Report for Q Mr. Tom Erixon President and CEO Alfa Laval Group.

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2 Report for Q Mr. Tom Erixon President and CEO Alfa Laval Group

3 Key figures July September 2018 Orders received grew 35% to SEK 11,357 million. Net sales increased 24% to SEK 10,131 million. Adjusted EBITA* up 33% at SEK 1,736 million. Adjusted EBITA margin at 17.1% vs 16.0%. *) Positive currency effect SEK 50 million. January September 2018 Orders received grew 25% to SEK 33,444 million. Net sales increased 17% to SEK 29,457 million. Adjusted EBITA* increased 23% to SEK 4,931 million. Adjusted EBITA margin at 16.7% vs 15.9%. *) Positive currency effect SEK 5 million. Alfa Laval 3

4 Order analysis - Q versus Q and versus Q (MSEK) Q ,418 Q ,062 Structural change, % Organic development, % Total Currency effects, % Total, % Q ,357 Q ,357 Alfa Laval 4

5 26% -15% -14% 15% 26% Orders received SEK million SEK million R Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 0 = Order intake per quarter large = Order intake per quarter XX% = Rolling twelve months value = % development at constant rates by quarter, year on year 5

6 Highlights in the quarter Energy Alfa Laval Niagara evaporative air cooler systems for a gas processing plant in the U.S. Value: SEK 100 million. Alfa Laval Compabloc heat exchangers for a petrochemical plant in the US. Value: SEK 85 million Marine Framo pumping systems for an FPSO. Value: SEK 70 million. Two fleet agreements for Alfa Laval PureBallast, covering retrofit installations onboard 80 vessels between 2019 and Alfa Laval 6

7 Adjusted EBITA/margin* - SEK millions and in percent of sales Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 24,0 21,0 18,0 15,0 12,0 9,0 6,0 3,0 0,0 * Adjusted EBITA Earnings before interests, taxes, amortization of goodwill and step up values and comparison distortion items. 7

8 Energy division - Highlights and comments MARKETS & ORDER INTAKE Continued positive sentiment across end markets. Sequential order decline due to seasonality in HVAC and fewer mid-sized and large orders from refineries and petrochemicals. Good service growth with increased demand for service contracts in oil & gas industry. PROFITABILITY (EBIT) Supported by higher volumes, while there was a negative impact from mix (ASS/CS). Cost, which reflects higher S&A due to increased activity, compares with a quarter when it was extraordinarily low. Q3 18 Q2 18 %- change Q3 17 ORDERS 3,039 3, ,513 SALES 3,043 3, ,598 EBIT EBIT mrgn (%) Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Sales Q3 16 Q4 16 Q1 17 EBIT Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q

9 Food & Water division - Highlights and comments MARKETS & ORDER INTAKE Orders declined sequentially, following two strong quarters. No change in end-market sentiment. Continued good development for the component business while project-related activity was a bit slower. PROFITABILITY (EBIT) Volume and mix had a positive effect on profitability. A favourable development within capital sales outweighed the impact from a smaller service share. Q3 18 Q2 18 %- change Q3 17 ORDERS 3,151 3, ,788 SALES 3,336 3, ,882 EBIT EBIT mrgn (%) Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q Sales EBIT 9

10 Marine division - Highlights and comments MARKETS & ORDER INTAKE High activity in the scrubber market. Contracting-related order intake on a somewhat higher level than last year. Continued good market activity offshore. Q3 18 Q2 18 %- change Q3 17 ORDERS 4,903 4, ,725 SALES 3,433 3, ,322 EBIT PROFITABILITY (EBIT) Volume had a positive impact, driven by scrubbers and pumping systems. The uptick in capital sales led to a smaller service share and hence a negative mix effect. EBIT mrgn (%) Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q Sales EBIT 10

11 Greenhouse - Highlights and sequential comments Greenhouse EBIT-margin at 6.7 percent, meaning the business has turned around from last year s loss-making level. Air heat exchangers affected by non-repeats as well as seasonally lower demand for commercial refrigeration. Applications in industrial refrigeration and data centre cooling, however, saw continued good demand. The remaining tubular business reported growth, as recently signed OEM agreements, started to generated orders for engine cooling applications in the U.S. Alfa Laval 11

12 Service, by division Order intake ENERGY FOOD & WATER MARINE 12 SERVICE SHARE Q3: 27% SERVICE SHARE Q2: 32% SERVICE SHARE Q2: 21% ABSOLUTE DEVELOPMENT ABSOLUTE DEVELOPMENT ABSOLUTE DEVELOPMENT - = YoY SEQ YoY SEQ YoY SEQ Alfa Laval

13 Orders received by business unit - July September 2018, at constant rates, like for like and year-on-year Pumping Systems Marine Separation & Heat Transfer Greenhouse - Boilers & Gas Systems High-speed Separators Hygienic Fluid Handling - Brazed & fusion-bonded HEX Energy Separation GPHE WHE Decanters Food Heat Transfer Food Systems Energy Food & Water Marine Greenhouse Year-on-year comparison 13

14 Organic order growth - Compared with same quarter last year (%), excluding currency effects Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 14

