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Lindab International

Annual Report Feb 6, 2020

2938_10-k_2020-02-06_eaa158c9-c032-4e2b-9ce4-16f71e335b9b.pdf

Annual Report

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Lindab International AB (publ) Interim Report

  • Net sales increased by 6 percent to SEK 2,526 m (2,384), of which organic growth was 3 percent.
  • Adjusted1) operating profi t increased by 23 percent to SEK 2122) m (173). Adjusted1) operating margin increased to 8.4 percent (7.3).
  • Operating profi t amounted to SEK 2122) m (147).
  • Profi t for the period increased to SEK 143 m (106).
  • Earnings per share, before and after dilution, increased to SEK 1.88 (1.38).
  • Cash fl ow from operating activities increased to SEK 3662) m (238).
  • In December, the Board of Directors decided to update the fi nancial targets and the dividend policy3).

Fourth quarter 2019 January-December 2019

  • Net sales increased by 6 percent to SEK 9,872 m (9,326), of which organic growth was 3 percent.
  • Adjusted1) operating profi t increased by 44 percent to SEK 9152) m (634). Adjusted1) operating margin increased to 9.3 percent (6.8).
  • Operating profi t amounted to SEK 9152) m (547).
  • Profi t for the period increased to SEK 678 m (394).
  • Earnings per share, before and after dilution, increased to SEK 8.89 (5.16).
  • Cash fl ow from operating activities increased to SEK 1,0172) m (593).
  • The Board of Directors proposes a dividend of SEK 3.60 (1.75) per share, which is in line with the updated dividend policy. The dividend should be equivalent to minimum 40 percent of the company's net profi t after tax.
Key Figures 2019
Oct-Dec
2018
Oct-Dec
Change,
%
2019
Jan-Dec
2018
Jan-Dec
Change,
%
Net sales, SEK m 2,526 2,384 6 9,872 9,326 6
Adjusted1) operating profi t2), SEK m 212 173 23 915 634 44
Operating profi t2), SEK m 212 147 44 915 547 67
Adjusted1) operating margin2), % 8.4 7.3 - 9.3 6.8 -
Operating margin2), % 8.4 6.2 - 9.3 5.9 -
Profi t for the period, SEK m 143 106 36 678 394 72
Earnings per share, before and after dilution, SEK 1.88 1.38 36 8.89 5.16 72
Cash fl ow from operating activities2), SEK m 366 238 54 1,017 593 72

1) Adjusted operating profi t/operating margin does not include signifi cant one-off items and restructuring costs. See 'Reconciliations' page 21.

2) Excluding the effect of implemented accounting standard, IFRS 16 Leases, operating profi t amounted to SEK 205 m during the quarter and the cash fl ow from operating activities amounted to SEK 312 m. Operating margin excluding IFRS 16 amounted in the quarter to 8.1 percent. Operating profi t excluding IFRS 16, for the period January-December, amounted to SEK 888 m and cash fl ow from operating activities amounted to SEK 803 m. Operating margin excluding IFRS 16 amounted for the full year to 9.0 percent. The comment only refers to year 2019.

3) For further information see page 6.

A word from the CEO

Photo: Mette Ottosson

Lindab increased the adjusted operating profi t in the quarter by 23 percent to 212 MSEK (173). Profi t for the period increased by 36 percent, and profi t for the full year of 2019 increased by 72 percent to 678 MSEK (394). We can hereby conclude a very successful year for Lindab and we see many good opportunities on the road ahead.

Ventilation Systems delivered sales and operating profi t in line with the historically strong fourth quarter of 2018. Since the middle of 2019, there has been a slowdown in demand in the Nordics and the UK. The growth in Central and Eastern Europe has partly offset these effects. The business area continues to keep a high pace in the implementation of the initiated investment program, with emphasis on further automation of production units as well as increased capacity in production and logistics.

Profi le Systems had a strong development in the quarter with an organic growth of 11 percent. The strong growth and improved gross margin led to an increase of the operating profi t to 85 MSEK (56). The increased sales is largely connected to industrial projects in Sweden and Eastern Europe. Sales in this project business can fl uctuate over the quarters.

Building Systems had substantial deliveries to large projects in the quarter. Organic growth amounted to 24 percent. The operating profi t increased to 15 MSEK (0) in the quarter, as a consequence

of high volume with good control of the project margins throughout the project cycle.

The Lindab Group can look back at 2019 as a year where many small and large improvements from all three business areas have contributed to strengthen both the fi nancial profi t and our operating performance. The focus on profi tability is visible in the organisation and most of our operating units have improved their results in a signifi cant way during the year.

During 2020 the Lindab Group will maintain the focus on improved profi tability and customer satisfaction. Continued decentralisation of resources and responsibilities is a prerequisite to succeed. The higher investment pace will continue and gradually start to deliver effi ciency improvements. With improved profi tability we can also increase the efforts in product development. A strong balance sheet opens up possibilities for Lindab to look more actively at acquisition opportunities.

I would like to take the opportunity to thank all colleagues for their great efforts during 2019 and we look forward to another developing year for Lindab, for our employees and for our customers.

Grevie, February 2020

Ola Ringdahl President and CEO

Long-term fi nancial targets

1) Organic and acquired growth.

2) Excluding the effect of implemented new accounting standard IFRS 16 Leases, operating margin amounted to 9.0.

3) In December 2019, the fi nancial target for net debt of EBITDA was updated to <3.0 (<2.5) as a result of the new accounting standard IFRS 16 Leases. 4) The net debt/EBITDA, excluding IFRS 16 amounted to 1.0.

2 Lindab International AB (publ), Corporate identifi cation number 556606-5446, www.lindabgroup.com

Sales, profi t and cash fl ow

Sales and markets

Net sales increased by 6 percent to SEK 2,526 m (2,384) during the quarter. Organic growth amounted to 3 percent and currency contributed positively with 3 percent.

The sales development during the quarter remained positive for the group as a whole. All regions in Europe reported positive organic growth despite a general slowdown in the European construction market.

The sales growth varied between the segments during the quarter. Building Systems together with Profi le Systems reported strong organic growth while Ventilation Systems had a negative organic sales development. Building Systems sales growth was primarily driven by increased sales within Western Europe, but Eastern Europe also contributed with strong organic growth. Profi le Systems' positive growth was mainly a result of increased sales of major industrial projects in the Nordics and parts of Eastern Europe. The negative sales development in Ventilation Systems is mainly explained by a lower demand in Europe together with the continued prioritisation between volume and profi tability, with a clear objective to improve earnings.

Net sales for the period January-December amounted to SEK 9,872 m (9,326), an increase of 6 percent compared with the same period of the previous year. Organic growth was 3 percent and currency had a positive impact of 3 percent.

Profi t

Adjusted operating profi t for the quarter increased by 23 percent to SEK 212 m (173). SEK 7 m of the increase is related to the implementation of the new accounting standard for lease agreements (IFRS 16). No one-off items or restructuring costs were reported during the quarter, compared to SEK -26 m in the same period previous year, see 'Reconciliations' page 21. Adjusted operating margin for the quarter increased to 8.4 percent (7.3).

All three segments contributed positively to the increase in operating profi t for the group. Ventilation Systems' adjusted operating profi t increased to SEK 129 m (127), Profi le Systems contributed SEK 85 m (56) and Building Systems increased to SEK 15 m (0).

The improvement in operating profi t was mainly due to volume increase and strengthened of gross margin. Relatively stable raw material prices together with implemented effi ciency measures

0 600 1,200 1,800 2,400 3,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q40 8,000 8,500 9,000 9,500 10,000 2018 2019 Quarter R 12M Quarter R 12M

have enabled a continued recovery of the gross margin.

Profi t for the period increased by 36 percent compared to same period previous year and amounted to SEK 143 m (106). Earnings per share increased to SEK 1.88 (1.38).

Adjusted operating profi t for the period January-December increased by 44 percent to SEK 915 m (634). SEK 27 m of the increase is explained by IFRS 16. No one-off items or restructuring costs were reported during the period, compared to SEK -87 m in the same period previous year, see 'Reconciliations' page 21. Adjusted operating margin increased to 9.3 percent (6.8).

Profi t for the period January-December increased to SEK 678 m (394) and earnings per share amounted to SEK 8.89 (5.16).

Seasonal variations

Lindab's business is affected by seasonal variations in the construction industry, and the highest proportion of net sales is normally seen during the second half of the year. The largest seasonal variations can be found in the segments Profi le Systems and Building Systems. Ventilation products are mainly installed indoors which is why the Ventilation Systems segment is less dependent on season or weather conditions.

There is normally a deliberate stock build-up of mainly fi nished goods during the fi rst six months, which gradually becomes a stock reduction during the second half of the year, as a result of increased activity within the construction market.

Depreciation/amortisation and impairment losses

Depreciation, amortisation and impairment losses for the quarter amounted to SEK 97 m (42), of which SEK 7 m (3) is related to intangible assets. Adjusting for the impact of IFRS 16, depreciation and amortisation for the quarter was in line with the same period previous year and amounted to SEK 43 m.

