Report for Q2 2017 - Key figures - Orders received and margins - Development per segment - Geographical development - Financials - Outlook Mr. Tom Erixon President and CEO Alfa Laval Group 1
Key figures April June 2017 Orders received grew 19% to SEK 9,629 million. Net sales unchanged at SEK 8,907 million. Adjusted EBITA* largely unchanged at SEK 1,410 million. Adjusted EBITA margin at 15.8% vs 15.6%. *) Positive currency effect SEK 96 million. January June 2017 Orders received grew 17% to SEK 18,430 million. Net sales declined 1% to SEK 17,033 million. Adjusted EBITA* largely unchanged at SEK 2,689 million. Adjusted EBITA margin at 15.8% vs 15.9%. *) Positive currency effect SEK 171 million. 3 Highlights in the quarter Energy Marine Food & Water Alfa Laval Compact heat exchangers to a refinery in China. Value: SEK 210 million. Alfa Laval Niagara evaporative air cooler systems for a gas processing plant in the US. Value: SEK 85 mln. Compact plate heat exchangers for a refinery in China. Value: SEK 90 mln. Two frame agreements for Alfa Laval PureBallast signed, estimated to generate orders of SEK 200 million over a three-year period. PureBallast order intake in the quarter: SEK 198 million. PureSOx: order intake in the quarter of SEK 219 million. Process solution for soybean oil refinery in Brazil. Value: SEK 125 million. 4 2
Orders received SEK million SEK million R 12 12 000 45 000 10 000 40 000 35 000 8 000 30 000 6 000 25 000 20 000 4 000 1% 18% -7% -9% 14% 15 000 2 000 10 000 5 000 0 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 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 - Q2 2017 versus Q2 2016 and versus Q1 2017 (MSEK) Q2 2016 8,101 Q1 2017 8,801 Structural change, % - - Organic development, % 14.0 9.7 Total 14.0 9.7 Currency effects, % 4.9-0.3 Total, % 18.9 9.4 Q2 2017 9,629 Q2 2017 9,629 6 3
Adjusted EBITA/margin* - SEK millions and in percent of sales 2 000 1 750 1 500 1 250 1 000 750 500 250 0 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 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 - April-June 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 4
Energy division - Highlights and sequential comments Brazed & Fusion up, partly due to seasonal upswing in demand for heat pumps and A/C. Energy separation lifted by base business. Project business positively impacted by wastewater treatment orders for mining. GPHE saw seasonal uptick for HVAC as well as growth in inorganics and organic chemicals. Large order contributed to positive development. Welded grew, mainly driven by the base business, which grew, not only throughout the hydro carbon chain, but also in areas like inorganic chemicals and mining. Order Backlog Sales Q2 2017 3,136 5,032 2,861 Brazed & Fusion Bonded HEX 6%* Energy Separation 3%* GPHE 15%* WHE 9%* Sequential comparison * Share of Group total 9 Food & Water division - Highlights and sequential comments Decanters boosted by water treatment and waste water sectors. Food heat transfer was unchanged with some food-related end markets reporting a slight contraction while pharma grew. Food Systems did well amid continued high project activity, as well as one large order in Brazil for soy bean refining. Hygienic fluid handling unchanged as slight increase in dairy and pharma was neutralized by small decline in broader food markets. HSS growth driven by traditional food markets such as dairy, brewery and starch. Order Backlog Sales Decanters 7%* Food heat transfer 6%* Food Systems 6%* Hygienic fluid handling 11%* HSS 6%* = = Q2 2017 3,385 4,702 2,923 Sequential comparison *Share of Group total 10 5
Marine division - Highlights and sequential comments Boilers & Gas systems declined amid lower demand for boilers. Demand for scrubbers grew. Separation & Heat transfer increased, boosted by higher demand for ballast water treatment systems. Pumping system reported growth, reflecting increased contracting of chemical tankers and higher offshore demand. Boiler and gas systems 7%* Separation & heat transfer 11%* Pumping Systems 9%* - Order Backlog Sales Q2 2017 2,678 8,414 2,672 Sequential comparison *Share of Group total 11 Service versus capital sales 25% 31% 38% Energy Food & Water YoY SEQ YoY SEQ YoY SEQ Marine = Service = Capital sales 12 6
Greenhouse - Highlights and comments Order intake grew sequentially, mainly driven by a seasonal uptick in demand for air heat exchangers and heat exchanger systems. Orders declined versus a year ago, due to structural initiatives that were completed or under implementation. The year-on-year profitability improvement is explained by higher volume and the effects from completed measures. 13 Orders received by region Orders received by region - April-June 2017, development at constant rates North America 20% Latin America 5% Africa & Oceania 2% Nordic 8% Western Europe 21% 9 13 8 10 9-5 8 7 23 13 CEE 7% 9 35 Asia 37% Year-on-year comparison Sequential comparison 14 7
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 = LTM Q2 2017 = WY 2016 *The development of the 2016 top ten markets. 15 Report for Q2 2017 - Key figures - Orders received and margins - Development per segment - Geographical development - Financials - Outlook Mr. Thomas Thuresson CFO Alfa Laval Group 8
