Report for Q4 2017 - Key figures - Orders received and margins - Development per segment - Geographical development - Financials - Outlook Mr. Tom Erixon President and CEO Alfa Laval Group
Key figures October December 2017 Orders received grew 12% to SEK 9,780 million. Net sales increased 2% to SEK 10,112 million. Adjusted EBITA* grew 8% to SEK 1,611 million. Adjusted EBITA margin at 15.9% vs 15.0%. *) Positive currency effect SEK 33 million. January December 2017 Orders received grew 14% to SEK 36,628 million. Net sales declined 1% to SEK 35,314 million. Adjusted EBITA* up 1% at SEK 5,610 million. Adjusted EBITA margin at 15.9% vs 15.6%. *) Positive currency effect SEK 223 million. Alfa Laval 3
Highlights in the quarter Energy Alfa Laval OLMI heat exchangers to a petrochemical plant in the Middle East. Value: SEK 55 million. Evaporative air-cooler systems to a gas processing plant in the US. Value: SEK 95 million. Alfa Laval Packinox heat exchangers to a petrochemical plant in India. Value: SEK 65 million. Alfa Laval Packinox heat exchangers to a refinery in the Middle East. Value: SEK 55 million. Marine Framo pumping systems for an oil platform in the North Sea. Value: SEK 60 million. PureBallast order intake: SEK 212 million. PureSOx order intake: SEK 332 million. Alfa Laval 4
16% 22% -11% -11% 16% Orders received SEK million SEK million R 12 12 000 10 000 8 000 6 000 45 000 40 000 35 000 30 000 25 000 20 000 4 000 2 000 0 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 15 000 10 000 5 000 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
Order analysis - Q4 2017 versus Q4 2016 and versus Q3 2017 (MSEK) Q4 2016 8,709 Q3 2017 8,418 Structural change, % - - Organic development, % 15.8 13.6 Total 15.8 13.6 Currency effects, % - 3.5 2.6 Total, % 12.3 16.2 Q4 2017 9,780 Q4 2017 9,780 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 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 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
Orders received by business unit - October December 2017, 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 Food Systems - = Brazed & fusion-bonded HEX Energy Separation GPHE WHE Decanters Food Heat Transfer Energy Food & Water Marine Greenhouse Year-on-year comparison 8
Energy division - Highlights and sequential comments The division reported good sequential growth, mainly driven by large orders from the hydro carbon chain. The base business was flat. Brazed & Fusion Bonded HEX 5%* Brazed & Fusion lifted by demand from boiler and A/C manufacturers. Energy separation orders dropped, reflecting a decline in the base business. Larger orders were flat versus Q3. GPHE grew, driven by larger orders in oil & gas processing as well as power. The base business was flat. Energy Separation 3%* GPHE 12%* - Welded boosted by larger orders from the hydro carbon chain. WHE 9%* Order Backlog Sales Q4 2017 2,852 4,471 3,259 Sequential comparison * Share of Group total 9
Activity split O&G, total Distribution of orders FY (MSEK) 2017 Drilling Processing & Transportation Refinery Petrochemicals Grand total Energy 188 1,527 948 1,557 4,220 () Marine 546 356 0 0 902() Alfa Laval Share of total Alfa Laval = 734 = 1,883 = 948 = 1,557 2.0% 5.1% 2.6% 4.2% =5,122*() = 13.9% * including Service Change yoy within parentheses 10
Food & Water division - Highlights and sequential comments Divisional growth supported by higher demand from brewery, ethanol and dairy. Vegetable oil flat and pharma lower due to a non repeat. Business Units Decanters, Food Heat Transfer, Hygienic Fluid Handling and HSS all reported growth, driven by a broad based increase in demand. Food Systems came in marginally below Q3 due to the non-repeat of a large pharma order. Brewery as well as wider food applications had a strong performance. Decanters 6%* Food heat transfer 5%* Food Systems 4%* Hygienic fluid handling 11%* HSS 5%* - Order Backlog Sales Q4 2017 3,053 4,317 3,261 Sequential comparison *Share of Group total 11