Depreciation, amortisation and impairment losses for the period January-December amounted to SEK 400 m (168), of which SEK 40 m (30) is related to intangible assets. Adjusting for the impact of IFRS 16, depreciation and amortisation for the period was in line with the same period previous year and amounted to SEK 174 m. Impairment losses during the period amounted to SEK 12 m (0), which is mainly related to intangible assets from previous business combinations.

Net sales, SEK m Adjusted operating profi t, SEK m

Sales, profi t and cash fl ow (cont.)

Tax

Tax on profi t during the quarter amounted to SEK 61 m (37). Earnings before tax increased to SEK 204 m (143). The average tax rate for the period was 22 percent (20). The effective tax rate amounted to 30 percent (26). The higher effective tax rate, compared to the same period previous year, is mainly explained by withholding tax on dividends. This is partly offset by the fact that Lindab improved its earnings before tax in a number of countries during the quarter, which generated only a few, minor unrecognised carry-forward tax losses. In addition, Lindab has been able to recognise and utilise a higher proportion of previously unrecognised carry-forward tax losses, compared with the same period previous year. The higher effective tax rate compared to the average tax rate is explained by the same reasons.

Tax on profi t for the period January-December amounted to SEK 203 m (137). Earnings before tax increased to SEK 881 m (531). The average tax rate was 21 percent (19), while the effective tax rate amounted to 23 percent (26). The lower effective tax rate, compared to the same period previous year, was mainly due to the fact that Lindab improved its earnings before tax in a number of countries, which generated only a few unrecognised carryforward tax losses. In addition, Lindab has been able to recognise and utilise a higher proportion of previously unrecognised carry-forward tax losses, compared with the same period previous year. The higher effective tax rate compared to the average tax rate is mainly explained by withholding tax on dividends.

Cash fl ow

During the quarter, cash fl ow from operating activities improved with SEK 128 m and amounted to SEK 366 m (238). Adjusting for the impact of IFRS 16, the corresponding cash fl ow amounted to SEK 312 m, an improvement of SEK 74 m compared to the same period previous year.

Cash fl ow before change in working capital amounted to SEK 245 m (183). The improvement by SEK 62 m was mainly related to the underlying operating profi t which increased to SEK 212 m (147). In addition, IFRS 16 had a positive impact on the outcome of SEK 54 m since the cash effect of rental and leasing costs are now mainly included in fi nancing activities. The positive cash fl ow related effects were partly offset by increasing tax payments, payments exceeding the equivalent payments by SEK 36 m in

the corresponding period previous year. The cash fl ow related to change in working capital had a positive impact by SEK 121 m (55). Compared to the corresponding period previous year the main deviations were related to settlement of accounts receivable respectively accounts payable and increased advances from customers within Building Systems.

Cash fl ow from fi nancing activities for the quarter amounted to SEK -218 m (-228). Adjusting for the impact of IFRS 16, the corresponding cash fl ow amounted to SEK -164 m. The cash fl ow development from fi nancing activities was mainly related to changes in borrowings and the utilisation of credit limits.

For the period January-December, cash fl ow from operating activities improved by SEK 424 m and amounted to SEK 1,017 m (593). Adjusting for the impact of IFRS 16, the corresponding cash fl ow amounted to SEK 803 m, an improvement of SEK 210 m compared to same period previous year.

Cash fl ow before change in working capital amounted to SEK 1,109 m (590). The improvement of SEK 519 m was mainly related to the underlying operating profi t which increased to SEK 915 m (547). In addition, IFRS 16 had a positive cash fl ow impact of SEK 214 m since the cash effect of rental and leasing costs are now mainly included in fi nancing activities. Cash fl ow related to change in working capital amounted to SEK -92 m (3). Relative to the corresponding period previous year, the most signifi cant changes were attributable to current receivables and an increased value tied up in accounts receivable.

Cash fl ow from fi nancing activities for the period January-December amounted to SEK -484 m (-547). Adjusting for the impact of IFRS 16, the corresponding cash fl ow amounted to SEK -270 m. The development was mainly related to changes in borrowings and the utilisation of credit limits. Further the dividend distribution to shareholders was slightly higher than 2018.

Cash fl ow from investing activities is explained under the headings 'Investments' and 'Business combinations'.

R 12M

Quarter

Nordic region Western Europe CEE/CIS Other markets

4 Lindab International AB (publ), Corporate identifi cation number 556606-5446, www.lindabgroup.com

Investments and fi nancial position

Investments

Investments in intangible assets and tangible fi xed assets for the quarter amounted to SEK 100 m (40), of which SEK 4 m (3) related to investments in intangible assets. The increased investments in tangible fi xed assets were mainly a result of the Group's objective to increase effi ciency in the production facilities.

Cash fl ow from investing activities, excluding business combinations, amounted to SEK -92 m (-40). The net cash fl ow included a positive impact from divestment of tangible fi xed assets amounting to SEK 8 m (0), mainly related to sale of land in Romania.

For the period January-December, investments in intangible assets and tangible fi xed assets amounted to SEK 278 m (120), of which SEK 14 m (16) was related to investments in intangible assets. Investments in tangible fi xed assets included SEK 45 m (-) related to the purchase of the previously leased property in Switzerland.

Cash fl ow from investing activities, excluding business combinations, amounted to net SEK -266 m (-105), for the period January-December. Investing activities included a property purchase of SEK -45 m (-). The net cash fl ow included a positive impact from the divestment of tangible fi xed assets amounting to SEK 12 m (15), mainly related to sale of land in Romania.

Business combinations

On July 26, 2019, Lindab divested the Dutch subsidiary Lindab Door B.V. The business of the company is mainly related to sales and assembly of industrial doors. The divestment is in accordance with Lindab's strategy to focus on long-term sustainable and profitable growth. At the time of divestment, Lindab Door B.V. had 14 employees and annual sales of approximately SEK 30 m.

On April 2, 2019, Lindab acquired the British ventilation company Ductmann Ltd., whose business is mainly focused on the production and sale of rectangular ducts and fi re-rated ducting for ventilation systems. Ductmann Ltd. is registered in Dudley, UK. The company has annual sales of approximately SEK 43 m and has 40 employees.

For more information, see Note 3.

Financial position

Net debt amounted to SEK 1,771 m (1,052) on 31 December 2019. Adjusting for the impact of IFRS 16 net debt amounted to SEK 732 m. Currency effects decreased net debt by SEK 51 m during the fourth quarter compared to a decrease by SEK 4 m, during the same period previous year.

The equity/assets ratio was 53 percent (57) and the net debt/ equity ratio was 0.4 (0.2) of which IFRS 16 decreased the equity/ assets ratio by 7 percentage points and increased the net debt/ equity ratio by 0.2. Financial items for the quarter amounted to SEK -8 m (-4) whereof SEK -6 m was related to IFRS 16.

The current credit limit of SEK 1,400 m with Nordea and Danske Bank and EUR 50 m from Raiffeisen Bank International are valid until third quarter 2022. The agreements contain covenants, which are monitored quarterly. Lindab fulfi lled all the conditions as at 31 December 2019.

Pledged assets and contingent liabilities

In connection with the acquisition of property in Switzerland, mortgages on the property amounting to SEK 50 m have been pledged. Otherwise, no signifi cant changes have been taken place in pledged collateral and contingent liabilities in 2019.

Investment programme

  • Lindab has increased the rate of investments regarding automation in the production in order to achieve increased capacity, effi ciency and safety.
  • During the second quarter Lindab acquired the previously leased property in Switzerland to the value of SEK 45 m.
  • Signifi cant investments were made during the fourth quarter within Ventilation Systems. Among other, automation of production in the Czech Republic. This is part of the Groups' investment programme, to improve effi ciency and capacity.

Other

Parent company

Lindab International AB (publ), corporate identifi cation number 556606-5446, is a registered limited liability company with its domicile in Båstad, Sweden. Lindab´s shares are listed on Nasdaq Stockholm, Mid Cap.

Net sales for the quarter amounted to SEK 2 m (1). Profi t for the period amounted to SEK 8 m (10).

Net sales for the period January-December amounted to SEK 5 m (4). Profi t for the period amounted to SEK 6 m (2,375). The profi t included dividend from shares in subsidiaries of SEK 0 m (2,373).

Signifi cant risks and uncertainties

There have been no signifi cant changes to what was stated by Lindab in its Annual Report for 2018 under Risks and Risk Management (pages 51-53).

Employees

The number of employees at the end of the quarter, calculated as full-time equivalent employees, was 5,196 (5,071). Adjusted for acquisitions and divestment the number of employees was 5,157 (5,055), a net increase of 102 employees compared with the corresponding quarter of the previous year.

Incentive programme

At the Annual General Meeting in May 2019, guidelines for the remuneration of senior executives were adopted. According to the adopted guidelines, the remuneration programme for these individuals shall among other things include, a long term variable cash pay element. This element shall be based on fi nancial performance targets that refl ect Lindab's value growth and will be assessed over a three year measuring period. Any outcome from the long term variable cash pay is presumed to be invested in shares or share related instruments in Lindab on market terms. The total cost in the event of maximum outcome for the three year measuring period of 2019 to 2021 is estimated at SEK 14 m.

