Company Presentation
November 2020
Introduction to Ferronordic
Overview
Russia/CIS
- Dealer of Volvo Construction Equipment
- Dealer of Terex, Dressta, Rottne and Mecalac
- Aftermarket dealer for Volvo Trucks and Renault Trucks in parts of Russia
- Sales of new and used construction equipment
- Service and technical support
- Sales of used trucks
- Growing contracting services business
- CIS markets currently include Kazakhstan2) from Q1 2019
Germany
- Dealer of Volvo Trucks and Renault Trucks in parts of Germany from January 2020
- Sales of new and used trucks
- Service and technical support
Group
- Founded in 2010
- Listed on Nasdaq Stockholm since 2017
Development
2010 (start) | Q3 2020 | |||
Employees | ~160 | 1,387 | ||
Revenue (SEKm)1) | 1,184 | 4,410 | ||
Outlets | 6 | 95 | ||
New machine revenue by customer type (2019, Russia/CIS)
Quarries & | Oil & Gas |
5% | |
Aggregates | Mining |
12% | |
23% |
Road
Construction
18%
General | |
Construction and | |
Forestry | Other |
14% | 28% |
1) | Annualized. | 2 |
2) | In Kazakhstan Ferronordic is a dealer of Volvo CE and Mecalac from January 2019. | |
Value pyramid
3
Russia/CIS: Vast market with long term potential
Russia at a glance | Russia's GDP development5) |
- Population: ~144 million1)
- Area: 16.4 million sq. km1)
- Rich in oil and minerals
- World's largest forest land
- A significant portion of the Federal Government income relates to oil and gas
- Strong balance sheet and approx. USD 583 billion2) in international currency reserves and gold
- 12.5% government debt/GDP ratio (nominal 2019)
3,4% | 1,5% | 2,3% | 2,8% | ||||||
1,3% | 1,3% | ||||||||
0,6% | |||||||||
-0,7% | |||||||||
-3,8% | -4,1% | ||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020e | 2021e |
Oil production (% of total)3)
17,9% | ||||||||
12,4% | 12,1% | |||||||
5,9% | 5,0% | 4,2% | 4,0% | 3,7% | 2,0% | |||
USA | Saudi Arabia | Russia | Canada | Iraq | UAE | China | Iran | Kazakhstan |
Natural gas production (% of total)3)
23,1% | ||||||||
17,0% | ||||||||
6,1% | 4,5% | 4,5% | 4,3% | 3,8% | 2,9% | |||
0,6% | ||||||||
USA | Russia | Iran | Qatar | China | Canada | Australia | Norway | Kazakhstan |
Coal reserves (% of total)3)
23,3% | ||||||||
15,2% 13,9% 13,2% | ||||||||
9,9% | ||||||||
3,7% | 3,4% | 3,2% | 2,4% | |||||
USA | Russia | Australia | China | India | Indonesia | Germany | Ukraine | Kazakhstan |
Gold reserves (% of total)4)
20,0%
10,6%
6,4% | 6,0% | 5,2% | 4,8% | 4,2% | 4,0% |
2,0% |
Australia | Russia | South Africa | USA | Indonesia | Brazil | Peru | China | Kazakhstan |
Sources: 1) World Bank 2) Russian Central Bank 3) BP Statistical Review of World Energy, June 2020 4) US Geological Survey, Mineral Commodity Summaries, February 2020 5) Including IMF, World Bank and OECD (October 2020) | 4 |
Significant need to improve infrastructure
Road density in Russia and Kazakhstan is low
Road density (km road per 100 sq. km land area)1) | 180 | 192 | |||||||||||
172 | |||||||||||||
129 | 132 | ||||||||||||
67 | |||||||||||||
23 | 43 | ||||||||||||
4 | 6 | 14 | |||||||||||
Kazakhstan | Russia | Canada | Finland | China | USA | Sweden | Poland | UK | Germany | France |
High need for increased infrastructure investment
Infrastructure spending levels in relation to GDP3)
Rail density is low too
Rail density (km railway per 1,000 sq. km of land area)2) | 122 | |||||||||||||
96 | ||||||||||||||
75 | ||||||||||||||
53 | 61 | |||||||||||||
17 | 20 | 24 | ||||||||||||
5 | 5 | 6 | 7 | |||||||||||
Russia | Canada | Kazakhstan | China | USA | Finland | Sweden | France | Poland | Slovakia | Germany | Czech Rep. |
- Construction equipment market is expected to capitalize on the long-term growth in Russia and Kazakhstan
70 | 5% | | |||||||
60 | 4% | ||||||||
50 | |||||||||
b | 40 | 3% | |||||||
USD | 30 | 2% | |||||||
20 | 1% | ||||||||
10 | |||||||||
| |||||||||
0 | 0% | ||||||||
2015 | 2016 | 2017 | 2018 | 2019e | 2020e | 2021e | 2022e | ||
