Strong ability to adapt in uncertain times

Jörgen Zahlin

Growth in the second quarter of 2020 has been marked by decreasing demand. Net sales were down 10% on the same period last year. Growth was up 1% due to the impact of acquisitions while currency movements had a negative effect of 1%, which resulted in -10% organic growth in the period. In turn, incoming orders fell by 13%.

Following a sustained period of positive growth, we now find ourselves in an entirely new market situation. Our operations have been heavily affected by the Covid-19 crisis, but our organisation has adapted positively to a new way of working. The pandemic has created a difficult situation and considerable uncertainty about the near-term outlook and the long-term effects on the market. At the same time, the fact that our earnings momentum remains intact despite a decline in sales demonstrates our high degree of agility and an ability to adapt and adjust to new conditions.

Operating profit (EBITA) rose 7% in the second quarter. Earnings have been affected by a reduction in the Group's operating costs during the period and by funding received from government support schemes in the countries where we have operations. The decrease in sales combined with the increase in earnings has pushed the operating margin up to 13%, which is an improvement of two percentage points on the second quarter of 2019.

Overall for the first six months of the year, OEM's sales were down 2% while incoming orders rose 2%. Operating profit (EBITA) rose 6% and the operating margin reached 12.6%. 

Growth across the regions

All regions continued to experience reduced demand in the second quarter. In Region Sweden, sales fell by 9% and the drop-off in demand has affected all operations, except for Elektro Elco and ATC Tape Converting. In Region Finland, the Baltic states and China, demand was down by 7% and most of the operations in this region also reported a year-on-year drop in sales. In Region Denmark, Norway, the UK and East Central Europe, sales fell by 16%, although the operations in Norway reported positive growth attributable to the acquisition made at the end of 2019.

Our business, like many others, has been significantly hit by the effects of the Covid-19 pandemic and most of our operations have seen a month-by-month slowdown in demand in the second quarter. We were prepared for the arrival of a whole new set of circumstances in the second quarter, however, and we took various measures early on to adapt our operations and safeguard the health of our employees. A strong ability to adapt will be a core component of our operations for the foreseeable future. 

No change to our long-term strategy 

I mentioned in the Chief Executive's Review for the first quarter of the year that how we get through this crisis depends greatly on how we enter it. It's important that we continue to be creative when it comes to driving our business forward. The digital transition and our employees' positive attitude have certainly helped us and, although the coronavirus is taking us into uncharted and challenging times, we are well placed to develop our operations and find new business opportunities.

Jörgen Zahlin

Managing Director and Chief Executive Officer