At the Annual General Meeting in 2017 and 2018, long-term incentive programmes were respectively adopted, with essentially the same principles as the above decided programme. The measuring period of the programmes are 2017-2019 respectively 2018-2020.

Share option programme

At the Annual General Meeting in May 2019, it was resolved to establish a share option programme for senior executives and other key persons in Lindab through a directed issue of a maximum of 290,000 share options. As a result of this programme, 175,000 share options have been acquired by senior executives and other key persons in Lindab, according to a market valuation determined on the basis of the agreement. Each share option entitles the holder to acquire one share in Lindab at a strike price of SEK 120.00. Acquisitions of shares supported by the share option may take place after Lindab has published the Q2 interim report for the year 2022 and up until 31 August of the same year.

At the respective 2017 and 2018 Annual General Meetings, it was resolved to establish warrant programmes for senior executives. As a result of these programmes, warrants have been issued by Lindab for the benefi t of the wholly-owned subsidiary Lindab LTIP 17-19 AB, which, in turn, sold the warrants to senior executives based on a market valuation pursuant to the warrant agreements. From the 2017 warrant programme, there are 25,000 outstanding options with a subscription price of SEK 108.80 exercisable during summer 2020. From the 2018 warrant programme, there are 110,000 outstanding options with a subscription price of SEK 86.40 exercisable during summer 2021. During the third quarter of 2019, the latest repurchase of warrants took place, see Note 5.

Financial targets and dividend policy

In December the Board of Directors decided to update the fi nancial targets and dividend policy for the group. These are now as follows:

  • The annual sales growth rate should be 5-8 percent, as a combination of organic and acquired growth.
  • The operating margin (EBIT) should average 10 percent over a business cycle, excluding one-off items and restructuring costs.
  • The net debt to EBITDA ratio should not exceed 3.0, measured over a 12 month average.
  • The dividend should be equivalent to minimum 40 percent of the company's net profi t, taking into account the company's fi nancial position, acquisition opportunities and long-term fi nancing needs.

Annual General Meeting

The Board has decided that the Annual General Meeting will be held on 29 April 2020. Notice will be issued in due cours.

Proposed dividend to shareholders

Lindab´s Board of Directors proposes that the Annual General Meeting on 29 April 2020 approves a dividend of SEK 3.60 per share, which is in line with the new approved dividend policy for the group and provides dividends totalling SEK 275 m. It is proposed that the record date for the right to a dividend payout is May 4, 2020, with the dividends expected to be paid to shareholders on May 7, 2020.

Signifi cant events during the reporting period

In October Lars Christensson was appointed Director of Business Development and M&A. Lars Christensson is part of Lindab Group´s Global Management.

In December the Board of Directors decided to update the fi nancial targets and dividend policy for the group, see above.

There are no other signifi cant events during the reporting period to report.

Signifi cant events after the reporting period

There are no signifi cant events after the reporting period to report.

General information

Unless otherwise indicated in this interim report, all statements refer to the Group. Figures in parentheses indicate the result for the corresponding period of the previous year. Unless otherwise indicated, amounts are in SEK m.

This is a translation of the Swedish original report. In case of differences between the English translation and the Swedish original, the Swedish text shall prevail.

Segment – Ventilation Systems

Key performance indicators 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales, SEK m 1,478 1,481 6,018 5,786
Net sales growth, % 0 10 4 12
Adjusted operating profi t, SEK m 129 127 609 472
Adjusted operating margin, % 8.7 8.6 10.1 8.2
Number of employees by end of period 3,545 3,416 3,545 3,416

Sales and markets

Net sales for Ventilation Systems amounted to SEK 1,478 m (1,481) during the quarter. Organically, net sales decreased by 4 percent, structure contributed positively by 1 percent and currency effects had a positive impact of 3 percent.

Several markets had negative organic growth during the quarter as a result of the general slowdown in the European construction market. Sales volumes have also been affected by continued prioritisation between volume and profi tability, with a clear objective to improve earnings.

In the Nordics, sales decreased in all countries compared to the same period previous year. The markets in Western Europe had a somewhat divided sales development with good growth in particularly Switzerland, France and Italy while sales decreased in the UK and Ireland. The UK and Ireland continued to be impacted by the uncertainty connected to Brexit. The sales development in the CEE/CIS region varied, with particularly strong growth in Hungary and Slovakia, while the markets Poland, the Czech Republic and Russia had negative sales development.

Net sales for the period January-December increased by 4 percent to SEK 6,018 m (5,786). Organic growth increased by 1 percent and currency contributed with 3 percent.

Profi t

Ventilation Systems' adjusted operating profi t during the quarter increased by 2 percent to SEK 129 m (127) of which SEK 5 m of the increase is explained by IFRS 16. Adjusted operating margin increased to 8.7 percent (8.6).

The improved adjusted operating profi t, despite somewhat lower sales volumes, was mainly related to the strengthened gross margin. The underlying operating costs have at the same time been stable, which contributed to the positive improvement in profi t.

Adjusted operating profi t for the period January-December increased by 29 percent, amounting to SEK 609 m (472) of which SEK 20 m of the increase is explained by IFRS 16.

Activities

Lindab Denmark received for the third year in a row, an award for being one of Denmark's best workplaces in the category of medium-size companies, from the organisation Great Place to Work. Great Place to Work publishes a list of the country's best workplaces each year, that prioritises employee well-being.

Segment – Profi le Systems

Key performance indicators 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales, SEK m 707 642 2,494 2,474
Net sales growth, % 10 5 1 13
Adjusted operating profi t, SEK m 85 56 270 198
Adjusted operating margin, % 12.0 8.7 10.8 8.0
Number of employees by end of period 882 892 882 892

Sales and markets

Net sales for Profi le Systems increased by 10 percent to SEK 707 m (642) during the quarter. Organically, sales increased by 11 percent, currency effects contributed positively by 1 percent while structure had a negative impact of 2 percent as a result of the divestment of Lindab's subsidiary in the Netherlands (see note 3 for more information).

The organic growth during the quarter was mainly related to the segment's largest region, the Nordics, where signifi cant deliveries have been made to a large logistic building in Sweden compared to same period previous year. The segment as a whole is strongly impacted by the development in the Swedish market, as this stands for about half of the segment's total sales. The sales development in the CEE/CIS region was also positive but varied. Particular strong growth was reported in Romania and Slovakia while sales in the region's largest market, Hungary, decreased. The business in Western Europe decreased slightly.

Net sales for the period January-December increased by 1 percent to SEK 2,494 m (2,474), compared to previous year. Organic growth was unchanged while currency contributed with 1 percent.

Profi t

Profi le Systems' adjusted operating profi t during the quarter amounted to SEK 85 m (56) of which SEK 1 m of the increase is explained by IFRS 16. Adjusted operating margin increased to 12.0 percent (8.7).

The improvement in adjusted operating profi t is mainly due to signifi cantly higher sales volumes and slightly strengthened gross margin. Activities to strengthen the segment's earnings further have also resulted in a more favourable product mix with higher gross margin compared to the same period previous year.

Adjusted operating profi t for the period January-December increased by 36 percent, amounting to SEK 270 m (198) of which SEK 3 m of the increase is explained by IFRS 16.

Activities

During the quarter, Lindab signed a new agreement with Sweden's largest family-owned wood industry, Derome. The agreement is an extended contract where Lindab will deliver rainwater products and sheet metals to Derome's building supplier and house factories starting in the fi rst quarter of 2020.

Segment – Building Systems

Key performance indicators 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales, SEK m 341 261 1,360 1,066
Net sales growth, % 31 15 28 21
Adjusted operating profi t, SEK m 15 0 85 9
Adjusted operating margin, % 4.4 0.0 6.3 0.8
Number of employees by end of period 727 699 727 699

Sales and markets

Net sales for Building Systems increased by 31 percent to SEK 341 m (261) during the quarter. Organic growth was 24 percent and currency effects had a positive impact of 7 percent.

The increased sales during the quarter was mainly explained by strong growth in both Western Europe as well as the CIS1)-region while sales to the CEE2)-region decreased. Of the segment's larger markets, Russia, Germany and Poland, all reported positive organic growth while sales to Romania, Belarus and Switzerland declined.

The general visible slowdown of the European construction market has resulted in a lower order intake during the quarter, particularly in Western Europe while it increased in CIS1)-region. The backlog was lower at the end of the period compared to previous year as a result of large shipments, mainly to Western Europe but also due to lower order intake during the second half of the year.

Net sales for the period January-December increased by 28 percent to SEK 1,360 m (1,066). Organic growth increased by 23 percent and currency contributed with 5 percent.

Profi t

Building Systems' adjusted operating profi t increased to SEK 15 m (0) during the quarter, of which SEK 1 m of the increase is explained by IFRS 16. Adjusted operating margin for the same period increased to 4.4 percent (0.0).

