Report for Q3 2018 Mr. Tom Erixon President and CEO Alfa Laval Group
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
Order analysis - Q3 2018 versus Q3 2017 and versus Q2 2018 (MSEK) Q3 2017 8,418 Q2 2018 12,062 Structural change, % - 1.0 - Organic development, % 27.1-5.8 Total 26.1-5.8 Currency effects, % 8.8 - Total, % 34.9-5.8 Q3 2018 11,357 Q3 2018 11,357 Alfa Laval 4
26% -15% -14% 15% 26% Orders received SEK million SEK million R 12 14 000 50 000 12 000 45 000 40 000 10 000 35 000 8 000 30 000 25 000 6 000 20 000 4 000 15 000 2 000 10 000 5 000 0 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
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 2024. Alfa Laval 6
Adjusted EBITA/margin* - SEK millions and in percent of sales 2 000 1 750 1 500 1 250 1 000 750 500 250 0 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
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 3,401-9.6 2,513 SALES 3,043 3,215-4.9 2,598 EBIT 461 490 417 EBIT mrgn (%) 15.1 15.2 16.1 3 500 3 000 2 500 2 000 1 500 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 Q3 18 800 600 400 200 0 8
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 3,589-11.6 2,788 SALES 3,336 3,390-1.0 2,882 EBIT 542 507 410 EBIT mrgn (%) 16.2 15.0 14.2 3 500 3 000 2 500 2 000 1 500 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 Q3 18 800 600 400 200 0 Sales EBIT 9
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 4,685 3.6 2,725 SALES 3,433 3,486-1.4 2,322 EBIT 599 571 361 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 (%) 17.4 16.4 15.5 4 000 3 500 3 000 2 500 2 000 800 700 600 500 400 300 1 500 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 Q3 18 200 Sales EBIT 10
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
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
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
Organic order growth - Compared with same quarter last year (%), excluding currency effects 30 20 10 0-10 -20-30 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 14
Organic order growth - Compared with same quarter last year (%), excluding currency effects 30 20 10 0-10 -20-30 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
Orders received by region - July September 2018, development at constant rates North America 16% Africa & Oceania 2% Nordic 9% Western Europe 18% 4-9 20-7 14-19 9-7 45-1 CEE 5% 58 33 Asia 45% Year-on-year comparison Sequential comparison 16
Report for Q3 2018 Mr. Jan Allde CFO Alfa Laval Group
Highlights 2018 - July September, SEK million Order intake 11,357 Net sales 10,131 Alfa Laval 18
Gross profit margin - In percent of sales 45 40 35.2 35.7 37.0 36.6 35 30 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Alfa Laval 19
Gross profit margin - Q3 2018 versus Q3 2017 and versus Q2 2018 Q3 2017 37.0 Q2 2018 35.4 Mix/price - - = Load/volume = PPV/metals - - FX Structure = = Q3 2018 36.6 Q3 2018 36.6 Alfa Laval 20
Highlights 2018 - 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
Divisional performance Energy Marine Food & Water Q3 2018 2017 2018 2017 2018 2017 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 461 417 599 361 542 410 Op. margin, % 15.1 16.1 17.4 15.5 16.2 14.2 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
Cash-flow statement SEK million Cash flow from - operating activities - investing activities Q3 2018 1,350-415 Q3 2017 1,044-121 9M 2018 3,393-765 9M 2017 2,890-437 Financial net paid -58-145 -66-234 Total 877 778 2,562 2,219 Pro Forma Free cash-flow* 876 779 2,396 2,263 *Incl. operating activities, capital expenditure and financial net paid. Alfa Laval 23
Foreign exchange - Estimated impact on adjusted EBITA from FX fluctuations SEK million Q3 2018 9M 2018 FY 2018 FY 2019** Transaction effect -25-65* -80 120 Revaluation 5 0 - - Translation effect 70 70 80 0 Total 50 5 0 120 *1H transaction effect has been restated to -40, from the reported 0. **Based on EUR/USD 1.1608 and EUR/SEK 10.3130 Projected FX-effect for 2018 communicated with the Q2 earnings release: SEK 150 million Alfa Laval 24
6,969 11,705 Order backlog as per September 30 SEK million 25 000 22,773 20 000 18,674 15 000 10 000 5 000 7,921 14,852 0 1.08 1.03 0.97 1.13 1.12 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
Sales Full year 2018, SEK (bn) 9M sales 29.5 Backlog, for delivery current year 7.9 FX translation 0.3 Divestments - 0.1 Subtotal 37.6 In-for-out /-? Price /-? Acquisitions? Full year 2018 Alfa In-for-out, Laval same period 2017: SEK 3.1 bln. 26
Report for Q3 2018 Mr. Tom Erixon President and CEO Alfa Laval Group
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
Activity split O&G, total Distribution of orders Q3 (MSEK) 2018 Drilling Processing & Transportation Refinery Petrochemicals Grand total SEQ/YOY Energy 64 469 106 433 1,072 (-/) Marine 162 171 0 0 333 (-/) Alfa Laval Share of total Alfa Laval = 226 = 640 = 106 = 433 2.0% 5.6% 1.0% 3.8% =1,405*(-/) = 12.4% * including Service 30
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
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
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
Top ten markets* - SEK million at prevailing rates United States China Nordic South Korea Mid Europe Japan Adriatic South East Benelux India 0 1000 2000 3000 4000 5000 6000 7000 = LTM Q3 2018 = WY 2017 *The development of the 2017 top ten markets. 34
Orders received by region - January September 2018, development at constant rates North America 17% Africa & Oceania 2% Nordic 10% Western Europe 20% 6 8 38 = 35 CEE 5% 43 Asia 41% Year-on-year comparison 35
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