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Elanders

Earnings Release Oct 19, 2018

3038_10-q_2018-10-19_e6cc5330-168c-4743-a9db-99c98391b564.pdf

Earnings Release

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Press release from Elanders AB (publ) 2018-10-19

January - September

  • Net sales increased by 16 percent to MSEK 7,852 (6,758), of which 10 percentage points were organic growth.
  • EBITA increased to MSEK 353 (269), which corresponded to an EBITA margin of 4.5 (4.0) percent.
  • The operating result increased to MSEK 305 (222).
  • The result before tax increased to MSEK 234 (163).
  • The result included one-off items of MSEK 0 (-28). One-off items last year consisted primarily of costs for redundancies.
  • The net result increased to MSEK 150 (120) or SEK 4.17 (3.41) per share. The net result includes a one-off deferred tax cost of around MSEK 11, when deferred tax assets were revaluated using the new corporate tax rate in Sweden.
  • Operating cash flow increased to MSEK 144 (-119).

Third quarter

  • Net sales increased to MSEK 2,817 (2,355), which was an increase of 20 percent, of which 9 percentage points were organic growth.
  • EBITA increased to MSEK 154 (55), which corresponded to an EBITA margin of 5.5 (2.3) percent.
  • The operating result increased to MSEK 138 (40).
  • The result before tax increased to MSEK 114 (20).
  • The result included one-off items of MSEK 0 (-28). One-off items last year consisted primarily of costs for redundancies.
  • The net result increased to MSEK 75 (14) or SEK 2.07 (0.39) per share.
  • Operating cash flow increased to MSEK 52 (-6).

COMMENTS FROM THE CEO

The positive trend we discerned at the end of the second quarter continued into the third, which led to Elanders delivering, in terms of results, our best quarter ever. Strong organic growth continues, amounting to nine percent in the quarter. Business area Supply Chain Solutions is behind most of the increase in sales. Growth is generated through both new and existing customers. The combined print and supply chain business in the US with subscription boxes also continued to show strong growth.

Business area Supply Chain Solutions presented a result which was twice the size of that in the third quarter last year. This is a tangible sign that our customer projects, which we previously had problems with, are now in balance. Organic growth amounted to nine percent and was generated in both Europe and Asia. During the quarter we initiated a new customer project with around MSEK 100 in annual net sales and the implementation process went well and even better than planned. In the fourth quarter we will start up yet another customer project with annual net sales of around MSEK 65. This project entails an omnichannel solution for profile articles for a well-known European soccer club with an

almost totally automated warehouse. All in all this is an investment of close to MSEK 50 and most of it has already been made in the second and third quarters. An omnichannel solution refers to a process that handles the entire product flow, both online sales and purchases made in a physical store. The project is proceeding right according to plan.

The market for business area Print & Packaging Solutions continues to be troubled by price pressure due to overcapacity which led to a reduction in the business area's organic growth by three percent in the quarter, not counting the subscription box business in the US. This business continues to show strong growth and we expect sales to double in 2018 compared to 2017 when it generated USD 18 million in net sales. Despite the price pressure the business area presented a better result for the quarter than last year, even if the one-off items from previous year are excluded. The shutdown of our last offset operations in Sweden, where 70 employees were made redundant, has been completed. In connection to the restructuring of the Swedish business, investments are made within supply chain management and, for instance, a logistics unit in Borås has started up.

The positive trend continued in e-Commerce Solutions with a significantly better result for the third quarter and sales in line with last year. The business area is now gearing up for the fourth quarter which is normally its strongest quarter.

Our focus going forward is still on developing our business by selling a larger portion of service where we take a higher degree of responsibility for our customers' value chain. We also need to be more selective in what we our offer so that we can successively raise the margins, improve cash flow and reduce the amount of capital tied up.

Magnus Nilsson President and Chief Executive Officer

January - September Third quarter MSEK 2018 2017 2016 2018 2017 2016 Net sales 7,852 6,758 3,956 2,817 2,355 1,878 Operating expenses -7,547 -6,536 -3,735 -2,679 -2,315 -1,779 Operating result 305 222 221 138 40 100 Net financial items -71 -59 -24 -24 -20 -14 Result before tax 234 163 197 114 20 86

FINANCIAL OVERVIEW

GROUP

Our business

Elanders is a global supplier of integrated solutions in supply chain management, print & packaging and e-commerce. The Group has over 7,000 employees and operates in some 20 countries on four continents. Our most important markets are China, Germany, Singapore, Sweden, the United Kingdom and the USA. Our major customers are active in the branches Automotive, Electronics, Fashion & Lifestyle, Industrial and Health Care & Life Science. The business is conducted mainly through three business areas, Supply Chain Solutions, Print & Packaging Solutions and e-Commerce Solutions, which are all more or less independent businesses, but together they form a whole that few companies can compete with.

Net sales and result

January – September

Net sales increased by MSEK 1,094 to MSEK 7,852 (6,758) compared to the same period last year. Cleared of exchange rate fluctuations and effects of acquisitions, net sales grew organically by ten percent, mainly in Supply Chain Solutions. EBITA, i.e. the operating result adjusted for amortization on assets identified in conjunction with acquisitions, increased to MSEK 353 (269), which corresponded to an EBITA margin of 4.5 (4.0)%. The outcome of last year included one-off items of around MSEK 28 that primarily stemmed from redundancy costs. When results in foreign subsidiaries were converted into Swedish krona changes in exchange rates affected the operating result positively by around MSEK 10.

