Neles’ Interim Review January 1 – March 31, 2021
Neles Corporation, Stock exchange release, April 27, 2021 at 09:00 a.m. EEST
This is a summary of Neles’ Interim Review for January 1 – March 31, 2021. The complete review is attached to this release and is also available at www.neles.com/results.
January-March in brief
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Orders received grew by 15% compared to the fourth quarter of 2020
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Services and Maintenance, Repair and Operations-driven (MRO) businesses recovered in Q1, and Services orders were at the good 2019 level
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Sales were negatively impacted by delivery delays caused by the temporary supply center closure in Brazil, the timing of backlog deliveries and exchange rate fluctuations
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Profitability was at the comparison period’s level, despite low sales. Cost control continued, and the sales margin was healthy
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Balance sheet further strengthened by the good cash flow
In this Interim Review, a comparable balance sheet and a cash flow statement are disclosed in addition to IFRS financial information. Figures in parentheses refer to the corresponding period of the continuing operations in 2020 unless otherwise stated. Neles Group has been reported as one segment since June 30, 2020.
Summary of key figures
| Operative key figures | 1–3/21 | 1–3/20 | Change, % | 2020 |
|---|---|---|---|---|
| Orders received1 | 153.9 | 190.9 | -19 | 590.1 |
| Order backlog at end of period | 298.4 | 337.4 | -12 | 270.3 |
| Sales2 | 129.1 | 136.8 | -6 | 576.3 |
| Adjusted EBITA, continuing operations | 15.9 | 16.7 | -5 | 85.0 |
| % of sales | 12.3 | 12.2 | 14.8 | |
| Adjustment items 3 | - | 1.3 | 11.3 | |
| Operating profit | 15.1 | 14.5 | 4 | 70.3 |
| % of sales | 11.7 | 10.6 | 12.2 | |
| Earnings per share, continuing operations, EUR | 0.07 | 0.07 | - | 0.32 |
| Free cash flow | 19.6 | -23.9 | - | 68.7 |
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Balance sheet key figures, IFRS |
3/21 | 2020 |
|---|---|---|
| Balance sheet total, EUR million | 675.6 | 643.8 |
| Net debt, EUR million | 63.0 | 81.4 |
| Net debt/EBITDA, rolling 12 months | 0.7 | 0.9 |
| Gearing, % | 25.2 | 30.9 |
| Personnel at end of period | 2,825 | 2,840 |
1 Of which EUR 112.4 (107.4 million) Services and MRO businesses, including EUR 40.5 (37.1) million Services orders. Orders received in comparable currencies declined by 14% in 1–3/2021.
2 Of which EUR 88.4 (94.6 million) Services and MRO businesses, including EUR 31.3 (29.4) million Services sales. Sales in comparable currencies increased by 1% in 1–3/2021.
3 Neles had no adjustment items in 1–3/2021 (EUR 1.3 million in 1–3/2020). See Note 5.
President and CEO Olli Isotalo:
The markets improved faster than expected toward the end of the first quarter. We saw improving activity in our Services and MRO-driven businesses. Services orders are already at the good 2019 level. The MRO-driven business has also improved significantly compared to the previous quarter, although it remains slightly below the pre-Covid-19 pandemic levels. Pulp, paper and bioproduct project activity remained good. We won new Pulp and Paper projects in APAC and booked add-ons to existing projects in EMEIA and South America. Chemicals and Oil & Gas market activity was weak; however, the future project funnel is satisfactory, and we expect orders to recover in the second half of 2021.
Sales in the first quarter were low. This was as expected due to the timing of the deliveries in the order backlog. The challenges caused by the Covid-19 pandemic in our Brazilian operations further deferred sales from the first quarter. We contained the outbreak and managed to reopen our Brazilian supply center, but with restricted capacity, prioritizing the health and safety of our employees. We will catch up with the deferred sales during this year.
During the first quarter, we continued with tight cost control, which supported our profitability despite the low sales. Despite the cost savings and the challenges caused by the Covid-19 pandemic, we were able to progress our strategic development programs. We progressed well in relocating and developing our sales support resources in India. We completed rollouts of our harmonized ERP system in Sweden and Brazil.
As the market situation improves during the coming quarters, we plan to accelerate our strategy execution, with targeted additions in sales and RTD resources.
Market outlook
Market activity in Pulp, Paper and bioproduct projects is expected to continue at a good level.
Market activity in Chemicals and Oil & Gas projects was weak in the first quarter of 2021. The market activity is expected to return to a satisfactory level during the second half of 2021. Postponements of projects and global uncertainties continue to reduce visibility in the Chemicals and Oil & Gas project businesses.
Market activity for the Services and the customer Maintenance, Repair and Operations-driven (MRO) businesses was satisfactory during the first quarter of 2021. These markets are expected to continue to improve, reaching a good level at the latest in the second half of 2021.
The ongoing Covid-19 pandemic continues to create uncertainties and risks of abrupt changes in all markets important for Neles.
The market outlook reflects management’s expectation for the next six months unless otherwise stated.
Covid-19 pandemic update
In 2020, the Services and other MRO-driven businesses were negatively impacted by Covid-19 pandemic-related mobility restrictions and customers’ tight cash management. Especially large maintenance shutdowns were postponed. The global situation in the Services and MRO-driven businesses has been clearly improving in the first quarter of 2021, but uncertainties and risks in certain regions are expected to continue in the first half of 2021.
In the first quarter of 2021, Neles’ Brazilian supply center was temporarily closed due to Covid-19 pandemic cases, which caused delays in deliveries and a reduction in sales in the first quarter. The supply center reopened more quickly than initially expected due to attentive management of the situation. Currently, the facility is operating with limited capacity, prioritizing the health and safety of the personnel. The deferred sales due to the facility’s closure are expected to be recovered during 2021. Neles has operations in several regions where the Covid-19 pandemic continues to cause disruptions. There continue to be risks of similar temporary closures of local Neles operations as those experienced in Brazil.
The global logistics situation continues to be challenging. The risk of delivery delays has increased toward the end of the first quarter.
Since the second quarter of 2020, Neles has taken proactive measures to ensure the safety of employees, control costs and preserve cash flow to protect the company’s financial position. The measures have included a variety of enforced safety procedures at manufacturing sites, remote working, travel restrictions, cuts to external spending across the organization, as well as cost-saving and optimization activities.
Increased attention has also been paid to managing net working capital. There have been no material credit losses or order cancellations.
Audiocast and conference call details
Neles’ President and CEO Olli Isotalo and CFO Simo Sääskilahti will present the financial results in an audiocast and a conference call for analysts and investors today at 2:00 p.m. EEST. The audiocast can be followed at www.neles.com/results. A recording and a transcript will be available at the same webpage after the event has finished.
Conference call participants are requested to dial in five minutes before the event on:
Finland Toll: +358 981710310
Sweden Toll: +46 856642651
United Kingdom Toll: +44 3333000804
United States Toll: +1 6319131422
PIN: 65197572#
Neles Corporation
Simo Sääskilahti, CFO
Rita Uotila, VP, Investor Relations
For more information, please contact:
Rita Uotila, Vice President, Investor Relations, Tel. +358 400 954141, E-mail: rita.uotila@neles.com
Neles is one of the leading providers of mission-critical flow control solutions and services for process industries. With our global team of experts and innovative solutions, we help our customers to improve their process performance and ensure the safe flow of materials. Neles is listed on the Nasdaq Helsinki in Finland and had sales of about EUR 576 million in 2020. Neles employs about 2,850 people in approximately 40 countries.