Prevailing investment level | Investment gap |
Prevailing investment as % of GDP | Total investment needed as % of GDP |
An important driver will be the need to improve aging infrastructure, the bulk of which was built in the Soviet era and needs to be upgraded
- Russia is ranked 99 out of 141 countries in terms of road quality2)
- Kazakhstan is ranked 93 out of 141 in terms of road quality2)
Signs that the government intends to create economic growth by increased infrastructure spending
Sources: 1) World Bank 2) Global Competitiveness Report 2019 3) Global Infrastructure Outlook, World Bank, Company estimates. | 5 |
National Projects
Environment
[USD 64 bln]
Healthcare
[USD 27 bln]
| Designed to transform the economy and | ||||||
promote economic growth | |||||||
| Recently signed July Decree is extending | ||||||
Demography | the terms of achieving the plan from 2024 | ||||||
to 2030 and updating the previous platform | |||||||
[USD 49 bln] | 2% | | Detailed program prepared and is to be | ||||
Roads | |||||||
14% | approved by the President | ||||||
[USD 75 bln] | |||||||
Almost half of the budget earmarked for | |||||||
National | | ||||||
infrastructure, including the road network | |||||||
Projects | 20% | USD 175 bln | 63% | | Planned investment into roads and | ||
[USD 400 bln] | infrastructure amounts to approx. 10% of | ||||||
Infrastructure | GDP | ||||||
Housing, | [USD 100 bln] | | Aim to transform regional roads to improve | ||||
links between Russian cities | |||||||
trade, digital | |||||||
economy and | The railway program includes | ||||||
others | | ||||||
[USD 90 bln] | high-speed rail and increase of the freight | ||||||
Roads | Railways | Waterways | Airports | capacity between key logistical hubs | |||
| Waterways development plan aims at | ||||||
growing sea port capacity and developing | |||||||
the Northeast Passage |
Source: The Russian Government. | 6 |
Pent-up demand
Import of construction equipment to Russia (units)
Young market - sales of high-quality construction equipment only took off 2006/2007
21 009 | 20 573 |
Import of high-quality brands
gains momentum
18 627
17 489
13 525 | 13 568 | Market starts to recover | |
after 2014-2015 economic | 11 766 | ||
downturn | |||
10 310 | 10 296 |
8 004 | 8 426 | ||||||||||||||||||||||||||||||||||||
Mainly local machines of | |||||||||||||||||||||||||||||||||||||
lower quality | |||||||||||||||||||||||||||||||||||||
4 436 | 3 573 | 4 354 | |||||||||||||||||||||||||||||||||||
2 655 | |||||||||||||||||||||||||||||||||||||
1 685 | 1 649 | ||||||||||||||||||||||||||||||||||||
1 131 | |||||||||||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | LTM | ||||||||||||||||||||
Import of construction equipment to Russia (units) | |||||||||||||||||||||||||||||||||||||
Source: Russian import statistics (until August 2020) compiled by Volvo CE. | 7 |
Note: Excluding Chinese brands, bulldozers, rigid dump trucks and forestry machines. |
Germany - Europe's largest truck market
Heavy truck registrations in Germany (units)
80 000 |
70 000 |
60 000 |
50 000 |
67 797 | 66 441 | 68 450 | |
65 280 | |||
60 218 | 61 940 | ||
58 574 | |||
55 167 | 55 215 |
48 827
115 | ||
70 264 | 110 | |
105 | ||
49 878 | 100 | |
40 000 |
30 000 |
20 000 |
10 000 |
0 |
40 322
95
90
85
80
75
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | LTM |
Heavy truck registrations | Average truck toll mileage index* | |||||||||||
Source: Germany registrations data compiled by Volvo Trucks (until September 2020). Federal Statistical Office Germany (Destatis). | 8 |
* Truck toll mileage index is a fixed base index that traces the development of the mileage of heavy trucks (with four or more axles) on German federal motorways and is calculated from digital process data from the truck toll collection system. |
Strategic objectives
Leadership within the | Expansion into related | |
market for construction | business | |