The improved result is mainly a consequence of getting previously problematic customer projects in Supply Chain Solutions under control. These customer projects had a negative affect on the result in the third and fourth quarters of 2017 as well as the first quarter of 2018. We have been able to negotiate increased prices with the customers and a number of streamlining measures have been put into motion.

In June 2018 the Swedish government adopted the new tax proposal on corporate income tax. The new rules will be effective on 1 January 2019 and entail a gradual lowering of corporate income tax from 22.0 to 20.6%. As a consequence the Group's deferred taxes in Sweden were revaluated using the new corporate tax rate which led to a higher deferred tax costs and a negative effect on the net result in the second quarter of MSEK 11.

Third quarter

During the quarter net sales increased by MSEK 462 to MSEK 2,817 (2,355) compared to the same period last year. Cleared of exchange rate fluctuations and effects of acquisitions, net sales grew organically by nine percent, mainly in Supply Chain Solutions. EBITA, i.e. the operating result adjusted for amortization on assets identified in conjunction with acquisitions, increased to MSEK 154 (55), which corresponded to an EBITA margin of 5.5 (2.3)%. The outcome of last year included one-off items of around MSEK 28 that primarily stemmed from redundancy costs. When results in foreign subsidiaries were converted into Swedish krona changes in exchange rates affected the operating result positively by around MSEK 10.

Supply Chain Solutions

Elanders is one of the leading companies in the world in Global Supply Chain Management. Our services include taking responsibility for and optimizing customers' material and information flows, everything from sourcing and procurement combined with warehousing to after sales service.

Supply Chain Solutions January-September
2018
2017 Third quarter
2018
2017 Last
12 months
Full year
2017
Net sales, MSEK 5,950 5,108 2,189 1,818 7,849 7,007
EBITA, MSEK 286 247 137 71 342 302
EBITA-margin, % 4.8 4.8 6.2 3.9 4.4 4.3
Operating result, MSEK 246 211 123 59 288 253
Operating margin, % 4.1 4.1 5.6 3.3 3.7 3.6
Average number of employees 5,608 4,952 5,740 5,050 5,547 5,055

The positive trend from the sceond quarter continued in business area Supply Chain Solutions with a tangibly improved result and organic net sales growth of nine percent for the quarter. There was growth in both Asia and Europe. The comparable figures for last year in the business area included one-off items of MSEK 5 attributable to redundancies.

A couple of the new customer projects mentioned above had, at the end of last year and the beginning of this one, considerably higher initial costs than expected. A large part of these expenses were for extra resources in the form of extra personnel, consultants and transportation that were necessary to

start the projects. As previously communicated these projects were expected to generate a considerably better result during the third and fourth quarters of this year than the previous year, which was proven true in the figures for this quarter. Two new customer projects are in the works in the second half of the year, one in the third quarter and one in the fourth. Implemenation of the first one went better than planned and the second is progressing according to plan.

Print & Packaging Solutions

Through its innovative force and global presence the business area Print & Packaging offers costeffective solutions that can handle customers' local and global needs for printed material and packaging, often in combination with advanced order platforms on the Internet or just-in-time deliveries.

January-September Third quarter Last Full year
Print & Packaging Solutions 2018 2017 2018 2017 12 months 2017
Net sales, MSEK 1,847 1,592 609 520 2,475 2,220
EBITA, MSEK 89 67 24 4 125 103
EBITA-margin, % 4.8 4.2 4.0 0.7 5.1 4.6
Operating result, MSEK 84 59 23 1 117 92
Operating margin, % 4.5 3.7 3.7 0.2 4.7 4.2
Average number of employees 1,479 1,525 1,470 1,533 1,490 1,525

The market for Print & Packaging Solutions continues to be characterized by price pressure and overcapacity. Lower net sales in Europe and Asia are compensated by organic growth in the US where there has been a noticeable improvement in the result over last year. This improvement can be found in both the existing print business and the part of the operations that has been transformed into a combined print and supply chain management unit. The section of the combined operations that produces supply chain services is still included in Print & Packaging Solutions and is the underlying factor behind the increase in net sales in the business area as a whole. Over the past two years this supply chain service has skyrocketed from nearly zero in net sales to USD 18 million in 2017, and this figure will most likely more than double in 2018. During the period January-September 2018 this section generated net sales of close to USD 32 million.

The shutdown of offset operations in Sweden is now completed and is expected to have some positive effects on the Swedish operations' result in 2019. At the same time the Swedish business is investing in supply chain management and has, for instance, started up a logistics unit in Borås and is holding discussions with several potential customers. The comparable figures for last year in the business area included one-off items of some MSEK 16 primarily attributable to redundancies in Sweden.

On 15 October 2018 Elanders signed a contract with the Edelmann Group, a global German packaging company with operations in, for instance, China, Germany, India and the US, to transfer its Beijing, China operations in Print & Packaging Solutions. This unit has nearly 170 employees and annual net sales of around MSEK 80. The deal is expected to be concluded during the fourth quarter.

e-Commerce Solutions

fotokasten, myphotobook and d|o|m are the Group's brands in e-Commerce. Through the technical solutions for e-commerce provided by d|o|m, fotokasten and myphotobook offer a broad range of photo products primarily to consumers.

e-Commerce Solutions January-September
2018
2017 2018 Third quarter
2017
Last
12 months
Full year
2017
Net sales, MSEK 112 108 39 36 212 208
EBITA, MSEK -9 -20 -4 -10 10 -1
EBITA-margin, % -7.9 -18.2 -10.8 -28.3 4.6 -0.6
Operating result, MSEK -12 -23 -5 -11 6 -5
Operating margin, % -10.2 -21.0 -13.1 -30.7 3.0 -2.5
Average number of employees 60 67 51 68 62 67

The business area is showing tangible result improvements compared to last year but has substantial seasonal sales variations and the fourth quarter is normally by far the strongest. A strategic review of the business is in progress at the same time several measures regarding costs and marketing have been implemented. The comparable figures for last year included one-off items of MSEK 5 attributable to a change in management.