Marine division - Highlights and sequential comments Boilers & Gas systems boosted by demand for exhaust gas cleaning and inert gas systems. Boiler and gas systems 10%* Separation & Heat transfer unchanged, with growth for fresh water generators, engine power and ballast systems. Heat exchangers declined from a very strong Q3. Separation & heat transfer 11%* = Pumping systems grew as a higher level of contracting of chemical tankers boosted demand. Demand from the offshore sector also grew, be it from a low level. Pumping Systems 15%* Order Backlog Sales Q4 2017 3,497 9,027 3,157 Sequential comparison *Share of Group total 12
Service, by division ENERGY FOOD & WATER 13 MARINE SERVICE SHARE SERVICE SHARE Q4: 24% FY: 26% SERVICE SHARE SERVICE SHARE Q4: 30% FY: 31% SERVICE SHARE SERVICE SHARE Q4: 29% FY: 35% ABSOLUTE DEVELOPMENT YoY SEQ ABSOLUTE DEVELOPMENT YoY ABSOLUTE DEVELOPMENT YoY SEQ ABSOLUTE DEVELOPMENT YoY ABSOLUTE DEVELOPMENT ABSOLUTE DEVELOPMENT - - = - = = YoY SEQ YoY Alfa Laval
Greenhouse - Highlights and sequential comments Order intake declined slightly, mainly due to seasonally lower demand for Heat Exchanger Systems as well as the closure of a unit in Tubular Heat Exchangers. Air heat exchangers did well, driven by demand for industrial cooling in conventional power and strong demand for commercial and industrial refrigeration. Achieved improved profitability. Alfa Laval 14
Orders received by region - October December 2017, development at constant rates North America 17% Africa & Oceania 2% Nordic 9% Western Europe 22% 6-2 19 6-11 22-3 16 52 18 CEE 6% -4 18 Asia 40% Year-on-year comparison Sequential comparison 15
Top ten markets* - SEK million at prevailing rates United States China Nordic Japan Mid Europe Adriatic SEA South Korea Benelux France 0 1000 2000 3000 4000 5000 6000 7000 = WY 2017 = WY 2016 *The development of the 2016 top ten markets. 16
Report for Q4 2017 - Key figures - Orders received and margins - Development per segment - Geographical development - Financials - Outlook Mr. Thomas Thuresson CFO Alfa Laval Group
Highlights 2017 - October-December, SEK million Order intake 9,780 Net sales 10,112 Alfa Laval 18
Gross profit margin - In percent of sales 45 40 34.3 34.2 34.3 36.3 35 30 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Alfa Laval 19
Gross profit margin - Q4 2017 versus Q4 2016 and versus Q3 2017 Q4 2016 34.3 Q3 2017 37.0 Mix/price - Load/volume = PPV - - FX Structure = = Q4 2017 36.3 Q4 2017 36.3 Alfa Laval 20
Highlights 2017 - October-December, SEK million Order intake 9,780 Net sales 10,112 Adjusted EBITA 1,611 Adjusted EBITA margin, % 15.9 Profit before tax 1,358 Earnings per share, % 2.52 Earnings per share, excl. step-up, % 2.91 ROCE 17.7 ROE 13.9 Alfa Laval 21
Reorganisation & capacity adjustment programme - Update as per December 31 st, 2017 EMPLOYEE IMPACT, FTE TOTAL SAVINGS, MSEK Realized Q4, 2017 Realized FY, 2017 Target Realized Q4, 2017 Realized FY, 2017 Target R&D S&A Other COGS - - 450-450 70 285 300-100 - 350-550 30 45 200 Total - 100-800 - 1,000 100 330 500 Alfa Laval
Divisional performance Energy Marine Food & Water Q4 2017 2016 2017 2016 2017 2016 Orders 2,852 2,924 3,497 2,243 3,053 3,009 Backlog 4,471 4,230 9,027 8,285 4,317 3,741 Sales 3,259 3,000 3,157 3,202 3,261 3,276 Op. profit 469 447 600 411 517 457 Op. margin, % 14.4 14.9 19.0 12.8 15.9 13.9 Comments on operating profit Volume (pos) Cost (neg) Price/mix (pos) No one-off charge (pos) Project exec. (pos) Mix (neg) Cost (neg) Alfa Laval 23
Cash-flow statement SEK million Cash flow from - operating activities - investing activities Q4 2017 1,573-284 Q4 2016 1,925-451 FY 2017 4,463-721 FY 2016 4,979-795 Financial net paid 20 129-214 147 Dividend - 1,797-1,800 Total 1,309 1,603 1,731 2,531 Pro Forma Free cash-flow* 1,311 1,799 3,574 4,509 *Incl. operating activities, capital expenditure and financial net paid. Alfa Laval 24
Foreign exchange - Estimated impact on adjusted EBITA from FX fluctuations SEK million Q4 2017 FY 2017 FY 2018* Transaction effect 75 210-25 Translation effect -45 13 0 Total 33 223-25 *Based on EUR/USD 1.17 and EUR/SEK 9.75 Projected FX-effect for 2017 communicated at the capital markets day: SEK 210 million Alfa Laval 25
