nuclear segment. There have been some delays in investment decisions, but future growth opportunities remain strong.
Management Consulting’s key markets have remained consistently stable. The most important drivers continue to be high business transaction volume in all sectors as well as the ongoing transition of the energy sector.
Strengthened position in 2020
The integration of Pöyry has been successful with cost synergies exceeding the target. We have strengthened our competitive position with a continued focus on efficiency in all divisions. We are focused on driving organic growth, and based on our strengthened balance sheet, we have the capability to ramp up acquisitions.
In November, we launched AFRY, our common brand, which reflects our position as a leading engineering and design company with focus on sustainable solutions.
We are now leaving 2019 behind us with a strong fourth quarter and we look forward to an exciting new year, ready to meet our clients’ needs and to continue pursuing profitable growth.
ÅF Pöyry AB (publ), SE-169 99 Stockholm, Sweden
Visitors’ address: Frösundaleden 2, 169 70 Solna, Sweden
Tel. +46 10 505 00 00 Fax +46 10 505 00 10
www.afry.com / email@example.com
Corporate ID number 556120-6474
This report has not been subjected to scrutiny by the company’s auditors.
This information fulfils ÅF Pöyry AB’s (publ) disclosure requirements under the provisions of the EU’s Market Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for publication through the agency of the contact person set out above at 08.00 CET on 7 February 2020.
All assumptions about the future that are made in this report are based on the best information available to the company at the time the report was written. As is the case with all assessments of the future, such assumptions are subject to risks and uncertainties, which may mean that the actual outcome differs from the anticipated result.
This is a translation of the Swedish original. The Swedish text is the binding version and shall prevail in the event of any discrepancies.
The full report including tables (pdf) is available for download.
Link to press-images
For further information:
Jonas Gustavsson, President and CEO, +46 70 509 16 26
Juuso Pajunen, CFO, +358 10 33 26 632