Highlights 2017 - April-June, SEK million Order intake 9,629 Net sales 8,907 17 Gross profit margin - In percent of sales 45 40 36.3 36.3 36.2 36.4 35 30 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 18 9
Gross profit margin - Q2 2017 versus Q2 2016 and versus Q1 2017 Q2 2016 36.2 Q1 2017 37.1 Mix/price - -- Load/volume - - PPV FX Structure = = Q2 2017 36.4 Q2 2017 36.4 19 Highlights 2017 - April-June, SEK million Order intake 9,629 Net sales 8,907 Adjusted EBITA 1,410 Adjusted EBITA margin, % 15.8 Profit before tax 733 Earnings per share, % 1.14 Earnings per share, excl. step-up, % 1.57 ROCE 15.3 ROE 8.9 20 10
Reorganisation & capacity adjustment programme - Update as per June 30 th, 2017 EMPLOYEE IMPACT, FTE TOTAL SAVINGS, MSEK Realized Q2, 2017 Realized 1H, 2017 Target Realized Q2, 2017 Realized 1H, 2017 Target R&D S&A Other - 75-450 - 450 75 135 300 COGS - 50-150 - 550 4 5 200 Total - 125-600 - 1,000 79 140 500 Savings expected to be reached to 75% level by end 2017 and completely by end of 2018 21 Divisional performance Energy Marine Food & Water Q2 2017 2016 2017 2016 2017 2016 Orders 3,136 2,443 2,678 2,324 3,385 2,910 Backlog 5,032 4,316 8,414 9,918 4,702 3,937 Sales 2,861 2,676 2,672 3,102 2,923 2,813 Op. profit 384 299 421 576 408 430 Op. margin, % 13.4 11.2 15.8 18.6 14.0 15.3 Comments on operating profit - Volume (pos) - Costs (pos) - Volume (neg) - Price/mix (neg) - Load (neg) - FX (pos) - Volume (pos) - Price/mix (neg) 22 11
Cash-flow statement SEK million Cash flow from - operating activities - investing activities Q2 2017 1,042-196 Q2 2016 1,233-128 1H 2017 1,846-316 1H 2016 2,143-227 Financial net paid -86 21-89 -2 Total 760 1,126 1,441 1,914 Pro Forma Free cash-flow* 818 1,157 1,499 1,951 *Incl. operating activities, capital expenditure and financial net paid. 23 Foreign exchange - Estimated impact on adjusted EBITA from FX fluctuations SEK million Q2 2017 1H 2017 FY 2017 FY 2018* Transaction effect 46 94 200 130 Translation effect 50 77-20 - Total 96 171 180 130 *Based on EUR/USD 1.11 and EUR/SEK 9.75 Projected FX-effect for 2017 communicated with the Q1 report: SEK 280 million 24 12
Order backlog as per June 30 SEK million 25 000 20 000 18,599 18,662 15 000 10 000 5 000 7,810 10,789 11,037 7,625 0 0.90 0.88 0.88 1.08 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 1.08 book to bill = For delivery later than 2017 = For delivery in 2017 25 Sales Full year 2017, SEK (bn) YTD 2017 17.0 Backlog, current year 11.0 Orders in-for-out 2H 2016 7.7 Subtotal 35.7 Change in in-for-out /-? Price /-? Full year 2017 xx 26 13
Report for Q2 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 third quarter We expect that demand during the third quarter will be lower than in the second quarter. 28 14
Activity split O&G, total Distribution of orders Q2 (MSEK) 2017 Drilling Processing & Transportation Refinery Petrochemicals Grand total Energy 63 417 343 383 1,206 () Marine 110 69 0 0 179 () Alfa Laval Share of total Alfa Laval * including Service = 173 = 486 = 343 = 383 1.8% 5.0% 3.6% 4.0% =1,385*() = 14.4% Sequential direction within parentheses 30 15
Marine Division s industry split - Distribution of orders LTM June 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 36% 3% 13% 6% 42% 31 Marine Division s industry split - Distribution of sales LTM June 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 48% 4% 10% 4% 34% 32 16
Orders received by business unit - January-June 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 33 Highlights Europe April June 2017, at constant rates, sequential comments Western Europe incl. Nordic Region reported a modest decline as lower order intake in Marine outweighed growth in Food & Water. The Energy division was flat. Nordic area did well, as did France while Benelux saw orders decline across all three divisions. Central and Eastern Europe Region boosted by Russia, where all three divisions reported growth for both capital sales and service. 8 10 9-5 8 7 Year-on-year comparison Sequential comparison 34 17
Highlights Asia April June 2017, at constant rates, sequential comments Asia The region reported sequential growth, mainly driven by a strong Marine development in South Korea. The Marine activities in the rest of the region, however, remained on a low level. 23 13 China remained on the strong level seen in the previous quarter. Food & Water had a very positive development, while the Marine Division declined. Year-on-year comparison Sequential comparison 35 Highlights Americas April June 2017, at constant rates, sequential comments North America Growth was driven by a very positive development in the US, where both the Energy and Marine Division grew. Energy s development was partly explained by a large natural gas order. 9 13 Latin America All parts of the region recovered from a weak first quarter. Brazil still has a weak underlying market situation, so the positive development in the country was explained by a large vegetable oil order. 9 35 Year-on-year comparison Sequential comparison 36 18
Orders received by region Orders received by region - January-June 2017, development at constant rates North America 20% Latin America 4% Africa & Oceania 2% Nordic 8% Western Europe 23% 8 17 14 14 12 CEE 7% -11 Asia 36% Year-on-year comparison 37 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. 38 19