12,928 3,942 13,922 4,367 Order backlog as per December 31 SEK million 25 000 20 000 16,870 18,289 15 000 10 000 5 000 0 0.88 1.08 1.08 1.03 0.97 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 book to bill = For delivery later than 2018 = For delivery in 2018 26
Sales Full year 2018, SEK (bn) FY 2017 35.3 Backlog, current year 1.0 FX translation /- 0.0 Acquisitions? Subtotal 36.3 Change in in-for-out /-? Price /-? Full year 2018 Alfa Laval 27
Board s proposal to the AGM The board proposes a dividend of SEK 4:25 (4:25) Alfa Laval 28
Report for Q4 2017 - Key figures - Orders received and margins - Development per segment - Geographical development - Financials - Outlook Mr. Tom Erixon President and CEO Alfa Laval Group
Outlook for the first quarter We expect that demand during the first quarter will be somewhat lower than in the fourth quarter. Alfa Laval 30
Activity split O&G, total Distribution of orders Q4 (MSEK) 2017 Drilling Processing & Transportation Refinery Petrochemicals Grand total Energy 51 415 277 355 1,098 () Marine 225 152 0 0 377 () Alfa Laval Share of total Alfa Laval * including Service = 276 = 567 = 277 = 355 2.8% 5.8% 2.8% 3.6% =1,475*() = 15.0% Sequential direction within parentheses 32
Marine Division s industry split - Distribution of orders 2017 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% 2% 17% 6% 34% Alfa Laval 33
Marine Division s industry split - Distribution of sales 2017 Marine Offshore oil and gas Environment & Energy, Marine Diesel power Service Driver World trade & fleet capacity Oil & gas demand and prices Legislation & fuel cost Electrical power needs World trade Share 43% 4% 13% 5% 35% Alfa Laval 34
Orders received by business unit - January-December 2017, at constant rates and like for like Pumping Systems Marine Separation & Heat Transfer Greenhouse - = Boilers & Gas Systems High-speed Separators Hygienic Fluid Handling Food Systems = Brazed & fusion-bonded HEX Energy Separation GPHE WHE Decanters Food Heat Transfer Energy Food & Water Marine Greenhouse Year-on-year comparison 35
Highlights Europe October December 2017, at constant rates, sequential comments Western Europe incl. Nordic Regional growth supported by all three divisions. Base business, large orders and service all grew. Nordic area did well, lifted by Energy. Central and Eastern Europe Region reported increase in orders, completely explained by a very good development in Turkey. Russia came in somewhat lower as growth in Food & Water could not compensate for declines in Energy and Marine. 19 6-11 22-3 16 Year-on-year comparison Sequential comparison 36
Highlights Asia October December 2017, at constant rates, sequential comments Asia Most countries in the region reported sequential growth. China and Japan were among the best performers, benefiting from an increase in yard contracting. India also did very well, boosted by higher demand in the Energy division, and Middle East had a good quarter on the back of some large downstream projects. 52 18 Alfa Laval Year-on-year comparison Sequential comparison 37
Highlights Americas October December 2017, at constant rates, sequential comments North America US reported sequential growth, based on order development for Food & Water as well as Energy. Service grew in all three divisions. Canada declined as it was unable to repeat the positive development seen in Energy in the previous quarter. 6-2 Latin America Strong development for Food & Water in Brazil and Mexico explains the growth on a regional level. Brazil benefitted from a positive trend in Food & Water, as well as an improved service business in Marine. -4 18 Year-on-year comparison Sequential comparison 38
Orders received by region - January - December 2017, development at constant rates North America 19% Africa & Oceania 2% Nordic 9% Western Europe 22% 7 4 12 3 29 CEE 6% -8 Asia 38% Year-on-year comparison 39
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 40