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Alimak profit boost

Mastclimber and hoist manufacturing and rental group Alimak has reported a strong increase in profitability in its third quarter and year to date results.

Year to date

Total revenues for the nine months to the end of September were SK2.7 billion (€269.8 million) almost four percent down on the same period last year. This was made up of four divisions:
Building Maintenance Units: SK734 million (€73.4 million) +2.7%
Construction SK815 million (€81.5 million ) +8.3%
Industrial SK613 (€61.3 million) -8.7%
Wind SK537 million (€53.7 million) -20%

Order intake for the period was SK2.9 billion (€285.9 million), down two percent on last year, due to lower order levels for both the BMU and Wind divisions, partly offset by significantly higher order intake levels from the Construction and Industrial divisions.

Pre-tax profit for the period jumped 70 percent to $289.4 million (€28.9 million), up 70 percent, entirely due to strong performances from the Construction and Industrial operations, although the BMU division turned a substantial loss last year into a small operating profit this year. Profits from the Wind business were slightly lower, as might be expected with a 34 percent drop in revenues.

Third quarter
Moving on to a quick review of the third quarter results, total revenues came in at SK902 million (€90.2 million) 1.4 percent below last year’s levels. This was entirely due to a SK82 million (€3.2 million)/ 34 percent reduction in revenues from the Wind business, partly as a result of the withdrawal from the turbine tower internal hoist market.

Group order intake was 1.8 percent lower at SK872 million (€87.2 million) thanks to reductions from both Wind and BMU divisions. However, pre-tax profits for the period almost doubled to SK100.1 million (€10.1 million).

Chief executive Ole Kristian Jødahl said: “Our Construction and Industrial divisions continued to have positive development with solid order intake development in both new equipment and services in the quarter. I am pleased to see, according to plan, continued strong service order intake development for the group and margin improvements in all divisions during the quarter. In BMU and Wind, we continue to face challenges that we are working diligently to mitigate. Construction delivered another strong quarter with order intake up 14 percent, with solid contribution from both new equipment and Services and with continued good development in Rental.”

“Industrial also delivered strong organic order intake growth of 19 percent in the quarter where new equipment sales is continuing to develop very strong. The new industrial elevator for the emerging markets, launched at the beginning of the year, has contributed positively.”

“BMU had weak equipment sales in the quarter due to continued low investment activity level in high complexity BMU projects for new high-rise buildings. However, the division continued to show a strong service order intake. We continue to drive the profitability improvement program which includes both growth enhancing initiatives as well as improving cost efficiency. As expected, order intake in Wind was lower year over year due to our decision to exit tower internals. We also still face a weak development in China, impacted by increased competition from local suppliers and low level of government support incentives. It is pleasing to see that service order intake for the group continues to show solid growth, up 26 percent in the quarter, in line with our efforts to increase the share of Service revenue.”

“Organic revenue growth in the quarter was at the same level as last year, excluding the effects of our exit from tower internals. We are facing supply chain challenges which we to a large extent have been able to manage. Despite lower reported revenue in the quarter, EBITA was up by 77 percent, corresponding to a margin increase of 5.9 percentage points year over year. Margins improved in all divisions, in line with plan, supported by improved gross margins and lower SG&A expenses. I am pleased to see that the organisation to a large extent has managed to offset the cost increases for freight and raw material through active price management and other mitigating activities, and all divisions are delivering improved gross margins.”

“Digitalisation is a key enabler for us, and it is exciting to see the high customer interest in our Alimak Group BIM gallery with over 2,000 downloads to date. Increasing the pace in product development is also a key initiative for future growth. In October, we are launching a new product, in close cooperation with a customer in Construction, providing scaffolders greater efficiency and increased workplace safety. We are well set for growth and further margin improvements, supported by increased M&A efforts, in a continued uncertain macro environment.”

Vertikal Comment

This something of a mixed bag from Alimak, which has become quite diverse, while maintaining a focus on powered access equipment. The challenge for management is being able to cope with the wildly different market trends, demands and pace of the permanently installed Building Maintenance Unit market and construction hoists. With Wind and Industrial somewhere in between.

There are however a good number of strategies that transcend the differing markets which present some very interesting opportunities. The difficulty with such potential is capitalising on it by getting some real cross sector pollination. A tough thing when managers are focused on their immediate results, which is what they will be measured on at the end of the day.

Having said all that, Alimak is clearly getting a lot of it right with strong profitability growth, from both margin improvements and lower operating expenses, the latter achieved seemingly without sacrificing long term prospects.

All in all, not a bad set of numbers.