equipment and trucks | areas | |
Aftermarket absorption
rate of at least 1.0 x
Further development of
Geographic expansioncontracting services
9
Strategic cornerstones
CUSTOMER ORIENTATION
- Customer centricity
- Leading service and product availability
- Tailored customer solutions (including contracting services)
- Financial services offerings
- Developed trade-in system
- Fleet and residual value management
BUILD ON STRONG BRAND - VOLVO
- World leading manufacturer of trucks and construction equipment
- Leading brand position in Russia
- Development through additional strong brands
GREAT TEAM
SUPERIOR INFRASTRUCTURE
- High density network - many points of presence
- Mobile workshops and service vans/trucks
- Well equipped, purpose-build facilities in select locations
- Infrastructure to be used for all brands and business areas
OPERATIONAL EXCELLENCE
- Strong teams and high employee engagement
- Safety and sustainability
- Continuous improvement of practices and processes
- Business driven digitalisation solutions
- Close cooperation with manufacturers
10
UN Sustainable Development Goals
- Anti-corruptionprogram consisting of policies, procedures, trainings and zero tolerance policy
- Code of Conduct
- Swedish Corporate Governance Code
- Minimum emissions and waste
- High-quality,long-life,fuel-efficient machines
- Maximizing uptime for efficient production
- Recycling (Component rebuild
center)
- Customer support, training and contracting services for most efficient use
- Zero injury objective
- 6,810 hours invested in Health & Safety trainings
- 57,000 hours of training and development
- Equal opportunities employer: proportion of women in management positions increased from 13% to 17%
- Contributing to economic growth and social development
- Contributing to employment in remote regions
- Providing service and equipment for building critical infrastructure
11
Strategic development
2010-2013: Phase I - establishing
platform
12 outlets | 75 outlets | |
326 FTEs | 731 FTEs | |
2 421 | 2 403 | 2 483 | |||||||||
1 1841) | |||||||||||
3.9% | 3.6% | ||||||||||
2.8% | |||||||||||
2010 | 2011 | 2012 | 2013 | ||||||||
Revenue (SEKm) | Operating margin2) |
- Processes and procedures established
- Establishment of countrywide platform
- Building market awareness and market share
2014-2016: Phase II - streamlining
to handle market decline
75 outlets | 73 outlets | |
767 FTEs | 782 FTEs | |
2 335
1 658
1 469 7.9%
5.9%
4.4%
2014 | 2015 | 2016 | |
Revenue (SEKm) | Operating margin2) | ||
- Increased aftermarket focus
- Reduction of unprofitable outlets
- NWC efficiency focus
- Adding brands and services
2017 and onwards: Phase III - leveraging market recovery and company
maturity
74 outlets | 79 outlets | 92 outlets | 95 outlets | |||||||||||
847 FTEs | 1,032 FTEs | 1,239 FTEs | 1,387 FTEs | |||||||||||
4 410 | ||||||||||||||
3 747 | ||||||||||||||
3 241 | ||||||||||||||
2 567 | ||||||||||||||
9.5% | ||||||||||||||
8.4% | 8.1% | |||||||||||||
7.3% |
2017 | 2018 | 2019 | LTM | ||
Revenue (SEKm) | Operating margin | ||||
Digitalisation | Growing | Continued | |||
contracting | aftermarket | ||||
focus | |||||
services | focus | ||||
Leveraging | High market | Expansion of | |||
geography and | |||||
existing | |||||
potential | customer | ||||
organization | |||||
offering | |||||
1) Annualized 2) 2011-2016 refer to adjusted EBIT, i.e. operating profit excluding amortization of transaction-related intangible assets and write-downs of non-current assets in Q4 2016. | 12 |
Product offering
Brand
Volvo CE
Volvo & Renault | Volvo & Renault | |
Trucks | Trucks |
Gensets Dressta Rottne
Mecalac
Example Area Product Year product
2010 (Russia)
2019 (Kazakhstan)
Full VCE range
All of Russia &
Kazakhstan
~57% of 9M 2020
revenue
2020
Full Volvo &
Renault Trucks
range
~20% of German market for heavy trucks
~22% of 9M 2020
revenue
2012
Aftermarket
11 locations in
Russia
2014 | 2016 | 2016 | ||