The improved adjusted operating profi t is mainly explained by signifi cant volume growth and somewhat strengthened gross margin. The implementation of the previously communicated turnaround programme continues according to plan.

Adjusted operating profi t for the period January-December increased to SEK 85 m (9) of which SEK 4 m of the increase is explained by IFRS 16.

Activities

During the quarter, Building Systems signed agreements on six major orders, each worth more than SEK 10 m; fi ve in the CIS1) region and one in Western Europe.

1) Commonwealth of Independent States 2) Central and Eastern Europe

Net sales, SEK m

Net sales and segments

Net sales and growth

SEK m 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales 2,526 2,384 9,872 9,326
Change 142 199 546 1,084
Change, % 6 9 6 13
Of which
Organic, % 3 5 3 8
Acquisitions/divestments, % 0 1 0 1
Currency effects, % 3 3 3 4

Net sales per region

2019 2018 2019 2018
SEK m Oct-Dec % Oct-Dec % Jan-Dec % Jan-Dec %
Nordic region 1,122 44 1,104 46 4,236 43 4,198 45
Western Europe 801 32 752 32 3,445 35 3,057 33
CEE/CIS 560 22 481 20 2,034 21 1,834 20
Other markets 43 2 47 2 157 1 237 2
Total 2,526 100 2,384 100 9,872 100 9,326 100

Net sales per segment

2019 2018 2019 2018
SEK m Oct-Dec % Oct-Dec % Jan-Dec % Jan-Dec %
Ventilation Systems 1,478 59 1,481 62 6,018 61 5,786 62
Profi le Systems 707 28 642 27 2,494 25 2,474 27
Building Systems 341 13 261 11 1,360 14 1,066 11
Other operations - - - - - -
Total 2,526 100 2,384 100 9,872 100 9,326 100
Gross internal sales all segments 8 6 30 21

Operating profi t, operating margin and earnings before tax1)

2019 2018 2019 2018
SEK m Oct-Dec % Oct-Dec % Jan-Dec % Jan-Dec %
Ventilation Systems 129 8.7 127 8.6 609 10.1 472 8.2
Profi le Systems 85 12.0 56 8.7 270 10.8 198 8.0
Building Systems 15 4.4 0 0.0 85 6.3 9 0.8
Other operations -17 - -10 - -49 - -45 -
Adjusted operating profi t 212 8.4 173 7.3 915 9.3 634 6.8
One-off items and restructuring costs2) - -26 - - -87 -
Operating profi t 212 8.4 147 6.2 915 9.3 547 5.9
Net fi nancial items -8 - -4 - -34 - -16 -
Earnings before tax 204 8.1 143 6.0 881 8.9 531 5.7

1) For key performance indicators excl. the effect of implemented accounting standard, IFRS 16 Leases, see 'Reconciliations' page 21. 2) One-off items and restructuring costs are described in 'Reconciliations' page 21.

Number of employees by end of period

2019
2018
2018
Oct-Dec Oct-Dec 2019
Jan-Dec
Jan-Dec
Ventilation Systems 3,545 3,416 3,545 3,416
Profi le Systems 882 892 882 892
Building Systems 727 699 727 699
Other operations 42 64 42 64
Total 5,196 5,071 5,196 5,071

Consolidated income statement

SEK m 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales 2,526 2,384 9,872 9,326
Cost of goods sold -1,836 -1,752 -7,149 -6,895
Gross profi t 690 632 2,723 2,431
Other operating income 18 11 69 75
Selling expenses -306 -287 -1,184 -1,141
Administrative expenses -148 -149 -549 -567
R & D expenses -18 -19 -64 -72
Other operating expenses -24 -41 -80 -179
Total operating expenses -478 -485 -1,808 -1,884
Operating profi t1) 212 147 915 547
Interest income 7 5 21 17
Interest expenses -13 -6 -50 -26
Other fi nancial income and expenses -2 -3 -5 -7
Financial items -8 -4 -34 -16
Earnings before tax 204 143 881 531
Tax on profi t for the period -61 -37 -203 -137
Profi t for the period 143 106 678 394
–attributable to the parent company's shareholders 143 106 678 394
–attributable to non-controlling interests - 0 - 0
Earnings per share, SEK2) 1.88 1.38 8.89 5.16

1) One-off items and restructuring costs, which are included in operating profi t, are described in 'Reconciliations' on page 21. 2) Based on the number of outstanding shares, i.e. excluding treasury shares. Earnings per share is before and after dilution.

Consolidated statement of comprehensive income

SEK m 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Profi t for the period 143 106 678 394
Items that will not be reclassifi ed to the income
statement
Actuarial gains/losses, defi ned benefi t plans -10 7 -51 -3
Deferred tax attributable to defi ned benefi t plans 2 -1 10 1
Sum -8 6 -41 -2
Items that will later be reclassifi ed to the income
statement
Translation differences, foreign operations -84 -35 131 108
Hedges of net investments 37 2 -28 -60
Tax attributable to hedges of net investments -8 -1 6 13
Sum -55 -34 109 61
Other comprehensive income, net of tax -63 -28 68 59
Total comprehensive income 80 78 746 453
–attributable to the parent company's shareholders 80 78 746 453
–attributable to non-controlling interests - 0 - 0

Consolidated statement of cash fl ow

2019 2018 2019 2018
SEK m Oct-Dec Oct-Dec Jan-Dec Jan-Dec
OPERATING ACTIVITIES
Operating profi t 212 147 915 547
Reversal of depreciation/amortisation and impairment
losses
97 42 400 168
Reversal of capital gains (-)/losses (+) reported in operating
profi t
-1 3 1 0
Provisions, not affecting cash fl ow 8 22 -9 31
Adjustment for other items not affecting cash fl ow -3 -3 -6 -7
Total 313 211 1,301 739
Interest received 7 4 21 16
Interest paid -13 -6 -46 -24
Tax paid -62 -26 -167 -141
Cash fl ow before change in working capital 245 183 1,109 590
Change in working capital
Stock (increase -/decrease +) 46 26 -87 -71
Operating receivables (increase -/decrease +) 271 416 -20 63
Operating liabilities (increase +/decrease -) -196 -387 15 11
Total change in working capital 121 55 -92 3
Cash fl ow from operating activities 366 238 1,017 593
INVESTING ACTIVITIES
Acquisition of Group companies -3 - -36 -
Divestment of Group companies - - 2 -
Investments in intangible assets -4 -3 -14 -16
Investments in tangible fi xed assets -96 -37 -264 -104
Change in fi nancial fi xed assets 0 0 0 0
Disposal of intangible assets - 0 - 0
Disposal of tangible fi xed assets 8 0 12 15
Cash fl ow from investing activities -95 -40 -300 -105
FINANCING ACTIVITIES
Proceeds from borrowings - - 238 94
Repayment of borrowings -164 -227 -374 -522
Repayment of leasing-related liabilities -54 - -214 -
Issue of warrants - 0 0 0
Dividends to shareholders - -1 -134 -119
Cash fl ow from fi nancing activities -218 -228 -484 -547
Cash fl ow for the period 53 -30 233 -59
Cash and cash equivalents at start of the period 493 320 289 342
Effect of exchange rate changes on cash and cash
equivalents
-10 -1 14 6
Cash and cash equivalents at end of the period 536 289 536 289

Consolidated statement of fi nancial position

SEK m 31 Dec 2019 31 Dec 2018
ASSETS
Non-current assets
Goodwill 3,211 3,144
Other intangible assets 97 110
Tangible fi xed assets 2,383 1,277
Financial interest-bearing fi xed assets 34 38
Other fi nancial fi xed assets 126 79
Total non-current assets 5,851 4,648
Current assets
Stock 1,468 1,350
Accounts receivable 1,349 1,317
Other current assets 219 193
Other interest-bearing receivables 15 5
Cash and cash equivalents 536 289
Total current assets 3,587 3,154
TOTAL ASSETS 9,438 7,802
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity attributable to parent company shareholders 5,027 4,464
Non-controlling interests - 0
Total shareholders' equity 5,027 4,464
Non-current liabilities
Interest-bearing provisions for pensions and similar obligations 283 234
Liabilities to credit institutions 1,001 1,085
Leasing liabilities 798 -
Provisions 135 114
Other non-current liabilities 9 14
Total non-current liabilities 2,226 1,447
Current liabilities
Other interest-bearing liabilities 274 65
Provisions 26 36
Accounts payable 763 788
Other current liabilities 1,122 1,002
Total current liabilities 2,185 1,891
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 9,438 7,802

Financial instruments measured at fair value through the income statement

SEK m 31 Dec 2019 31 Dec 2018
Disclosures regarding the fair value by class Carrying
amount
Fair
value
Carrying
amount
Fair
value
Financial assets
Derivative receivables 15 15 5 5
Financial liabilities
Liabilities to credit institutions 1,004 1,007 1,056 1,060
Derivative liabilities 3 3 4 4

Description of fair value

Derivatives relate to forward exchange contracts which are valued at fair value by discounting the difference between the contracted forward rate and the forward rate that can be subscribed for on the balance sheet date for the remaining contract term. The fair value of interest bearing liabilities to credit institutions is provided for the purpose of disclosure and is calculated by discounting the future cash fl ows of principal and interest payments, discounted at current market interest rates.

