Annual General Meeting of OEM International 22 April 2020
For 46 years, OEM has been a value-adding link between its customers and leading manufacturers of products and systems. OEM is one of Europe's leading technology trading groups, bringing value to its customers by offering an extensive and diverse range of products coupled with considerable technical and applications expertise. OEM has a portfolio of more than 60,000 products from over 400 suppliers who, with strong brands, are among the leading players in their respective niches. OEM has 34 operating business units in 14 countries. The company's largest market is Sweden, where OEM holds a market-leading position in most of its product areas. In other regions, the company's position varies from market to market. The majority of its customers operate in various segments of the manufacturing industry.
2019 was another year of record financial performance for OEM in terms of sales and profit. Net sales rose 6%, of which 3% was organic growth. In the first six months, demand remained on the same high level as in the previous year, but after the summer there was a noticeable slowing of momentum.
The Group has been experiencing strong growth in the past few years. From sales of just under SEK 1.7 billion in 2013 to SEK 3.3 billion in 2019, which is an annual average growth of 12%. Considering that OEM is operating in a mature market, this clearly indicates that OEM has a successful concept and the organisation is doing a good job.
The EBITA margin increased from 11.0% to 11.7%. The gross margin has been stable throughout the year, with the weak Swedish krona having a positive impact to some extent and a general downward pressure on prices in the market having a negative impact to some degree. Capacity adjustments were introduced during the year to keep the overall cost base at a stable level. Thanks to the stability in both the cost base and gross margins, we realised positive leverage effects on sales growth, with the result that profit before tax rose 16%.
OEM has had its best year ever in Region Sweden, despite a progressive decline in the growth rate during the year. OEM Automatic, the region's largest operations, clearly felt the effects of the slowdown during the autumn, while the two other major operations in the region, Elektro Elco and OEM Electronics, continued to report good growth.
In Region Finland, the Baltic states and China, OEM has been on a strong growth trajectory for a considerable period of time, despite low underlying growth. However, demand has slowed notably during the year.
Region Denmark, Norway, the UK and East Central Europe has reported good growth. It is particularly the operations in Denmark, which largely focus on sales of process investment products, and the operations in Poland that have a good rate of growth.
Two acquisitions were completed in 2019. In September, the operations of the Swedish company Cabavo AB, with annual sales of SEK 8 million, were acquired. In December, the pumping division of the Norwegian company Finisterra AS, with annual sales of SEK 12 million, was acquired. In early 2020, the UK company Zoedale Ltd, with annual sales of SEK 37 million, was acquired. We are not achieving our targets for acquisitions and we aim to address this in the coming years!
The 5,000-square-metre extension at OEM's logistics centre at Höganloft in Tranås was officially opened in the autumn. The centre previously had a floor space of 7,000 square metres and this additional capacity offers opportunities for further expansion. The implementation of the digital platform, in which we have previously been investing, was completed during the year. Investment has progressively strengthened our offering and we are continuing to develop the digitalisation of the businesses.
Sales and earnings both reached a new all-time high in the first quarter of 2020. Net sales rose 5% and the operating margin (EBITA) stood at just over 12%, which is on a par with the previous year period.
We are all greatly affected by the Corona crisis and all our entities are working to cut costs and prepare for a significant decline in demand. Although sales figures for the first quarter were good for most of our operations, it is obvious that we're currently facing very different market circumstances. The health of our employees is high priority and we are following the directives and recommendations of the governments of the respective countries to contain the spread of COVID-19 to the greatest extent possible. We aim to retain as much of our organisation, customer base and supplier network as possible. However, we will have to expect changes. OEM's size and strong financial position mean we are well placed to cope with the current situation and we will seize new business opportunities.
Tranås 22 April 2020
Jörgen Zahlin
Managing Director and CEO, OEM International AB.