Own labelled | Bulldozers and | Forwarders and | ||
diesel generators | ||||
pipe layers | harvesters | |||
(gensets) | ||||
All of Russia | All of Russia | All of Russia | ||
~12% of 9M 2020 revenue
2017 (Russia)
2019 (Kazakhstan)
Backhoe loaders
All of Russia &
Kazakhstan
13
Russia and Kazakhstan coverage
Murmansk | ||||||||
Kirovsk | ||||||||
St .Petersburg | Petrozavodsk | |||||||
Velikiy Novgorod | Arkhangelsk | |||||||
Cherepovets | Vologda | Karpogory | ||||||
Smolensk | Tver | |||||||
Velsk | ||||||||
Kaluga | Moscow | Yaroslavl | Koryazhma | Vorkuta | ||||
Sharya | Syktyvkar | |||||||
Belgorod Tula | Ryazan | Kirov | ||||||
Voronezh | N.Novgorod | Cheboksary | ||||||
Saransk | ||||||||
Rostov-on-Don | Kazan | Perm | Sovetskiy | |||||
Naberezhnye | ||||||||
Krasnodar | Chelny | Samara Ufa | Berezovskiy | |||||
Armavir | Ekaterinburg | |||||||
Tyumen | ||||||||
Mineralnye Vody | Chelyabinsk | |
Orenburg | Varna | |
Makhachkala | ||
Novotroitsk | ||
Aktobe | ||
Karaganda |
Almaty
Norilsk
Labytnangi
Noviy Urengoy
Udachniy
Surgut
Kyumba | |||
Tomsk | Ust-Ilimsk | Vysochaishy | |
Kemerovo | Bratsk | ||
Belovo Krasnoyarsk
Chita
Egvekinot
Yagodnoe
Ust-OmchugMagadan
Mar-Kuel
Aldan
Elga
Neryungri
BlagoveshchenskYuzhno-Sakhalinsk
Khabarovsk
Artyom
(84) Ferronordic outlets in Russia and Kazakhstan as of September, 2020
14
Germany coverage
Ferronordic expanded to become dealer for Volvo and Renault Trucks in Germany in January 2020
Germany is Europe's largest trucks market with 70,000 registrations in 2019
Ferronordic's sales area covers approx. 20% of the German market for heavy trucks
The area includes some of the busiest and
most developed parts of Germany, like Hannover and Frankfurt Rhine-Main, the second largest metropolitan region in the country
It also includes a large part of Eastern Germany with fast growing cities, like Leipzig and Dresden
(11) Ferronordic outlets in Germany as of September, 2020
15
Moving towards further customer integration
Complexity of customer demand
Ferronordic offering
16
Aftermarket focus
Share of sales (9M 2020) - Russia/CIS | Share of sales (9M 2020) - Germany | |
Contracting services | Other 1% | Other 8% |
12% | ||
Aftermarket | Aftermarket | |
24% | 28% | |
Machine sales | Truck sales | |
62% | 65% |
1 000 | Aftermarket sales (SEKm) |
900 | |
800 | |
700 | |
600 | |
500 | |
400 | |
300 | |
200 | |
100 |
0
2015 | 2016 | 2017 | 2018 | 2019 | 9M 2020 |
Russia/CIS | Germany |
Aftermarket sales
- Proactive customer coverage based on real-time data from the existing machine population
- Proprietary system transforms machine telematic signals (e.g. VCE's CareTrack) into sales leads on the mobile devices of sales and service staff
- Ferronordic's presence in all Russian regions allows for fast delivery of parts and timely customer support
Offering
- Spare parts delivery
- Telematics - through Care-Track; fuel efficiency control, operator efficiency, fleet management
- Operator training
- Preventive maintenance service
- Planned and unplanned repair
- Overhaul
- Providing new life to older machines
- Diagnostics of machines
- Remanufacturing of vital parts
17
Focus on connectivity and digitalisation to grow sales
We are in the forefront of using a system that utilizes telematics systems to maximize sales and increase customer satisfaction and fleet efficiency
18
Contracting services
Integrating with our customers
Parts Machine
Traditional method | Outsourcing method: | |
Contracting services | ||
• | Part of strategy of becoming increasingly integrated |
in the business of our customers | |
• | In addition to supplying and maintaining machines, |
we provide customers with operators to carry out | |
specific works | |
• | Current projects cover excavation and |
Payments Operators Service
or the customer
or the customer
Provided
by:
The customer
Cost of machine, parts
and service
Provided
by:
Volume based (per tonne,
cubic meter, etc.)
