24.10.2019

Profit growth continues at Alimak

Swedish based mast climber, hoist and suspended building maintenance platform manufacturer Alimak has reported a mixed third quarter in terms of revenues and order intake, but managed to generate substantially higher profit levels.

Group revenues for the nine months to the end of September improved nine percent to Sk3.44 billion (€323 million) although order intake fell three percent to Sk3.29 billion (€309 million). However pre-tax profits jumped 47 percent to Sk404.6 million (€37.9 million), thanks to improved margins and lower operating expenses, although some of the improvement is down to a restatement of currency gains and losses. Net debt at the end of the period was seven percent lower at Sk1.68 billion (€157 million)

Nine month revenues at the Construction division were 13 percent higher at Sk609.4 million (€57.2 million), while operating profits jumped 35 percent to Sk99.5 million (€9.3 million) an increase of 35 percent on last year. Third quarter revenues dropped 26 percent to Sk130.7 million (€12.3 million), with order intake down 10 percent, this due to lower sales in the UK and Nordic countries and a shift away from sales to rental as economic uncertainty takes hold.

The Industrial division had nine month sales seven percent higher at Sk1.6 billion (€150 million) while operating profits jumped 93 percent to Sk83 million (€7.8 million). Third quarter revenues were marginally lower on the year at Sk534.9 million (€50.2 million), with order intake falling 11 percent to Sk523.4 million (€49.1 million) – due mostly to a sharp fall in demand from the wind power industry for internal access hoists etc.., however, operating profits leapt 80 percent to Sk32.3 million (€3 million).

The group’s rental division reported nine month revenues of Sk289.9 million (€27.2 million) up 11 percent on last year, while operating profits were five percent higher at €99.6 million (€9.3 million).

After sales revenues for the nine months were seven percent higher at Sk947 million (€88.8 million) while operating profits were four percent higher at Sk252.9 million (€23.7 million).

Chief executive Tormod Gunleiksrud said: “During the third quarter of 2019, the trends and developments from earlier this year have continued. We are seeing the fruits from our integration efforts of the Wind and BMU businesses with improving margins in Industrial Equipment and increased penetration and growth within After Sales in these segments. However, the Wind business unit, which forms part of Industrial Equipment, is facing lower orders for tower internal equipment which will have an impact on orders and revenue throughout the year. The service lift and ladder parts of the Wind business continued to perform well and we are evaluating further measures to mitigate the changed market conditions for tower internals since we will not participate in price competition on more commoditised, low margin products as highlighted after Quarter 1.”

“Furthermore, investment willingness within the construction market is affected by outlook concerns – especially noticeable in the UK and the Nordics and market conditions have not improved in the quarter. All above are reflected in the financial results for the quarter where order intake decreased by 6% to MSEK 1,039 (1,104) with an organic decrease of 9%. Revenue decreased by 1% to MSEK 1,084 (1,099) with an organic decrease of 5% despite a strong quarter for After Sales. EBITA adj. for the quarter amounted to MSEK 152 (136), corresponding to a margin of 14.0% (12.4). We continuously improve our margin and earnings and the quarter included a 45% increase of EPS.”

"Construction customers cautious on new capex Following a strong Q1 and solid Q2, the market uncertainty took its toll in Q3 for Construction Equipment. Our customers invest in new equipment when they need to replace old ones early in the business ycle and to meet their long-term needs. However, when there is uncertainty for the future, our customers are less likely to invest in new equipment even though the construction activity remains high. We see proof that the latter still is valid by the continued growth in business area Rental. Gaining a good foothold in After Sales As construction customers’ fleet utilisation decreases, so does the demand for accessories for construction products, which can be seen in the order volume for After Sales. Given this development in the construction market, I am pleased with After Sales on all metrics. The underlying performance shows that we are developing the BMU After Sales business at a good pace which is satisfying. We are well on our way to develop another stable revenue stream in our most resilient business area."

"So, while we are facing market uncertainties in some areas, I still believe that the margin run-rate target in Q4, although challenging, can be reached."

Vertikal Comment

It looks as though Alimak is now digesting the splurge of acquisitions that it made in 2016 – including Avanti, and Façade Access made up of Cox Gomyl and Manntech - which effectively doubled its revenues. While order intake may be slipping the group still has plenty of gains to go after and is a great mire diversified that it was when the recession hit in 2008.
These results appear to paint a similar story to that of other third quarter numbers, which is that while business remains OK there are clear signs of slower growth, currently caused by uncertainty, but such uncertainties can quite quickly become self-fulfilling as the knock on effects are felt over an increasing range of market sectors.

That said this is a very positive result from Alimak.