Important events during the period

Redundancies in Sweden

In April 2018 employees in Swedish Print & Packaging Solutions were given notice as a result of the decision to close down Elanders' last offset operations in Sweden. In total, some 70 employees were given notice of redundancy. The restructuring has not generated any significant extra costs. The shutdown is part of the streamlining and consolidation process in the Group necessary to adjust to decreasing total volumes, mainly in conventional printing.

Corporate income tax in Sweden

In June 2018 the Swedish government adopted the new tax proposal on corporate income tax. The new rules will be effective on 1 January 2019 and entail a gradual lowering of corporate income tax from 22.0 to 20.6%. As a consequence the Group's deferred taxes in Sweden were revaluated using the new corporate tax rate which led to higher deferred tax costs and a negative effect on the net result of MSEK 11.

Investments and depreciation

January - September

Net investments for the period amounted to MSEK 120 (158), of which acquisitions amounted to MSEK 0 (22). Depreciation and amortization amounted to MSEK 202 (190).

Third quarter

For the quarter net investments amounted to MSEK 41 (54), of which acquisitions amounted to MSEK 0 (22). The investments were mainly related to investments in a totally automated warehouse within business area Supply Chain Solutions. Depreciation and amortization amounted to MSEK 68 (64).

Financial position, cash flow and financing

The net debt as of 30 September 2018 was MSEK 2,890 compared to MSEK 2,665 at the beginning of the year. Of the total increase of MSEK 225, MSEK 124 was related to changes in currency rates, where the Swedish krona has weakened against the euro and the US dollar and a big part of the financing is in these currencies.

Operating cash flow for the period January-September amounted to MSEK 144 (-119), of which acquisitions amounted to MSEK 0 (-22). The comparison figure includes a one-off effect of MSEK -262 related to a repayment of a factoring debt which increased the accounts receivable. For the third quarter the operating cash flow amounted to MSEK 52 (-6), of which acquisitions amounted to MSEK 0 (-22).

Due to the fact that the existing credit agreement with the Group's main banks expires in the summer of 2019 this bank financing is recognized as short-term in the balance sheet although its nature is long-term.

Personnel

January - September

The average number of employees during the period was 7,158 (6,556), whereof 190 (245) in Sweden. At the end of the period the Group had 7,246 (6,708) employees, whereof 160 (242) in Sweden.

Third quarter

The average number of employees during the quarter was 7,271 (6,663), whereof 175 (244) in Sweden.

PARENT COMPANY

The parent company has provided intragroup services. The average number of employees during the period was 11 (11) and at the end of the period 11 (11).

OTHER INFORMATION

Elanders' offer

Elanders offers global integrated solutions in supply chain management, print & packaging and ecommerce. Elanders can take an overall responsibility for complex and global deliveries comprising procurement, warehousing, configuration, production and distribution. Our offer also includes order management, payment solutions and after sales services for our clients.

The services are provided by business-oriented employees. They use their expertise and our intelligent IT solutions to develop our customers' offers, which are often completely dependent on efficient product, component and service flows as well as traceability and information.

In addition to our offer to B2B markets the Group also sells photo products directly to consumers through the own brands fotokasten and myphotobook.

Goal and strategy

Elanders' overall goal is to be a leader in global solutions in supply chain management, print & packaging and e-commerce with a world class integrated offer. Our strategy is to work in niches in each business area where the company can attain a leading position in the market. We will achieve this goal by being best at meeting customers' demands for efficiency and delivery. Acquisitions play an important role in our company's development and provide competence, broader product and service offers and enlarge our customer base.

Risks and uncertainties

Elanders divides risks into circumstantial risk (the future of our products/services and business cycle sensitivity), financial risk (currency, interest, financing and credit risks) as well as business risk (customer concentration, operational risks, risks in operating expenses as well as contracts and disputes). These risks, together with a sensitivity analysis, are described in detail in the Annual Report 2017. Circumstances in the world around us since the Annual Report was published are not believed to have caused any significant risks or influenced the way in which the Group works with these compared to the description in the Annual Report 2017.

Seasonal variations

The Group's net sales, and thereby income, are affected by seasonal variations. Historically the fourth quarter has been the strongest for Elanders before the acquisition of LGI. Nowadays the seasonal variations are not as high as before.

Transaction with related parties

The following significant transactions with related parties have occurred during the period:

  • One of the members of the Board, Erik Gabrielson, is a partner in the law firm Vinge, which provides the company with legal services.
  • Related parties to Peter Sommer, a member of Group Management and Managing Director of Elanders GmbH, own shares in a property where Elanders GmbH runs most of its operations.

Remuneration is considered on par with the market for all of these transactions.