15 Organic order growth - Compared with same quarter last year (%), excluding currency effects Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 = Organic order growth from Marine Environmental in % = Organic order growth in %, excluding Marine Environmental 15

16 Orders received by region - July September 2018, development at constant rates North America 16% Africa & Oceania 2% Nordic 9% Western Europe 18% CEE 5% Asia 45% Year-on-year comparison Sequential comparison 16

17 Report for Q Mr. Jan Allde CFO Alfa Laval Group

18 Highlights July September, SEK million Order intake 11,357 Net sales 10,131 Alfa Laval 18

19 Gross profit margin - In percent of sales Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Alfa Laval 19

20 Gross profit margin - Q versus Q and versus Q Q Q Mix/price - - = Load/volume = PPV/metals - - FX Structure = = Q Q Alfa Laval 20

21 Highlights July - September, SEK million Order intake 11,357 Net sales 10,131 Adjusted EBITA 1,736 Adjusted EBITA margin, % 17.1 Profit before tax 1,458 Earnings per share 2.56 Earnings per share, excl. step-up 3.06 ROCE 22.1 ROE 20.0 Alfa Laval 21

22 Divisional performance Energy Marine Food & Water Q Orders 3,039 2,513 4,903 2,725 3,151 2,788 Backlog 4,852 4,883 12,529 8,714 4,917 4,541 Sales 3,043 2,598 3,433 2,322 3,336 2,882 Op. profit Op. margin, % Comments on operating margin Volume/load (pos) Mix (neg) S&A cost (neg) Volume/load (pos) Mix (neg) Volume/load (pos) Mix (pos) Alfa Laval 22

23 Cash-flow statement SEK million Cash flow from - operating activities - investing activities Q , Q , M , M , Financial net paid Total ,562 2,219 Pro Forma Free cash-flow* ,396 2,263 *Incl. operating activities, capital expenditure and financial net paid. Alfa Laval 23

24 Foreign exchange - Estimated impact on adjusted EBITA from FX fluctuations SEK million Q M 2018 FY 2018 FY 2019** Transaction effect * Revaluation Translation effect Total *1H transaction effect has been restated to -40, from the reported 0. **Based on EUR/USD and EUR/SEK Projected FX-effect for 2018 communicated with the Q2 earnings release: SEK 150 million Alfa Laval 24

25 6,969 11,705 Order backlog as per September 30 SEK million , , ,921 14, Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 book to bill = For delivery after 2018 = For delivery this year 25

26 Sales Full year 2018, SEK (bn) 9M sales 29.5 Backlog, for delivery current year 7.9 FX translation 0.3 Divestments Subtotal 37.6 In-for-out /-? Price /-? Acquisitions? Full year 2018 Alfa In-for-out, Laval same period 2017: SEK 3.1 bln. 26

27 Report for Q Mr. Tom Erixon President and CEO Alfa Laval Group

28 Outlook for the fourth quarter We expect that demand during the fourth quarter will be somewhat higher than in the third quarter. Alfa Laval 28

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30 Activity split O&G, total Distribution of orders Q3 (MSEK) 2018 Drilling Processing & Transportation Refinery Petrochemicals Grand total SEQ/YOY Energy ,072 (-/) Marine (-/) Alfa Laval Share of total Alfa Laval = 226 = 640 = 106 = % 5.6% 1.0% 3.8% =1,405*(-/) = 12.4% * including Service 30

31 Marine Division s industry split - Distribution of orders LTM September Marine Offshore oil and gas Environment & Energy, Marine Engine power Service Driver World trade & fleet capacity Oil & gas demand and prices Legislation & fuel cost Electrical power needs World trade Share 33% 8% 32% 4% 23% Alfa Laval 31

32 Marine Division s industry split - Distribution of sales LTM September Marine Offshore oil and gas Environment & Energy, Marine Engine power Service Driver World trade & fleet capacity Oil & gas demand and prices Legislation & fuel cost Electrical power needs World trade Share 41% 6% 18% 5% 30% Alfa Laval 32

33 Orders received by business unit - January September 2018, at constant rates, like for like and year-on-year Pumping Systems Marine Separation & Heat Transfer Greenhouse - Boilers & Gas Systems High-speed Separators Hygienic Fluid Handling = = = Brazed & fusion-bonded HEX Energy Separation GPHE WHE Decanters Food Heat Transfer Food Systems Energy Food & Water Marine Greenhouse Year-on-year comparison 33

34 Top ten markets* - SEK million at prevailing rates United States China Nordic South Korea Mid Europe Japan Adriatic South East Benelux India = LTM Q = WY 2017 *The development of the 2017 top ten markets. 34

35 Orders received by region - January September 2018, development at constant rates North America 17% Africa & Oceania 2% Nordic 10% Western Europe 20% = 35 CEE 5% 43 Asia 41% Year-on-year comparison 35

36 Cautionary statement This presentation contains forward-looking statements that are based on the current expectations of the management of Alfa Laval Group. Although management believes that the expectations reflected in such forwardlooking statements are based on reasonable assumptions, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment, other government actions and fluctuations in exchange rates. Alfa Laval undertakes no obligation to publicly update or revise these forward-looking statements, other than as required by law or other regulations. Alfa Laval 36