transportation of earth and rock for mining | |
customers | |
• | Payment is based on volume of earth and rock |
transported | |
• | Common in other parts of the world but relatively |
undeveloped in our markets. We believe demand | |
may grow | |
• | Machines used by contracting services are on |
Ferronordic's balance sheet (PP&E) | |
• | Contracting services projects should be ROIC |
accretive to Ferronordic |
19
Contracting services - case study
Client: GV Gold, top 10 gold mining company in Russia
Location: Irkutsk region, Golets Vysochaishy, Vysochaishy mine
Project staff: 173 people (as at end of September 2020)
Fleet size: 43 units (35 haulers, 1 grader, 7 excavators)
20
Machine and component rebuild center
- Opened in Ekaterinburg in Q4 2019
- Capacity expansion launched in Q3 2020
- Rebuild of used machines
- Rebuild of engines and gearboxes for Volvo CE and Volvo and Renault Trucks
- Chop-offand recycling of parts
- Components to be resold to customers with a warranty from Ferronordic or installed in used machines in "Volvo Certified Rebuild" program
- Part of the center's capacity is expected to be used by Ferronordic's contracting services business
- Recycling of used equipment, broader product offering, and increased local market access
21
Volvo and Renault Trucks Russia
- Authorised aftermarket dealer for Volvo and Renault Trucks in parts of Russia
- Currently operating in 11 locations
- Network capacity utilization
- Cross-sellingand customer service
- Used trucks business launched in 2019
- Purchasing, restoring and selling used trucks
- Mainly Volvo and Renault Trucks
- Small scale but with potential to grow
- 48 units sold in 9M 2020
- Potential synergies with Germany
22
Volvo and Renault Trucks Germany
- Authorised dealer for Volvo Trucks and Renault Trucks in parts of Germany
- Ferronordic services and sells Volvo and Renault trucks, trades and restores used trucks and manages a trucks rental business
- Ferronordic will invest to grow and improve network in area
- Plan to apply Ferronordic's business model to grow revenue and profitability
- Opportunities to grow Volvo and Renault Trucks market shares and increase share of aftermarket sales and improve profitability
- 259 employees in Ferronordic Germany; mostly sales representatives and mechanics
23
Russia/CIS: Strong resilience and growth in market with upside
450% | ||||||||||
400% | 425% | |||||||||
350% | 381% | |||||||||
300% | ||||||||||
291% | ||||||||||
in 2011 | 250% | |||||||||
200% | ||||||||||
= 100 | ||||||||||
199% | 155% | 151% | ||||||||
Index | 134% | |||||||||
150% | ||||||||||
113% | 110% | 109% | 140% | 106% | ||||||
92% | ||||||||||
100% | ||||||||||
99% | 103% | 96% | 69% | 63% | ||||||
100% | 61% | 55% | 55% | |||||||
95% | 73% | 45% | ||||||||
50% | 71% | |||||||||
19% | 23% | |||||||||
0% | ||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | LTM |
Market (units)1) | Operating profit (SEK)2) | Revenue (SEK) | ||
1) | Source: Russian import statistics (until August 2020) compiled by Volvo CE. | 24 |
2) | 2011-2016 refer to adjusted EBIT, i.e. operating profit excluding (i) amortization of transaction-related intangible assets and (ii) write-downs of non-current assets in Q4 2016. | |
Development of revenue and operating profit
Revenue | Operating profit and operating margin1) |
5 250
4 500
3 750
3 000
SEKm
2 250
1 500
750
0
4 410 | |
3 747 | 749 |
3 241 | ||
2 567 | ||
1 658 | 3 661 | |
1 469 | ||
2015 | 2016 | 2017 | 2018 | 2019 | LTM |
400 | 20% | ||||||
358 | 358 | ||||||
350 | |||||||
300 | 274 | 15% | |||||
250 | |||||||