The derivative assets, derivative liabilities and interest bearing liabilities to credit institutions that exist can all be found at Level 2 of the valuation hierarchy.

For other fi nancial assets and liabilities, the carrying amount is deemed to be a reasonable approximation of fair value. The Group holdings of unlisted shares, the fair value of which cannot be estimated reliably, are recognised at acquisition cost. The carrying amount is SEK 1 m (1).

Consolidated statement of changes in equity

SEK m Share
capital
Other
contributed
capital
Foreign
currency
translation
reserve
Profi t
brought
forward
incl. profi t
for the year
Total Non
controlling
interests
Total
sharehol
ders' equity
Opening balance, 1 January 2018 79 2,260 152 1,638 4,129 1 4,130
Profi t for the period 394 394 0 394
Other comprehensive income, net of tax
Actuarial gains/losses, defi ned benefi t plans -2 -2 - -2
Translation differences, foreign operations 108 108 0 108
Hedges of net investments -47 -47 - -47
Total comprehensive income - - 61 392 453 0 453
Dividend to shareholders -118 -118 -1 -119
Issue of warrants 0 0 - 0
Transactions with shareholders - - - -118 -118 -1 -119
Closing balance, 31 December 2018 79 2,260 213 1,912 4,464 0 4,464
Changed accounting principles -49 -49 - -49
Opening balance, 1 January 2019 79 2,260 213 1,863 4,415 - 4,415
Profi t for the period 678 678 - 678
Other comprehensive income, net of tax
Actuarial gains/losses, defi ned benefi t plans -41 -41 - -41
Translation differences, foreign operations 131 131 - 131
Hedges of net investments -22 -22 - -22
Total comprehensive income - - 109 637 746 - 746
Dividend to shareholders -134 -134 - -134
Issue of share options 0 0 - 0
Total transactions with shareholders - - - -134 -134 - -134
Closing balance, 31 December 2019 79 2,260 322 2,366 5,027 - 5,027

Shareholders' equity attributable to parent company shareholders

Share capital

The share capital of SEK 78,707,820 is divided among 78,707,820 shares with a face value of SEK 1.00. Lindab International AB (publ) holds 2,375,838 (2,375,838) treasury shares, corresponding to 3.0 percent (3.0) of the total number of Lindab shares. The number of outstanding shares totals 76,331,982 (76,331,982).

Parent company

Income statement

SEK m 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Net sales 2 1 5 4
Administrative expenses -2 -2 -7 -6
Other operating income/expenses 0 0 0 0
Operating profi t 0 -1 -2 -2
Profi t from subsidiaries 12 13 12 2,386
Interest expenses, internal -1 0 -2 -9
Earnings before tax 11 12 8 2,375
Tax on profi t for the period -3 -2 -2 0
Profi t/Loss for the period1) 8 10 6 2,375

1) Comprehensive income corresponds to profi t for all periods.

Statement of fi nancial position

SEK m 31 Dec 2019 31 Dec 2018
ASSETS
Non-current assets
Financial fi xed assets
Shares in Group companies 3,467 3,467
Financial interest-bearing fi xed assets 5 5
Deferred tax assets 1 1
Total non-current assets 3,473 3,473
Current assets
Receivables from Group companies 12 14
Current tax assets - 0
Cash and cash equivalents 0 0
Total current assets 12 14
TOTAL ASSETS 3,485 3,487
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Restricted shareholders' equity
Share capital 79 79
Statutory reserve 708 708
Non-restricted shareholders' equity
Share premium reserve 90 90
Profi t brought forward 2,346 105
Profi t/Loss for the period 6 2,375
Total shareholders' equity 3,229 3,357
Provisions
Interest-bearing provisions 5 5
Total provisions 5 5
Current liabilities
Liabilities to Group companies 248 123
Accounts payable - 0
Current tax liability 1 -
Accrued expenses and deferred income 2 2
Total current liabilities 251 125
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 3,485 3,487

Key performance indicators

2019 2018 2017
SEK m Oct-Dec Jul-Sep Apr-Jun Jan-Mar Oct-Dec Jul-Sep Apr-Jun Jan-Mar Oct-Dec
Net sales 2,526 2,462 2,569 2,315 2,384 2,397 2,392 2,153 2,185
Growth, % 6 3 7 8 9 15 13 16 7
of which organic 3 1 5 5 5 8 8 13 7
of which acquisitions/divestments 0 0 0 - 1 1 1 1 0
of which currency effects 3 2 2 3 3 6 4 2 0
Operating profi t before depreciation/amortisation and impairment
losses1)
309 380 339 287 189 243 169 114 149
Operating profi t1) 212 273 238 192 147 200 129 71 109
Adjusted operating profi t1) 212 273 238 192 173 209 148 104 119
Earnings before tax1) 204 267 228 182 143 196 124 68 103
Profi t for the period1) 143 212 181 142 106 152 91 46 84
Operating margin,%1) 8.4 11.1 9.3 8.3 6.2 8.3 5.4 3.3 5.0
Adjusted operating margin, %1) 8.4 11.1 9.3 8.3 7.3 8.7 6.2 4.8 5.4
Profi t margin, %1) 8.1 10.8 8.9 7.8 6.0 8.2 5.2 3.2 4.7
Cash fl ow from operating activities1) 366 395 177 79 238 262 51 42 346
Cash fl ow from operating activities per share, SEK1) 4.79 5.18 2.32 1.03 3.12 3.43 0.67 0.55 4.53
Cash fl ow, investments in intangible assets/tangible fi xed assets 100 51 82 45 40 30 26 24 27
Number of shares outstanding, thousands 76,332 76,332 76,332 76,332 76,332 76,332 76,332 76,332 76,332
Average number of shares outstanding, thousands 76,332 76,332 76,332 76,332 76,332 76,332 76,332 76,332 76,332
Earnings per share, SEK2) 1.88 2.78 2.38 1.85 1.38 1.99 1.19 0.60 1.10
Shareholders' equity attributable to parent company shareholders 5,027 4,947 4,708 4,643 4,464 4,387 4,276 4,300 4,129
Shareholders' equity attributable to non-controlling interests - - - - 0 1 1 1 1
Shareholders' equity per share, SEK 65.86 64.80 61.68 60.83 58.49 57.47 56.02 56.32 54.09
Net debt1) 1,771 1,996 2,262 2,130 1,052 1,249 1,487 1,369 1,305
Net debt/equity ratio, times1) 0.4 0.4 0.5 0.5 0.2 0.3 0.3 0.3 0.3
Equity/asset ratio, %1) 53.3 50.6 49.2 49.2 57.2 52.5 50.6 52.3 53.4
Return on equity, %1) 14.3 13.8 12.9 11.1 9.1 8.9 8.2 8.7 8.8
Return on capital employed, %1) 13.6 12.8 12.6 10.9 9.4 8.8 8.1 8.6 8.8
Interest coverage ratio, times1) 16.5 22.9 20.0 15.8 24.4 30.3 19.0 11.7 14.7
Net debt/EBITDA, excl. one-off items and restructuring costs1) 1.6 1.5 1.5 1.6 1.6 1.9 2.0 2.1 2.2
Number of employees by end of period 5,196 5,148 5,277 5,148 5,071 5,142 5,195 5,132 5,083
2019 2018 2017 2016
SEK m Jan-Dec Jan-Dec Jan-Dec Jan-Dec
Net sales 9,872 9,326 8,242 7,849
Growth, % 6 13 5 3
of which organic 3 8 4 4
of which acquisitions/divestments 0 1 0 0
of which currency effects 3 4 1 -1
Operating profi t before depreciation/amortisation and impairment losses1) 1,315 715 654 657
Operating profi t1) 915 547 492 483
Adjusted operating profi t1) 915 634 511 511
Earnings before tax1) 881 531 467 445
Profi t for the period1) 678 394 347 306
Operating margin,%1) 9.3 5.9 6.0 6.2
Adjusted operating margin, %1) 9.3 6.8 6.2 6.5
Profi t margin, %1) 8.9 5.7 5.7 5.7
Cash fl ow from operating activities1) 1,017 593 410 499
Cash fl ow from operating activities per share, SEK1) 13.32 7.77 5.37 6.54
Cash fl ow to investments in intangible assets and tangible fi xed assets 278 120 100 125
Number of shares outstanding, thousands 76,332 76,332 76,332 76,332
Average number of shares outstanding, thousands 76,332 76,332 76,332 76,332
Earnings per share, SEK2) 8.89 5.16 4.54 4.02
Dividens per share, SEK 3.60 1.75 1.55 1.40
Shareholders' equity attributable to parent company shareholders 5,027 4,464 4,129 3,848
Shareholders' equity attributable to non-controlling interests - 0 1 1
Shareholders' equity per share, SEK 65.86 58.49 54.09 50.41
Net debt1) 1,771 1,052 1,305 1,396
Net debt/equity ratio, times1) 0.4 0.2 0.3 0.4
Equity/asset ratio, %1) 53.3 57.2 53.4 51.3
Return on equity, %1) 14.3 9.1 8.8 8.4
Return on capital employed, %1) 13.6 9.4 8.8 8.8
Interest coverage ratio, times1) 18.8 21.4 14.1 11.4
Net debt/EBITDA, excl. one-off items and restructuring costs1) 1.6 1.6 2.2 2.5
Number of employees end of period 5,196 5,071 5,083 5,136

1) For key performance indicators excl. the effect of implemented accounting standard, IFRS 16 Leases, see 'Reconciliations' page 21. 2) Earnings per share is before and after dilution.