Events after the balance sheet date

On 15 October 2018 Elanders signed a contract with the Edelmann Group, a global German packaging company with operations in, for instance, China, Germany, India and the US, to transfer its Beijing, China operations in Print & Packaging Solutions. This unit has nearly 170 employees and annual net sales of around MSEK 80. The deal is expected to be concluded during the fourth quarter and have a positive effect on cash flow of about MSEK 20 and a minor negative effect on the operating result.

The Edelmann Group has operations in nine countries, around 3,000 employees and offers packaging solutions for the health care, beauty care and consumer brand sectors.

No other major events have taken place between the balance sheet date and the date this report was signed.

Forecast

No forecast is given for 2018.

Accounting principles

The quarterly report for the Group has been prepared in accordance with the Annual Accounts Act and IAS 34 Interim Financial Reporting and for the parent company in accordance with the Annual Accounts Act. The same accounting principles and calculation methods as those in the last Annual Report have been used, except for the standards with mandatory effective date 1 January 2018, where the significant differences for the Group are presented below.

IFRS 9 "Financial Instruments" had mandatory effective date 1 January 2018. The standard includes a model for classification, measurement and reporting of financial assets and liabilities. IFRS 9 introduces a new write-down model based on expected credit losses and considering forward information. The use of the new model has not had any significant effect on the Group and recalculation of comparative figures for 2017 has therefore not been considered necessary. Furthermore, the new rules in the standard regarding hedge accounting have not had any significant impact on the Group.

IFRS 15 "Revenue from Contracts with Customers" had mandatory effective date 1 January 2018. The standard has not entailed any material impact on the Group's net sales and cost of products and services sold. In accordance with IFRS 15 revenue is recognized when the customer receives control over the goods or services and has the possibility to use and receive the benefit from the goods or services. The Group's revenues from service contracts are normally recognized when final delivery is made, or when contractual partial deliveries are made. The increased disclosure requirements according to IFRS 15 have been considered and disclosures related to disaggregation of revenue are presented on pages 15-16. The transition to IFRS 15 has been based on the Modified retrospective approach.

International Accounting Standards Boards (IASB) has also issued new and revised standards that have not yet come into effect and the most significant one for Elanders is IFRS 16 "Leases". It has mandatory effective date 1 January 2019 and will affect primarily the accounting of the Group's operating lease agreements where there are large commitments in terms of rental contracts for premises and leasing of machinery and equipment. Both types of agreements often have an agreement period between 3-10 years. The assessment by the company's management is that the new standard will have a significant effect on the Group's total assets and liabilities, but there is currently no exact calculation. Based on the information provided by the subsidiaries a rough estimate indicates that the Group has to manage around 1,500 leasing agreements. A project has been initiated to implement and test the instrument to calculate the standard's effect on Group financial reports and the work is proceeding according to plan. The future commitments related to operating leases amounted to close to 1.4 billion Swedish kronor as of 31 December 2017, including rental contracts for premises.

Nomination committee for the Annual General Meeting 2019

The nomination committee for the Annual General Meeting on 29 April 2019 is as follows:

Carl Bennet, Chair Carl Bennet AB
Hans Hedström Carnegie Funds
Carl Gustafsson Didner & Gerge Funds
Göran Espelund Lannebo Funds
Sophie Nachemson-Ekwall Representative from the smaller shareholders

Shareholders who would like to submit proposals to Elanders' 2019 Nomination Committee, can contact the Nomination Committee by e-mail at [email protected] or by mail: Elanders AB, Att: Nomination Committee, Flöjelbergsgatan 1C, SE-431 35 Mölndal, Sweden.

Annual General Meeting 2019

Elanders AB's Annual General Meeting will be held on April 29, 2019, Gothia Towers, Mässans gata 24, Gothenburg, Sweden. Shareholders wishing to have a matter addressed at the Annual General Meeting on April 29, 2019, can submit their proposal to Elanders' Board Chairman by e-mail: [email protected], or by mail: Elanders AB, Flöjelbergsgatan 1C, SE-431 35 Mölndal, Sweden. To ensure inclusion in the notice and thus in the Annual General Meeting's agenda, proposals must be received by the company not later than February 28, 2019.

Financial calendar

Q4 2018 29 January 2019
Annual Report 2018 27 March 2019
Q1 2019 29 April 2019
Annual General Meeting 2019 29 April 2019
Q2 2019 16 July 2019
Q3 2019 21 October 2019

Conference call

In connection to the issuing of the Quarterly report for the third quarter 2018 Elanders will hold a Press and Analysts conference call on 19 October 2018, at 15.00 CET, hosted by President and CEO Magnus Nilsson and CFO Andréas Wikner.

To join this event, please use the below Click to Join link 5-10 minutes prior to start time, where you will be asked to enter your phone number and registration details. Our Event Conferencing system will call you on the phone number you provide and place you into the event. Please note that the Click To Join link will be active 15 minutes prior to the event.

CLICK TO JOIN

Use the Click to Join option above for the easiest way to join your conference or use one of the access numbers below:

Sweden: +46 (0)8 5033 6546
Germany: +49 (0)69 2222 10763
UK: +44 (0)330 336 9401
USA: +1 929-477-0443

Participant code: 954180

Agenda

14.50 Conference number is opened
15.00 Review of the quarterly report
15.20 Q&A
16.00 End of the conference

During the telephone conference a presentation will be held. To access the presentation, please use this link:

https://www.elanders.com/presentations

Contact information

Further information can be found on Elanders' website www.elanders.com or requested via e-mail [email protected].