SEKm | 200 | 187 | 9,5% | 10% | |||
8,4% | |||||||
132 | 8,1% | ||||||
7,3% | |||||||
150 | |||||||
87 | 7,9% | ||||||
100 | 5,9% | 5% | |||||
50 | |||||||
0 | 0% | ||||||
2015 | 2016 | 2017 | 2018 | 2019 | LTM |
Russia/CIS Germany
1) 2015-2016 refer to adjusted EBIT, i.e. operating profit excluding amortization of transaction-related intangible assets and write-downs of non-current assets in Q4 2016. | 25 |
Cash flow and capital allocation
Working capital development | Net debt/(cash) development |
800 | 675 | 734 | 660 | 25% | |||
700 | |||||||
20% | |||||||
600 | |||||||
20% | 476 | ||||||
500 | 18% | 15% | |||||
SEKm | 354 | ||||||
400 | |||||||
13% | 10% | ||||||
300 | |||||||
10% | |||||||
200 | 8% | 5% | |||||
100 | |||||||
0 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | 0% | |
NWC | NWC as % of LTM revenue* |
SEKm
600 | 593 | 531 | ||||
500 | 411 | |||||
400 | ||||||
300 | 230 | |||||
200 | ||||||
100 | 83 | |||||
0 | ||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||
Capital expenditure development | Comments |
200 | 187 | 173 | 10% | • | ||||
175 | 165 | • | ||||||
150 | 8% | |||||||
150 | • | |||||||
125 | 5% | |||||||
SEKm | 96 | |||||||
100 | 3% | 3% | 5% | • | ||||
3% | ||||||||
75 | 3% | |||||||
3% | • | |||||||
50 | ||||||||
25 | ||||||||
0 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | 0% | • | |
LTM capex | LTM capex as % of LTM revenue* | • |
Focus on working capital efficiency and return on invested capital Asset light core business. Contracting services more capital intense
Increased working capital in 2019 mainly due to inventory build-up, partly due to transition to take over importation from Volvo
Working capital and net debt decline during 9M 2020
Capex increase in 2019 and 2020 mainly driven by investment in machines for contracting services and expansion to Germany in Q4 2019
IFRS 16 lease liabilities of SEK 82m as at Q3 2020 Net debt/EBITDA at 0.2 x as at Q3 2020
* LTM revenue for Germany annualized. | 26 |
Return on capital employed | ||
48% | ||
• Decline in 2019 related to working | ||
43% | capital build-up and IFRS 16 | |
• German expansion added assets at | ||
38% | end of 2019 | |
• 9M 2020 includes negative | ||
33% | contribution from Germany | |
28% | ||
23% | ||
18%
13%
8%
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 |
14 | 14 | 14 | 14 | 15 | 15 | 15 | 15 | 16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 18 | 18 | 18 | 18 | 19 | 19 | 19 | 19 | 20 | 20 | 20 |
Return on capital employed1)
1) Operating profit plus financial income (LTM) in relation to capital employed (equity and interest-bearing liabilities) (average LTM) | 27 |
Note: 2014-2016 refer to adjusted EBIT, i.e. operating profit excluding amortization of transaction-related intangible assets and write-downs of non-current assets in Q4 2016. |
Record result and strong cash flow
Strong unit sales growth despite lower market in Russia/CIS
Organic sales growth partly hidden by weaker ruble
Solid operating profit due to revenue mix and cost control
Unit sales in Germany flat as market remained weak
Strong cash flows and lower net debt
EGM approved SEK 4.25 per share dividend payout
17% | 1% | 9.5% | 9% |
revenue increase | operating profit | operating margin | EPS increase |
decline |
28
Q3 2020 Income statement
Q3 2020 | % | ||||
Q3 2019 | Russia / | Q3 2020 | Q3 2020 | change | |
SEK MM | Group | CIS | Germany | Group | Group |
New units sold | 242 | 292 | 151 | 443 | 83% |
Revenue | 964 | 900 | 229 | 1,129 | 17% |
Gross Profit | 206 | 199 | 23 | 221 | 7% |
% Margin | 21.4% | 22.1% | 9.8% | 19.6% | -1.8pp |