3) Proposed dividend.

Notes

NOTE 1 – ACCOUNTING POLICIES

The consolidated accounts for the interim report have been prepared in line with the annual consolidated accounts for 2018, in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board RFR 1, Supplementary Accounting Rules for Groups.

This interim report has been prepared in accordance with IAS 34. The Group has applied the same accounting policies as described in the Annual Report for 2018 except for leases (see below).

With exception for the new standard regarding leasing, none of the new or amended standards, interpretations or improvements adopted by the EU have had any signifi cant impact on the Group.

Information in terms of IAS 34 Interim fi nancial reporting has been disclosed in notes to the fi nancial statements as well as in other pages of the interim report.

New or amended standards which came into force during 2019

IFRS 16 Leases is applied by Lindab as of January 1, 2019 and the standard replaces IAS 17 Leases. The Group has implemented the new standard based on a simplifi ed transition method and all leases that are affected by the new standard have been valued on the fi rst day of application as if the standard had always been valid. By applying a relief rule, comparative fi gures in the Group's reported income statement, statement of fi nancial position and statement of cash fl ow have not been restated. On the other hand, there are some clarifi cations of the effects of IFRS 16 Leases on key performance indicators for the year 2019 under 'Reconciliations' on page 21.

Prior to the implementation of IFRS 16 Leases, Lindab analysed the contractual and fi nancial implications of rental and leasing agreements within the Group. The evaluation resulted in a leasing portfolio corresponding to approximately 1,000 contracts being capitalised in the opening balance for 2019. Most of these rental and lease agreements related to vehicles, but the majority of the capitalised value was attributable to property related lease agreements. The implementation of IFRS 16 Leases has an estimated effect on the opening balance of the statement of fi nancial position according to the table below.

SEK m Closing
balance 31 Dec
2018 before
transition to
IFRS 16
Effect due to
transition to
IFRS 16
Adjusted
opening
balance
1 Jan 2019
Tangible fi xed assets 1,277 9912) 2,268
Deferred tax assets 73 10 84
Equity 4,464 -49 4,415
Non-current leasing
liability
291) 831 860
Current leasing liability 41) 219 223

1) Future obligations for fi nancial lease contracts in accordance with IAS 17 Leases. For detailed reconciliation of recognised leasing liability at beginning of 2019, in accordance with IFRS 16 Leases, see note 2 in the Annual Report of 2018. 2) Closing balance of leasing related tangible assets amounted to SEK 1,009 m as per end of December 2019.

As far as the Group's income statement is concerned, as of January 1, 2019, it has to a certain extent changed the cost structure as a result of the implementation of IFRS 16 Leases. The change in cost structure is a consequence of the fact that previous operating expenses attributable to operational leases are replaced by depreciations and interest expenses. Based on identifi ed rental and leasing agreements at the beginning of 2019, operating profi t was expected to improve by SEK 27 m (in line with actual cost) on an annual basis for the current fi scal year, which is offset by an increased fi nancial expense by a slightly higher amount. The net effect on profi t after fi nancial items amounted to SEK 0.5 m.

Lease agreements

IFRS 16 Leases is based on the fact that all rental and leasing agreements are to be reported in the lessee's statement of fi nancial position, with the possibility of exemptions with regard to short-term leasing agreements and agreements where the underlying asset amounts to a low value. Lindab has chosen to apply exemptions provided by IFRS, which means that the statement of fi nancial position will not recognise rental and lease agreements with a lease term shorter than 12 months and leasing agreements for which the underlying asset has a low value (EUR 5 k according to Lindab's application). Lease payments from these excluded agreements are recognised directly as an operating expense on a straight-line basis over the leasing period.

Lindab evaluates at the start of new agreements if they contain leasing components that are to be capitalised in accordance with IFRS 16 Leases. Lease payments that are capitalised are primarily fi xed fees respectively variable index/price charges as well as any relevant residual value guarantees, option prices or termination charges. Agreements that consist of both a capitalised and non-capitalised component are capitalised in their entirety if the latter part is of an immaterial value. The capitalisation of rental and leasing agreements are initially made at present value of future lease payments, discounted based on the agreement's implicit interest rate or incremental borrowing rates established for the Group. The right of use assets also include lease payments paid at or before the commencement date of the lease, existing initial direct expenses and any estimated restoration costs for which there are reported provisions in accordance with IAS 37 Provisions, contingent liabilities and contingent assets. In connection with the capitalisation, an assessment is also made regarding the expected contract period/right of use of the asset in question within the framework of the existing agreement.

The tangible assets/right of use included in the Group's statement of fi nancial position in accordance with IFRS 16 Leases are in subsequent periods recognised at cost less depreciation and any write-downs or adjustments for revaluations made. Depreciation takes place on a straight-line basis from the commencement date of the agreement and over the useful life which is the shortest of the estimated economic life and the agreed lease term. Impairment losses are reported in accordance with IAS 36 Impairment of assets. With regard to the leasing liabilities that are reported in the

statement of fi nancial position, they are included on an ongoing basis at amortised cost less lease payments made and taking into account the calculated interest effect. Revaluation of the leasing related balance sheet items takes place on an ongoing basis based on changes in interest/index components, leasing periods, residual value guarantees, etc.

The parent company

The fi nancial statements for the parent company are prepared according to the Swedish Annual Accounts Act and RFR 2, Accounting for legal entities and according to the same accounting policies as were applied in the Annual Report for 2018.

NOTE 2 – EFFECTS OF CHANGES IN ACCOUNTING ESTIMATES AND JUDGEMENTS

Signifi cant estimates and judgements are described in Note 4 in the Annual Report for 2018. Except for leases no changes have been made to these estimates, judgements that would have a substantial impact on this interim report.

As for leasing, Lindab applies IFRS 16 Leases since 1 January 2019 (see Note 1). In connection with the recognition of rental and leasing agreements, there are some elements of subjective estimates and assessments, both in terms of the possibility/likelihood of utilising extension, termination and purchase options, assessed right of use for contracts with undefi ned maturity and the actual expected right of use of the asset within the framework of existing agreements. From a materiality perspective, the most signifi cant leases are related to properties where these assessments can have a material impact on the Group. Lindab has set up a structure for how the assessment of these components should take place and in terms of properties, this structure is based on the properties' main character (production, warehouses, branches respectively offi ces). The guidelines are aimed at guiding and refl ecting, in a fair manner, expected right of use and thus also the value of the assets in question on the basis of known information at each fi nancial closing. The assessments also include, in accordance with IAS 36 Impairment of assets, testing of the assets' recognised value from a write-down perspective.

Another component that affects the recognised value of rental and leasing agreements in the Group's statement of fi nancial position is the underlying discount factors. In the calculation of current balance sheet value, Lindab applies a fair incremental borrowing rate assessed for the Group for each currency and category of asset, all with the purpose of refl ecting rental and leasing related assets and fi nancial commitments in a fair manner.

NOTE 3 – BUSINESS COMBINATIONS

On April 2, 2019, Lindab acquired all shares and voting rights in the British ventilation company Ductmann Ltd., whose business is mainly focused on production and sale of rectangular ducts and fi re-rated ducting for ventilation systems. The acquisition is a natural step for Lindab to further strengthen the offering in ventilation systems in the UK market. Ductmann Ltd. is registered in Dudley, UK. The company has annual sales of approximately SEK 43 m and has 40 employees.

SEK 61 m, which was mainly settled in cash at the time of acquisition during April 2019. The net purchase price after adjustment for cash and cash equivalents of acquired company amounted to SEK 33 m. There are no additional purchase settlements. Costs related to the acquisition amounted to SEK 1 m.

According to the fi nal purchase price allocation analysis, the acquisition results in a goodwill of SEK 15 m. This is due to, among other things, competence of the management and a well-established market presence. Recognised intangible assets in acquired company mainly relate to customer based values. For specifi cation of acquired assets and liabilities at the time of acquisition and fi nal purchase price allocation, see the table below.