Questions concerning this report can be put to:

Magnus Nilsson Andréas Wikner Elanders AB (publ) Phone +46 31 750 07 50 Phone +46 31 750 07 50 Flöjelbergsgatan 1 C

President and CEO Chief Financial Officer (Company ID 556008-1621) 431 35 Mölndal, Sweden Phone +46 31 750 00 00

This document is a translation of the Swedish original. In the event of any discrepancies between this translation and the Swedish original, the latter shall prevail.

AUDITOR'S REPORT

Elanders AB (publ) corp. reg. no. 556008-1621

Introduction

We have reviewed the condensed interim financial information (interim report) of Elanders AB as of 30 September 2018 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim 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 Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

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

Gothenburg, 19 October 2018

PricewaterhouseCoopers AB

Magnus Willfors Tomas Hilmarsson Authorized Public Accountant Authorized Public Accountant Auditor in Charge

GROUP

Group - Income Statements

January-September Third quarter Last Full year
MSEK 2018 2017 2018 2017 12 months 2017
Net sales 7,852 6,758 2,817 2,355 10,436 9,342
Cost of products and services sold -6,831 -5,768 -2,435 -2,061 -9,071 -8,008
Gross profit 1,021 991 382 294 1,365 1,334
Sales and administrative expenses -762 -802 -259 -258 -1,027 -1,067
Other operating income 70 63 23 19 86 79
Other operating expenses -24 -30 -8 -15 -32 -38
Operating result 305 222 138 40 392 308
Net financial items -71 -59 -24 -20 -90 -78
Result after financial items 234 163 114 20 302 230
Income tax -84 -43 -39 -6 -107 -65
Result for the period 150 120 75 14 195 165
Result for the period attributable to:
- parent company shareholders 147 120 73 14 191 164
- non-controlling interests 3 - 2 - 4 1
Earnings per share, SEK 1) 2) 4.17 3.41 2.07 0.39 5.41 4.65
Average number of shares, in
thousands 35,358 35,358 35,358 35,358 35,358 35,358
Outstanding shares at the end of the
year, in thousands 35,358 35,358 35,358 35,358 35,358 35,358

1) Earnings per share before and after dilution.

2) Earnings per share calculated by dividing the result for the period attributable to parent company shareholders by the average number of outstanding shares during the period.

Group - Statements of Comprehensive Income

MSEK January-September
2018
2017 Third quarter
2018
2017 Last
12 months
Full year
2017
Result for the period 150 120 75 14 195 165
Items that will not be reclassified to the income
statement
Actuarial gains/losses on defined
benefit pensions plans, after tax -0 -1 -0 -0 0 -1
Items that will be reclassified to
the income statement
Translation differences, after tax 114 -117 -37 -46 158 -73
Cash flow hedges, after tax -0 0 0 0 1 1
Hedging of net investment abroad,
after tax -29 42 3 15 -34 37
Other comprehensive income 85 -75 -34 -31 124 -36
Total comprehensive income for
the period 235 45 41 -17 319 129
Total comprehensive income
attributable to:
- parent company shareholders 232 45 40 -17 315 128
- non-controlling interests 3 - 1 - 4 1

Group – Statements of Financial Position

January-September Third quarter Last Full year
MSEK 2018 2017 2018 2017 12 months 2017
Result after financial items 234 163 114 20 302 230
Adjustments for items not included in
cash flow 156 169 92 97 245 258
Paid tax -101 -119 -36 -21 -116 -134
Changes in working capital -197 -353 -137 -88 -263 -418
Cash flow from operating activities 92 -140 33 8 168 -64
Net investments in intangible and
tangible assets -120 -136 -41 -32 -180 -196
Acquisition of operations - -22 - -22 -45 -67
Payments received regarding long
term holdings - 1 - 0 0 1
Cash flow from investing activities -120 -158 -41 -54 -224 -262
Amortization of loans -120 -79 -41 -26 -147 -106
New loans - 262 - - 64 326
Other changes in long- and short
term borrowing 34 148 -19 42 128 243
Dividend to shareholders -93 -92 - - -93 -92
Cash flow from financing activities -179 239 -60 16 -48 371
Cash flow for the period -208 -58 -68 -30 -104 45
Liquid funds at the beginning of the
period 679 651 596 601 561 651
Translation difference 37 -31 -19 -10 52 -17
Liquid funds at the end of the period 509 561 509 561 509 679
Net debt at the beginning of the
period 2,665 2,224 2,915 2,580 2,597 2,224
Translation difference in net debt 124 -23 -21 -33 164 16
Net debt in acquired operations - 1 - 1 -14 -13
Change in net debt 101 395 -4 49 143 438
Net debt at the end of the period 2,890 2,597 2,890 2,597 2,890 2,665
Operating cash flow 144 -119 52 -6 148 -115

Group – Statements of Financial Position

MSEK 30 Sep
2018
30 Sep
2017
31 Dec
2017
Assets
Intangible assets 3,230 3,029 3,136
Tangible assets 815 800 828
Other fixed assets 253 233 247
Total fixed assets 4,298 4,061 4,211
Inventories 413 365 390
Accounts receivable 2,040 1,784 1,795
Other current assets 636 313 333
Cash and cash equivalents 509 561 679
Total current assets 3,598 3,024 3,198
Total assets 7,896 7,085 7,409
Equity and liabilities
Equity 2,596 2,365 2,453
Liabilities
Non-interest-bearing long-term liabilities 207 200 208
Interest-bearing long-term liabilities 186 2,477 2,504
Total long-term liabilities 393 2,677 2,712
Non-interest-bearing short-term liabilities 1,694 1,362 1,403
Interest-bearing short-term liabilities 3,213 681 840
Total short-term liabilities 4,907 2,043 2,243
Total equity and liabilities 7,896 7,085 7,409

Due to the fact that the existing credit agreement with the Group's main banks expires in the summer of 2019 this bank financing is recognized as short-term in the balance sheet although its nature is long-term.