Operating profit | 109 | 124 | -17 | 107 | -1% |
% Margin | 11.3% | 13.8% | -7.3% | 9.5% | -1.8pp |
Result | 74 | 81 | 9% | ||
EPS | 5.09 | 5.57 | 9% | ||
EBITDA | 150 | 155 | -8 | 147 | -2% |
- Total revenue of SEK 1,129m
- 80% Russia/CIS and 20% Germany
- 62% Equipment and trucks, 26% aftermarket and 11% contracting services
- Gross margin declined 1.8pp to 19.6% mainly on consolidation of Germany
- SG&A in Russia/CIS declined 19% Y-o-Y and 3% Q-o-Q
- Group SG&A expenses as share of revenue were 10.3% in Q3 2020 vs.10.0% in Q3 2019
- Operating margin stood at 9.5% despite negative contribution from Germany
- Operating profit decreased 1% to SEK 107m
- Lower financial costs on lower net debt
- Record net income
29
Revenue and margin development
- LTM revenue in Russia/CIS decreased to SEK 3.7b, mainly due to depreciation of RUB against SEK by 23%
- Revenue from German operations contributed an incremental SEK 229m in Q3 and SEK 749m in 9M 2020
- Q3 2020 consolidated gross margin declined by 1.8pp Y-o-Y to 19.6%
- Q3 2020 consolidated operating margin1) declined by 1.8pp to 9.5%, mainly due to -7.3% negative margin contribution from Germany as the Russia/CIS margin reached 13.8%
4500 | Revenue trends | |||||||||||||||||
4000 | ||||||||||||||||||
3500 | ||||||||||||||||||
3000 | ||||||||||||||||||
2500 | ||||||||||||||||||
2000 | ||||||||||||||||||
1500 | ||||||||||||||||||
1000 | Revenue Russia/CIS (Rolling 12 months) | |||||||||||||||||
500 | ||||||||||||||||||
Revenue Consolidated (Rolling 12 months) | ||||||||||||||||||
0 | ||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 |
16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 18 | 18 | 18 | 18 | 19 | 19 | 19 | 19 | 20 | 20 | 20 |
25% | Margin trends | |||||||||||||||||
20% |
15%
10%
5% | |||||||||||||||||||||
Gross margin Russia/CIS | Operating margin Russia/CIS | ||||||||||||||||||||
0% | Gross margin Group | Operating margin Group | |||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | |||
16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 18 | 18 | 18 | 18 | 19 | 19 | 19 | 19 | 20 | 20 | 20 |
1) 2016 refer to adjusted EBIT, i.e. operating profit excluding amortization of transaction-related intangible assets and write-downs of non-current assets in Q4 2016. | 30 |
Development of cost and return on capital employed
- LTM SG&A expenses to revenue were up by 0.4pp Y-o-Y to 10.5% and were flat Q-o-Q
- LTM SG&A expenses to revenue in Russia/CIS decreased 0.3pp Y-o-Y and Q-o-Q to 9.8%
- In Germany SG&A to revenue increased to 16.8% in Q3 2020, partly on restructurings, and stood at 14.2% in 9M 2020
- ROCE1) was 25% in Q3 2020
- Decline in ROCE in 9M 2020 mainly related to higher capital employed and operating loss in Germany
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
50%
45%
40%
35%
30%
25%
20%
15%
10%
SG&A development
LTM S,G&A Expenses to Revenue
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 |
16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 18 | 18 | 18 | 18 | 19 | 19 | 19 | 19 | 20 | 20 | 20 |
ROCE1)
Return on capital employed Russia/CIS | Return on capital employed Group | |||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | ||||
16 | 16 | 16 | 16 | 17 | 17 | 17 | 17 | 18 | 18 | 18 | 18 | 19 | 19 | 19 | 19 | 20 | 20 | 20 |
1) Operating profit plus financial income (LTM) in relation to capital employed (equity and interest-bearing liabilities) (average LTM) | 31 |
Note: 2016 refer to adjusted EBIT, i.e. operating profit excluding amortisation of transaction-related intangible assets and write-downs of non-current assets in Q4 2016. |
Q3 2020 Balance sheet
