Continued growth and increased profit despite generally weak demand
”I am looking forward to 2025, when we will continue to create values for customers and suppliers.Jörgen Zahlin, Managing Director and CEO
OEM International AB
It was another record year for the OEM Group, with incoming orders increasing by 8 per cent and sales by 2 per cent. Acquisitions impacted sales growth by just under three percentage points and organic growth was negative in the amount of one percentage point. The higher operating costs, which have been affected by completed acquisitions, meant that operating profit was unchanged excluding items affecting comparability of SEK 11 million in relation to EQT’s offer for OEM.Sales increased by 5% in the fourth quarter, making this the strongest quarter of the year in terms of both growth and earnings. Organic growth contributed 2.4%, acquisitions had a positive impact on growth of 1.5% and the currency made a positive contribution of 1%.
During 2024, the market has been characterised by a turbulent outside world. The weaker demand experienced in the autumn of 2023 continued into 2024, before stabilising in the second half of the year.
Demand has varied between industries and geographies, with half of the Group’s operations reporting growth. The largest company in the Group, OEM Automatic AB, which increased turnover by 4 per cent, is a good example of an operation that has reinforced its market position during the year. Acquisitions have had a positive impact of just under three percentage points and the currency has had a marginal positive effect on sales. Organic growth was negative in the amount of one percentage point.
Incoming orders increased by 8 per cent and were on a par with sales, which meant that the order book was largely unchanged.
The delivery capacity of suppliers has further improved, with the result that stock remains unchanged. This is also leading to another year with a strong cash flow, amounting to SEK 692 million compared to SEK 791 million the previous year.
The number of employees has gradually decreased during the year, from 1,054 to 1,048, as a result of implemented efficiency improvements.
Profit before tax increased by SEK 9 million to SEK 779 million, excluding items affecting comparability. The EBITA margin, which has strengthened in recent years, remained at a high level, amounting to 15.5 per cent (15.8) adjusted for items affecting comparability.
Growth across the regions
In terms of turnover, it was a record year for region Sweden and for region Denmark, Norway, the British Isles and East Central Europe. By contrast, demand was weak in Finland and the Baltic states, which led to a decrease in sales in that region. The continued focus on efficiency has enabled profitability to be maintained at a good level, with two-thirds of the operations reporting profitability levels higher than the Group’s profitability target of more than 12 per cent.
Sweden, which is the largest region, increased sales by 4 per cent, while incoming orders increased by 10 per cent. There was considerable variation in the demand experienced by the businesses, with just over half of the companies reporting growth. The businesses that performed the strongest were ATC Converting, which increased its sales by 15 per cent, and Elektro Elco, which increased by 10 per cent. A weaker gross margin and higher costs meant that profit for the region (EBITA) only increased by one per cent and the EBITA margin decreased by half a percentage point to 17 per cent.
Region Finland, the Baltic states and China experienced generally weaker demand in Finland and the Baltic states, although the operation in China performed well. Overall, this resulted in a decrease in both sales and incoming orders of 6 and 2 per cent respectively. OEM Automatic China performed most strongly, with 19 per cent growth, followed by Akkupojat, which increased its sales by 9 per cent. Operating profit (EBITA) for the region fell by 17 per cent as a result of lower sales, and the EBITA margin decreased to 11.5 per cent (12.9).
For region Denmark, Norway, the British Isles and East Central Europe, turnover increased by 4 per cent and incoming orders by 10 per cent. The operations in Denmark and Ireland developed most strongly, with sales increasing by 18 and 9 per cent respectively. This growth, together with an improved gross margin, means that operating profit for the region (EBITA) increased by 13 per cent. This produced an EBITA margin of 14.3 per cent, which is the strongest operating margin reported by this region.
Acquisitions
A number of companies have been up for discussion during the year, but for various reasons nothing was finalised. In some cases, this was related to the tendering process, where the seller opted for another buyer, while in others the seller’s price ambitions were higher than we considered reasonable. There were also cases where companies that were initially of interest turned out not to fit well with OEM later in the process. Acquisitions remain an important part of the growth strategy, however, and the work of identifying and implementing acquisitions is continuing.
Dividends
An unchanged dividend of SEK 1.75 per share (SEK 243 million) is proposed for the 2024 financial year. This is equivalent to about 40 per cent of earnings per share after tax and a direct return of 1.6 per cent based on OEM's year-end share price
Since OEM was listed on the stock market in 1983, the company has paid an improved dividend every year, with the exception of five years when the dividend was unchanged, as well as 2009 when the dividend was reduced by 33 per cent and the pandemic year 2020 when no dividend was paid. OEM’s strong balance sheet, with a significant net cash position (SEK 511 million excl. IFRS leases) and unleveraged properties, entails good conditions for combining continued acquisitions and gradually rising dividends.
Turmoil in the world and uncertain market situation
For several years, the world around us has been characterised by geopolitical tensions and general unrest. Challenges in terms of raw material shortages, supply disruptions and variations in demand have become the new normal. OEM has been characterised by being agile and adaptable. We are good at adapting our operations by organising ourselves in line with where the greatest need and the most potential are to be found.
This adaptability, combined with a constant desire to serve our customers, has generated growth and the gradual streamlining of our operations, irrespective of market conditions. Close collaboration with customers and suppliers occurs at various levels in the companies, constantly giving rise to new business opportunities. I am looking forward to 2025, when we will continue to create value for customers and suppliers with the ambition of setting new sales and profit records.
Jörgen Zahlin
Managing Director and Chief Executive Officer
OEM International AB