Acquired businesses

31 Dec 2019 31 Dec 2018
12 -
12 -
4 -
11 -
28 -
-2 -
-10 -
-9 -
46 -
15 -
61 -

Ductmann Ltd. is consolidated in Lindab as of April 2, 2019. As a result of the acquisition of the company, the Group's sales from the acquisition date to December 31, 2019 increased by SEK 33 m and profi t after tax by SEK 3 m. If the acquisition had been implemented as of January 1, 2019, the Group's net sales had increased by approximately SEK 45 m and profi t after tax by SEK 5 m. Ductmann Ltd. is part of the Ventilation Systems segment.

On July 26, 2019, Lindab divested all shares and voting rights in the Dutch subsidiary Lindab Door B.V. The business of the company is mainly related to sales and assembly of industrial doors on the domestic market. The annual sales amounts to approximately SEK 30 m and the operating profi t is minor. At the time of divestment, the total balance sheet value amounted to SEK 7 m and there were 14 employees. The divestment is part of Lindab's strategy with focus on long-term sustainable and profi table growth. The sales price amounted to SEK 4 m, which resulted in a consolidated capital loss of almost SEK 4 m including consideration of transaction related costs. The capital loss is recognised under Other operating expenses in the consolidated income statement. Lindab Door B.V. was part of segment Profi le Systems.

The cash fl ow related to business combinations was, beside above mentioned transactions, also impacted by settlement of some conditional additional purchase price during the year. This additional purchase price amounted to SEK 3 m and was related to the acquisition of A.C. Manufacturing Ltd in December 2017. No business combinations have been made during 2018.

The total acquisition cost of Ductmann Ltd. amounted to

NOTE 4 – OPERATING SEGMENTS

As of January 1, 2019, Lindab has implemented a new organisational structure. The former business area Products & Solutions has been divided into two new business areas, Ventilation Systems and Profi le Systems. The purpose of the reorganisation is to increase transparency and focus on the respective underlying businesses and to ensure an operational organisational structure that supports how Lindab strategically controls and monitors the operations.

In order to refl ect Lindab's organisational change and how operations are controlled and reported, as of January 1, 2019, have the two previously reported segments (Products & Solutions and Building Systems) been replaced with three segments: Ventilation Systems, Profi le Systems respectively Building Systems. The basis for segmental reporting is the various customer offers provided by each business area. Comparative periods reported in the interim report have been restated based on the new segment structure.

The customer offers within each segment are as follows:

  • Ventilation Systems offers air duct systems with accessories and indoor climate solutions for ventilation of heating and cooling to installers and other customers in the ventilation industry.
  • Profi le Systems offers the construction industry products and systems in sheet metal for rainwater systems, cladding for ceilings and walls as well as steel profi les for wall, ceiling and beam constructions.
  • Building Systems offers complete prefabricated steel construction systems.

Both Ventilation Systems' and Profi le Systems' operations are managed based on geographically divided sales organisations, which are supported by a number of product and system areas with joint production and purchasing functions for each business area. The Building Systems segment consists of a separate integrated project organisation. What is reported under Other includes the parent company's and other common functions.

Information on income from external customers and adjusted operating profi t per operating segment is presented in the tables on page 10.

Internal prices between the Group's segments are set based on the principle of arm's length, that is, between parties that are independent of each other, well-informed and have an interest in the transaction being carried out. Assets and investments are reported where the asset exists.

Assets and liabilities by segment that have changed by more than 10 percent (excluding the effect of transition to IFRS 16 Leases) compared with the end of 2018 are shown below:

  • Ventilation Systems: Stock has increased by 13 percent and Shareholders' equity has increased by 24 percent.
  • Profi le Systems: No changes exceeding 10 percent.
  • Building Systems: Other current receivables have increased by 57 percent and Other current liabilities have increased by 13 percent.

All segments' tangible fi xed assets and fi nancial liabilities have been affected by the transition to IFRS 16 Leases. When implementing the new standard, each rental and lease agreement has been allocated to the segment where the asset is used.

NOTE 5 - RELATED PARTY TRANSACTIONS

Lindab's related parties and the extent of transactions with its related parties are described in Note 30 of the Annual Report for 2018.

At the Annual General Meeting in May 2019, it was resolved to adopt a share option programme for senior executives and key persons. Under the programme, 175,000 share options were acquired by senior executives and key persons during the second quarter. During the third quarter repurchase of 45,000 previously issued warrants took place. All transactions have been to market value. See more under 'Share option programme', page 6.

During the year, there have been no other transactions between Lindab and related parties which have had a signifi cant impact on the company's position and profi t.

This interim report for Lindab International AB (publ) has been submitted following approval by the Board of Directors.

Båstad, 5 February 2020 Ola Ringdahl President and CEO

Auditor's review report

Introduction

We have reviewed the interim report for Lindab International AB (publ), org nr 556606-5446, for the period 1 January to 31 December 2019. The Board of Directors and the CEO are responsible for the preparation and presentation of this interim fi nancial report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim fi nancial report based on our review

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with ISA and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all signifi cant matters that might be identifi ed in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material respects, prepared for the Group in accordance with IAS 34 and the Annual Accounts Act and for the parent company in accordance with the Annual Accounts Act.

Gothenburg, 5 February 2020 Deloitte AB Hans Warén Authorised Public Accountant

Reconciliations, key performance indicators not defi ned according to IFRS

The company presents certain fi nancial measures in the interim report which are not defi ned according to IFRS. The company considers these measures to provide valuable supplementary information for investors and the company's management as they enable the assessment of relevant trends. Lindab's defi nitions of these measures may differ from other companies' defi nitions of the same terms. These fi nancial measures should therefore be seen as a

supplement rather than as a replacement for measures defi ned according to IFRS. Defi nitions of measures which are not defi ned according to IFRS and which are not mentioned elsewhere in the interim report are presented below. Reconciliation of these measures is shown in the tables below. As the amounts in the tables below have been rounded off to SEK m, the calculations do not always add up due to round-off.

Reconciliations

Amounts in SEK m unless otherwise indicated.

Return on shareholders' equity 31 Dec 2019 31 Dec 20191) 31 Dec 2018
Profi t for the period, rolling twelve months 678 678 394
Average shareholders' equity 4,758 4,797 4,312
Return on shareholders' equity, % 14.3 14.1 9.1
Return on capital employed 31 Dec 2019 31 Dec 20191) 31 Dec 2018
Total assets 2) 9,438 8,419 7,802
Provisions 135 135 114
Other non-current liabilities 9 9 14
Total non-current liabilities 144 144 128
Provisions
Accounts payable
Other current liabilities
26
763
1,122
26
763
1,122
36
788
1,002
Total current liabilities 1,911 1,911 1,826
Capital employed 7,383 6,364 5,848
Earnings before tax, rolling twelve months
Financial expenses, rolling twelve months
Total
881
55
936
880
29
909
531
33
564
Average capital employed 6,870 6,312 5,998
Return on capital employed, % 13.6 14.4 9.4
One-off items and restructuring costs 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Operating profi t 212 147 915 547
Ventilation Systems - -3 - -12
Profi le Systems - -5 - -5
Building Systems - -9 - -25
Other operations - -9 - -45
Adjusted operating profi t 212 173 915 634

Operating profi t has been adjusted by the following one-off items and restructuring costs per quarter:

2/2019 - 3/2019 -

1/2018 SEK -33 m related to assessment of structural alternatives and measures associated with the turnaround programme.

2/2018 SEK -19 m related to assessment of structural alternatives and measures associated with the turnaround programme.

3/2018 SEK -9 m related to restructuring program and measures associated with the turnaround programme.

4/2018 SEK -26 m related mainly to restructuring program and measures associated with the turnaround programme.

Net debt 31 Dec 2019 31 Dec 20191) 31 Dec 2018
Non-current interest-bearing provisions for pensions and similar obligations 283 283 234
Non-current liabilities to credit institutions 1,001 1,001 1,085
Non-current leasing liabilities 798 - -
Current other interest-bearing liabilities 274 33 65
Total liabilities 2,356 1,317 1,384
Financial interest-bearing fi xed assets 34 34 38
Other interest-bearing receivables 15 15 5
Cash and cash equivalents 536 536 289
Total assets 585 585 332
Net debt 1,771 732 1,052
Net debt/EBITDA 31 Dec 2019 31 Dec 20191) 30 Dec 2018
Average net debt 2,052 1,041 1,318
Adjusted operating profi t, rolling twelve months 915 888 634
Depreciation/amortisation and impairment losses, rolling twelve months 400 186 168
EBITDA 1,315 1,074 802
Net debt/EBITDA, times 1.6 1.0 1.6

1) Key performance indicators excluding the effect of implemented accounting standard IFRS 16.

2) Among total assets, the difference of SEK 1,019 m by December 31, 2019 relates to tangible fi xed assets corresponding to SEK 1,009 m as a result of capitalisation of rental and leasing agreements in accordance with IFRS 16. Remaining difference in total assets relates to deferred tax receivables.