Group – Statements of Changes in Equity

MSEK Equity
attributable
to parent
company
shareholders
Equity
attributable
to non
controlling
interests
Total equity
Opening balance on 1 Jan. 2017 2,411 - 2,411
Dividend to shareholders -92 - -92
Change in non-controlling interests - 5 5
Total comprehensive income for the period 128 1 129
Closing balance on 31 Dec. 2017 2,447 6 2,453
Opening balance on 1 Jan. 2017 2,411 - 2,411
Dividend to shareholders -92 - -92
Total comprehensive income for the period 45 - 45
Closing balance on 30 Sep. 2017 2,365 - 2,365
Opening balance on 1 Jan. 2018 2,447 6 2,453
Dividend to shareholders -92 -1 -93
Total comprehensive income for the period 232 3 235
Closing balance on 30 Sep. 2018 2,587 8 2,596

Segment reporting

The three business areas are reported as reportable segments, since this is how the Group is governed and the President has been identified as the highest executive decision-maker. The operations within each reportable segment have similar economic characteristics and resemble each other regarding the nature of their products and services, production processes and customer types. Sales between segments are made on market terms.

Net sales

MSEK January-September
2018
2017 Third quarter
2018
2017 Last
12 months
Full year
2017
Supply Chain Solutions 5,950 5,108 2,189 1,818 7,849 7,007
Print & Packaging Solutions 1,847 1,592 609 520 2,475 2,220
e-Commerce Solutions 112 108 39 36 212 208
Group functions 35 29 12 10 41 35
Eliminations -92 -79 -32 -29 -141 -128
Group net sales 7,852 6,758 2,817 2,355 10,436 9,342

Operating result

January-September Third quarter Last Full year
MSEK 2018 2017 2018 2017 12 months 2017
Supply Chain Solutions 246 211 123 59 288 253
Print & Packaging Solutions 84 59 23 1 117 92
e-Commerce Solutions -12 -23 -5 -11 6 -5
Group functions -13 -25 -3 -9 -19 -32
Group operating result 305 222 138 40 392 308

For the comparison periods, the operating result in the third quarter last year has been charged with one-off items of MSEK 28 primarily referring to redundancy costs, of which MSEK 5 within Supply Chain Solutions, MSEK 16 within Print & Packaging Solutions, MSEK 5 within e-Commerce Solutions and MSEK 2 within Group functions.

Disaggregation of revenue

Revenue has been divided into geographic markets, main revenue streams and customer segments since these are the categories the Group uses to present and analyze revenue in other contexts. Income for each category is presented per reportable segment. The Group's customer contracts are easy to identify and products and services in a contract are largely connected and dependent on each other, and therefore part of an integrated offer.

Main revenue streams are presented based on the internal names used in the Group. Sourcing & Procurement services refer to the purchase and procurement of products for customers as well as handling the flows connected to these products. Freight and transportation services refer to revenue from freight and transportation with our own trucks as well as pure freight forwarding. Other supply chain services such as fulfilment, kitting, warehousing, assembly and after sales services are presented under Other contract logistics services. Other work/services refer to pure print services and other services that do not fit into any of the first three categories.

Disaggregation of revenue, January – September 2018

MSEK Supply
Chain
Solutions
Print &
Packaging
Solutions
e-Commerce
Solutions
Total
Total net sales
Less: net sales to group companies
5,950
-11
1,847
-46
112
-0
7,909
-57
Net sales 5,939 1,801 112 7,852
MSEK Supply
Chain
Solutions
Print &
Packaging
Solutions
e-Commerce
Solutions
Group
Geographic markets
Europe
3,746 1,249 111 5,106
Asia 1,834 57 - 1,891
North and South America 273 465 0 738
Other 86 30 1 117
Net sales 5,939 1,801 112 7,852
Main revenue streams
Sourcing and procurement services 1,744 - - 1,744
Freight and transportation services 1,993 206 - 2,199
Other contract logistics services 1,970 252 - 2,221
Other work/services 232 1,343 112 1,687
Net sales 5,939 1,801 112 7,852
Customer segments
Automotive 1,576 385 - 1,961
Electronics 2,450 28 - 2,478
Fashion & Lifestyle 934 295 - 1,229
Health Care & Life Science 149 145 - 294
Industrial 646 558 - 1,204
Other 184 390 112 686
Net sales 5,939 1,801 112 7,852

Disaggregation of revenue, third quarter 2018

Supply
Chain
Print &
Packaging
e-Commerce
MSEK Solutions Solutions Solutions Total
Total net sales 2,189 609 39 2,837
Less: net sales to group companies -4 -16 -0 -20
Net sales 2,185 593 39 2,817
MSEK Supply
Chain
Solutions
Print &
Packaging
Solutions
e-Commerce
Solutions
Group
Geographic markets
Europe
Asia
1,333
715
403
18
39
-
1,775
733
North and South America 102 161 0 263
Other 35 11 0 46
Net sales 2,185 593 39 2,817
Main revenue streams
Sourcing and procurement services 681 - - 681
Freight and transportation services 701 74 - 775
Other contract logistics services 724 58 - 782
Other work/services 79 461 39 579
Net sales 2,185 593 39 2,817
Customer segments
Automotive 545 126 - 671
Electronics 961 6 - 967
Fashion & Lifestyle 351 103 - 454
Health Care & Life Science 51 50 - 101
Industrial 222 171 - 393
Other 55 137 39 231
Net sales 2,185 593 39 2,817