30 | 30 | 30 | |
SEK MM | September | June | September |
2019 | 2020 | 2020 | |
Property, plant & | 519 | 582 | 515 |
equipment | |||
Cash & cash equivalent | 210 | 733 | 539 |
Debt | 397 | 749 | 443 |
Lease liabilities | 224 | 214 | 179 |
Net Debt / (Cash) | 411 | 230 | 83 |
Working capital | 675 | 476 | 354 |
% of Revenue | 18% | 10% | 8% |
Shareholder equity | 837 | 883 | 848 |
Total Assets | 2,343 | 2,975 | 2,552 |
Equity / Assets | 36% | 30% | 33% |
- PP&E decreased Q-o-Q on depreciation and negative forex translation
- Russia/CIS
- Working capital decreased from SEK 400m to SEK 286m Q-o-Q on forex and lower inventory
- Net cash attributable to Russia/CIS increased from SEK 47m to
SEK 205m Q-o-Q
- Germany
- Working capital decreased from SEK 75m to SEK 67m Q-o-Q on lower inventory and receivables
- Net debt in Germany increased from SEK 280m to SEK 291m Q-o-Q
- Working capital at 8% of LTM revenue (annualized for Germany) vs 18% in Q3 2019
- Net debt decreased to SEK 83m and net debt/EBITDA decreased to 0.2x
32
Financial objectives and dividend policy
KPI | Objective | Q3 2020 LTM |
Revenue | Triple 2016 revenue in | 2.2 x |
Russia/CIS by 2021 | 2016 revenue | |
Operating margin | 6-8% | 8.1% |
Net Debt / EBITDA | 0-2 x | 0.2 x |
• Ambition to distribute at least 25% of the result to shareholders | ||
Dividend Policy | • Board takes several factors into consideration when proposing | |
the dividend level, including expansion opportunities, financial | ||
position and investment needs | ||
33
OUTLOOKOutlook- CEO COMMENT
"The outbreak and the measures to contain the spread of COVID-19 have caused great uncertainty across our markets. For the rest of 2020 and parts of 2021, we may face various degrees of disruption in supply, demand and customer interfacing.
In October, the business trends seen in Q3 2020 have continued. Our business adapted well to the challenges related to COVID-19. As cases again pick up and restrictions are reintroduced, we recognise that the future remains uncertain and visibility is low. Currently, we however expect the markets in Russia/CIS and Germany to start to recover next year. In a longer perspective, we are also positive as we believe that the underlying fundamentals and business opportunities in our markets are strong."
34
Ferronordic in the capital market
2010 | 2011 | 2013 | 2017 | |||
Volvo CE Russian | 3-year SEK 400m bond | SEK 500m preference | Ordinary shares listed | |||
distribution business | issued and listed on | shares issued and listed | on Nasdaq Stockholm | |||
was taken over | Nasdaq Stockholm | on Nasdaq First North | and SEK 200m raised in | |||
Premier | IPO | |||||
Ferronordic statistics
- Shares outstanding: 14,532,434
- Listing: Nasdaq Stockholm
- Market cap. as at 30 September 2020: SEK 2,386m
- Net debt as at 30 September 2020: SEK 83m
- Enterprise value: SEK 2,469m
- Estimated effective free float: 60%
- Dividend policy: 25% subject to capital allocation alternatives
Analyst coverage
Bank | Analyst | Contact | |
Carnegie | Kenneth Toll | +46 | 734 17 89 11 |
kentol@carnegie.se | |||
ABGSC | Ofelia Aspemyr | +46 | 8 566 286 31 |
Karl Bokvist | ofelia.aspemyr@abgsc.se | ||
+46 | 8 566 286 33 | ||
karl.bokvist@abgsc.se | |||
Nordea | Carl Ragnerstam | +46 | 101 562 817 |
Victor Hansen | carl.ragnerstam@nordea.com | ||
+46 | 101 561 327 | ||
victor.hansen@nordea.com |
35
Worksite Applications_2_Machine Performance 271114
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Ferronordic Machines AB published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2020 09:54:00 UTC