1/2019 -

4/2019 -

Organic growth 2019
Oct-Dec
2018
Oct-Dec
2019
Jan-Dec
2018
Jan-Dec
Change Net sales 142 199 546 1,084
Of which
Organic 74 109 291 684
Acquisitions/divestments 2 13 19 57
Currency effects 66 77 236 343
Interest coverage ratio, times 2019
Oct-Dec
2019
Oct-Dec1)
2018
Oct-Dec
2019
Jan-Dec
2019
Jan-Dec1)
2018
Jan-Dec
Earnings before tax 204 203 143 881 880 531
Interest expenses 13 7 6 50 24 26
Total 217 210 149 931 904 557
Interest expenses 13 7 6 50 24 26
Interest coverage ratio, times 16.5 31.4 24.8 18.8 38.5 21.4
Operating profi t before depreciation/amortisation-EBITDA 2019
Oct-Dec
2019
Oct-Dec1)
2018
Oct-Dec
2019
Jan-Dec
2019
Jan-Dec1)
2018
Jan-Dec
Operating profi t 212 205 147 915 888 547
Depreciation/amortisation and impairment losses 97 43 42 400 186 168
Operating profi t before depreciation/amortisation-EBITDA 309 248 189 1,315 1,074 715

1) Key performance indications excluding the effect of implemented accounting standard, IFRS 16 Leases.

Additional key performance indicators, including respectively excluding IFRS 16, with aim to increase comparability against previous periods

Amounts in SEK m unless otherwise indicated 2019 incl.
IFRS 16
2019 excl.
IFRS 16
2019 incl.
IFRS 16
2019 excl.
IFRS 16
Operating profi t, operating margin and earnings before tax Oct-Dec % Oct-Dec % Jan-Dec % Jan-Dec %
Ventilation Systems 129 8.7 124 8,4 609 10.8 589 9.8
Profi le Systems 85 12.0 84 11.9 270 10.4 267 10.7
Building Systems 15 4.4 14 4,1 85 6.9 81 6.0
Other operations -17 - -17 - -49 - -49 -
Adjusted operating profi t 212 8.4 205 8.1 915 9.3 888 9.0
One-off items and restructuring costs - - - - - - - -
Operating profi t 212 8.4 205 8.1 915 9.3 888 9.0
Net fi nancial items -8 - -2 - -34 - -8 -
Earnings before tax 204 8.1 203 8.0 881 8.9 880 8.9
2019 incl.
IFRS 16
2019 excl.
IFRS 16
2019 incl.
IFRS 16
2019 excl.
IFRS 16
Key performance indicators Oct-Dec Oct-Dec Jan-Dec Jan-Dec
Operating profi t before depreciation/amortisation and impairment losses 309 248 1,315 1,074
Operating profi t 212 205 915 888
Adjusted operating profi t 212 205 915 888
Earnings before tax 204 203 881 880
Profi t for the period 143 143 678 678
Operating margin,% 8.4 8.1 9.3 9.0
Adjusted operating margin, % 8.4 8.1 9.3 9.0
Profi t margin, % 8.1 8.0 8.9 8.9
Cash fl ow from operating activities1) 366 312 1,017 803
Cash fl ow from operating activities per share, SEK 4.79 4.09 13.32 10.52
Net debt 1,771 732 1,771 732
Net debt/equity ratio, times 0.4 0.1 0.4 0.1
Equity/asset ratio, % 53.3 59.8 53.3 59.8
Return on equity, % 14.3 14.1 14.3 14.1
Return on capital employed, % 13.6 14.4 13.6 14.4
Interest coverage ratio, times 16.5 31.4 18.8 38.5
Net debt/EBITDA, excl. one-off items and restructuring costs 1.6 1.0 1.6 1.0

1) Within cash fl ow from operating activities there has been a reclassifi cation to interest related to rental and leasing agreements. Previously this was included in the operating profi t but from 2019 it is part of 'Interest paid'. The amount of leasing-related interest amounts to SEK 6 m in the quarter and to SEK 26 m in the period January to December.

Defi nitions

Key performance indicator according to IFRS

Earnings per share, SEK: Profi t for the period attributable to parent company shareholders to average number of shares outstanding.

Key performance indicators not defi ned according to IFRS

Adjusted operating margin: Adjusted operating profi t expressed as a percentage of net sales.

Adjusted operating profi t: Operating profi t adjusted for one-off items and restructuring costs when the amount is signifi cant in size.

Cash fl ow from operating activities per share, SEK: Cash fl ow from operating activities to number of shares outstanding at the end of the period.

Equity/asset ratio: Shareholders' equity including non-controlling interests, expressed as a percentage of total assets.

Interest coverage ratio, times: Earnings before tax plus interest expense to interest expense

Investments in intangible assets and tangible fi xed assets: Investments excluding acquisitions and divestments of companies.

Net debt: Interest-bearing provisions and liabilities less interest-bearing assets and cash and cash equivalents.

NET debt/EBITDA: Average net debt in relation to EBITDA, excluding one-off items and restructuring costs, based on a rolling twelve-month calculation.

Net debt/equity ratio: Net debt to shareholders' equity including non-controlling interests.

One-off items and restructuring costs: Items not included in the ordinary business transactions and when each amount is

1) Average capital is based on the quarterly value.

Lindab in brief

The Group had sales of SEK 9,872 m in 2019 and is established in 31 countries with approximately 5,200 employees.

The main market is non-residential construction, which accounts for 80 percent of sales, while residential construction accounts for 20 percent of sales. During 2019, the Nordic region accounted for 43 percent, Western Europe for 35 percent, CEE/CIS (Central and Eastern Europe) for 21 percent and Other markets for 1 percent of total sales.

The share is listed on the Nasdaq Stockholm List, Mid Cap, under the ticker symbol LIAB.

Business concept

Lindab develops, manufactures, markets and distributes products and system solutions for simplifi ed construction and improved indoor climate.

Business model

Lindab's product and solution offering includes products and

signifi cant in size and therefore has an effect on the profi t or loss and key performance indicators, are classifi ed as one-off items and restructuring costs.

Operating margin: Operating profi t expressed as a percentage of net sales.

Operating profi t: Profi t before fi nancial items and tax.

Operating profi t before depreciation/amortisation - EBITDA: Operating profi t before planned depreciation/amortisation.

Organic growth: Change in sales adjusted for currency effects as well as acquisitions and divestments compared with the same period of the previous year.

Profi t margin: Earnings before tax expressed as a percentage of net sales.

Return on capital employed: Earnings before tax after adding back fi nancial expenses based on a rolling twelve-month calculation, expressed as a percentage of average capital employed1). Capital employed refers to total assets less non-interest-bearing provisions and liabilities.

Return on shareholders' equity: Profi t for the period attributable to parent company shareholders based on a rolling twelve-month calculation, expressed as a percentage of average shareholders' equity1) attributable to parent company shareholders.

Shareholders' equity per share, SEK: Shareholders' equity attributable to parent company shareholders to number of shares outstanding at the end of the period.

entire systems for ventilation, cooling and heating, as well as construction products and building solutions such as steel rainwater systems, roofi ng and wall cladding, steel profi les for wall, roof and beam constructions and large span buildings. Lindab also offers complete, pre-engineered steel construction systems under the Astron brand. These are complete building solutions comprising the outer shell with the main structure, wall, roof and accessories.

Lindab's products are characterised by high quality, ease of assembly, energy effi ciency and environmentally friendly design and are delivered with high levels of service. Altogether, this provides greater customer value.

Lindab's value chain is characterised by a good balance between centralised and decentralised functions. The distribution has been developed in order to be close to the customer. Sales are made through around 130 Lindab branches and approximately 3,000 retailers, with the exception of Building Systems, which conducts sales through a network of approximately 300 building contractors.

Lindab share

January - December 2019

Share price performance: +88%
Average share turnover/day: 210,337
Highest closing price (December 13): 121.0 SEK
Lowest closing price (January 2): 63.8 SEK
Closing price December 30: 119.6 SEK
Market cap December 30: SEK 9,129 m
Total no. of shares: 78,707,820
- whereof treasury shares: 2,375,838
- whereof outstanding shares: 76,331,982

Share price performance 2019, SEK

Press- and analyst meetings Calendar

A live audiocast will be held at 13:00 am (CET) on 6 February. The Interim Report will be presented by Ola Ringdahl, President and CEO, and Malin Samuelsson, CFO.

To access the audiocast, please call:

Phone +46 (0) 8 505 583 58 Alternatively phone +44 333 300 9034

The audiocast and presentation can be followed live via Lindabs homepage.

For more information see www.lindabgroup.com.

Annual Report 27 March 2020
Interim Report January - March 29 April 2020
Annual General Meeting 29 April 2020
Interim Report January - June 17 July 2020
Interim Report January - September 23 October 2020
All fi nancial reports will be published at
www.lindabgroup.com.

This is information that Lindab International AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below, at 07:40 am (CET) on 6 February 2020.

For further information, please contact:

Ola Ringdahl, President and CEO | E-mail: [email protected] Malin Samuelsson, CFO | E-mail: [email protected]

Telephone +46 (0) 431 850 00 For more information, please visit www.lindabgroup.com.

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