Financial assets and liabilities measured at fair value

The financial instruments recognized at fair value in the Group's report on financial position are derivatives identified as hedging instruments. The derivatives consist of forward contracts and are used for hedging purposes. Valuation at fair value of forward contracts is based on published forward rates on an active market. All derivates are therefore included in level 2 in the fair value hierarchy. Since all the financial instruments recognized at fair value are included in level 2 there have been no transfers between valuation levels.

Derivative instruments in hedge accounting relationships recognized at fair value is presented under other current assets and non-interest bearing short-term liabilities. These items gross are below MSEK 1 both per 30 September 2018 and the comparison periods.

The fair value of other financial assets and liabilities valued at their amortized purchase price is estimated to be equivalent to their book value.

PARENT COMPANY

Parent Company – Income Statements

MSEK 2018 January-September
2017
Third quarter
2017
Last
12 months
Full year
2017
Net sales 35 28 12 11 42 35
Operating expenses -51 -54 -14 -21 -64 -67
Operating result -16 -26 -2 -10 -22 -32
Net financial items 29 153 20 36 125 249
Result after financial items 13 127 18 26 103 217
Income tax -6 -17 -3 -6 -7 -18
Result for the period 7 111 15 20 96 199

Parent Company - Statements of Comprehensive Income

January-September
Third quarter
Last Full year
MSEK 2018 2017 2018 2017 12 months 2017
Result for the period 7 111 15 20 96 199
Other comprehensive income - - - - - -
Total comprehensive income for
the period
7 111 15 20 96 199

Parent Company - Balance Sheets

MSEK 30 Sep
2018
30 Sep
2017
31 Dec
2017
Assets
Fixed assets 4,520 4,302 4,461
Current assets 365 262 471
Total assets 4,885 4,564 4,932
Equity, provisions and liabilities
Equity 1,662 1,659 1,747
Provisions 3 3 3
Long-term liabilities 66 2,155 2,184
Short-term liabilities 3,153 747 998
Total equity, provisions and liabilities 4,885 4,564 4,932

Due to the fact that the existing credit agreement with the Group's main banks expires in the summer of 2019 this bank financing is recognized as short-term in the balance sheet although its nature is long-term.

Parent Company - Statements of Changes in Equity

MSEK Share
capital
Statutory
reserve
Unrestricted
equity
Total
equity
Opening balance on 1 Jan. 2017 354 332 953 1,640
Dividend - - -92 -92
Total comprehensive income for the period - - 199 199
Closing balance on 31 Dec. 2017 354 332 1,061 1,747
Opening balance on 1 Jan. 2017 354 332 953 1,640
Dividend - - -92 -92
Total comprehensive income for the period - - 111 111
Closing balance on 30 Sep. 2017 354 332 972 1,659
Opening balance on 1 Jan. 2018 354 332 1,061 1,747
Dividend - - -92 -92
Total comprehensive income for the period - - 7 7
Closing balance on 30 Sep. 2018 354 332 976 1,662

QUARTERLY DATA

MSEK 2018
Q3
2018
Q2
2018
Q1
2017
Q4
2017
Q3
2017
Q2
2017
Q1
2016
Q4
2016
Q3
Net sales 2,817 2,613 2,422 2,584 2,355 2,264 2,139 2,330 1,878
EBITDA 206 168 134 151 104 155 152 187 152
EBITA 154 116 83 103 55 108 105 139 112
EBITA-margin, % 5.5 4.4 3.4 4.0 2.3 4.8 4.9 6.0 6.0
Operating result 138 100 68 86 40 93 90 123 100
Operating margin, % 4.9 3.8 2.8 3.3 1.7 4.1 4.2 5.3 5.3
Result after financial items 114 74 46 68 20 73 69 103 86
Result after tax 75 42 34 45 14 54 53 79 58
Earnings per share, SEK 1) 2) 2.07 1.15 0.95 1.24 0.39 1.52 1.49 2.37 2.04
Operating cash flow 52 127 -34 5 -6 47 -161 69 -1,565
Cash flow per share, SEK2) 3) 0.94 2.85 -1.17 2.14 0.23 1.12 -5.31 2.83 6.30
Depreciation and write-downs 68 68 67 65 64 63 63 65 52
Net investments 41 41 38 104 54 73 31 79 1,787
Goodwill 2,440 2,466 2,429 2,337 2,261 2,269 2,264 2,272 2,274
Total assets 7,896 7,850 7,684 7,409 7,085 7,058 7,064 6,782 6,713
Equity 2,596 2,554 2,559 2,453 2,365 2,382 2,454 2,411 1,607
Equity per share, SEK 2) 73.16 72.02 72.17 69.21 66.88 67.38 69.39 71.87 56.93
Net debt 2,890 2,915 2,834 2,665 2,597 2,580 2,437 2,224 2,921
Capital employed 5,486 5,469 5,392 5,118 4,961 4,962 4,890 4,635 4,528
Return on total assets, % 4) 7.0 6.3 5.1 4.8 2.3 5.3 5.2 7.3 7.8
Return on equity, % 4) 11.4 6.4 5.4 7.3 2.3 8.9 8.7 15.8 14.8
Return on capital employed, % 4) 10.1 7.3 5.2 6.8 3.2 7.5 7.5 10.7 11.7
Debt/equity ratio 1.1 1.1 1.1 1.1 1.1 1.1 1.0 0.9 1.8
Equity ratio, % 32.9 32.5 33.3 33.1 33.4 33.8 34.7 35.6 23.9
Interest coverage ratio 5) 4.7 3.7 3.8 4.1 4.5 5.5 6.4 7.8 11.0
Number of employees at the end of 7,246 7,170 7,085 6,997 6,708 6,589 6,501 6,444 6,472
the period

1) There is no dilution.

2) Historic number of shares have been adjusted for the bonus issue element in the new share issue in 2016.

3) Cash flow per share refers to cash flow from operating activities.

4) Return ratios have been annualized (the result has been recalculated to correspond to the result for a 12 month period).

5) Interest coverage ratio calculation is based on a moving 12 month period.

FIVE YEAR OVERVIEW – JANUARY - SEPTEMBER

2018 2017 2016 2015 2014
Net sales, MSEK 7,852 6,758 3,956 3,113 2,631
EBITA, MSEK 353 269 245 197 118
Result after tax, MSEK 150 120 138 101 43
Earnings per share, SEK 1) 2) 4.17 3.41 4.89 3.58 1.62
Cash flow from operating activities per share, SEK 2) 2.59 -3.95 8.35 1.18 0.10
Equity per share, SEK 2) 73.16 66.88 56.93 51.19 44.09
Return on equity, % 3) 11.6 6.7 12.0 9.7 5.0
Return on capital employed, % 3) 7.6 6.1 10.4 10.4 6.9
EBITA-margin, % 4.5 4.0 6.2 6.3 4.5
Operating margin, % 3.9 3.3 5.6 5.8 4.0
Average number of shares, in thousands 2) 35,358 35,358 28,224 28,224 26,359

FIVE YEAR OVERVIEW – THIRD QUARTER

2018 2017 2016 2015 2014
Net sales, MSEK 2,817 2,355 1,878 1,041 870
EBITA, MSEK 154 55 112 69 32
Result after tax, MSEK 75 14 58 36 11
Earnings per share, SEK 1) 2) 2.07 0.39 2.04 1.27 0.40
Cash flow from operating activities per share, SEK 2) 0.94 0.23 6.30 -1.87 -0.98
Equity per share, SEK 2) 73.16 66.88 56.93 51.19 44.09
Return on equity, % 3) 11.4 2.3 14.8 10.0 3.3
Return on capital employed, % 3) 10.1 3.2 11.7 10.9 4.9
EBITA-margin, % 5.5 2.3 6.0 6.7 3.6
Operating margin, % 4.9 1.7 5.3 6.2 3.1
Average number of shares, in thousands 2) 35,358 35,358 28,224 28,224 28,224

FIVE YEAR OVERVIEW – FULL YEAR

2017 2016 2015 2014 2013
Net sales, MSEK 9,342 6,285 4,236 3,730 2,096
EBITDA, MSEK 563 516 428 292 229
EBITA, MSEK 371 384 313 194 139
Result after financial items, MSEK 230 300 259 140 102
Result after tax, MSEK 165 217 175 88 70
Earnings per share, SEK 1) 2) 4.65 7.35 6.18 3.27 2.81
Cash flow from operating activities per share, SEK 2) -1.81 11.19 9.52 6.03 5.15
Equity per share, SEK 2) 69.21 68.19 52.72 47.75 42.93
Dividends per share, SEK 2) 2.60 2.60 2.07 1.03 0.73
EBITA-margin, % 4.0 6.1 7.4 5.2 6.6
Return on total assets, % 4.3 6.7 8.2 5.9 5.6
Return on equity, % 6.8 12.4 12.1 7.4 7.0
Return on capital employed, % 6.2 10.0 12.6 8.7 7.7
Net debt/EBITDA ratio 4.7 4.3 1.7 3.1 3.2
Debt/equity ratio 1.1 0.9 0.5 0.7 0.7
Equity ratio, % 33.1 35.6 42.0 37.8 42.2
Average number of shares, in thousands 2) 35,358 29,555 28,224 26,825 24,900

1) There is no dilution.

2) Historic number of shares and historic key ratios have been adjusted for the bonus issue element in the new share issues in

2014 and 2016.

3) Return ratios have been annualized (results are recalculated to correspond to a 12-month period).

RECONCILIATION ALTERNATIVE PERFORMANCE MEASURES – QUARTERLY DATA

MSEK 2018
Q3
2018
Q2
2018
Q1
2017
Q4
2017
Q3
2017
Q2
2017
Q1
2016
Q4
2016
Q3
Operating result 138 100 68 86 40 93 90 123 100
Depreciation, amortization and write
downs 68 68 67 65 64 63 63 65 52
EBITDA 206 168 134 151 104 155 152 187 152
Operating result 138 100 68 86 40 93 90 123 100
Amortization of assets identified in
conjunction with acquisitions 16 16 16 17 15 16 15 16 12
EBITA 154 116 83 103 55 108 105 139 112
Cash flow from operating activities 33 101 -41 76 8 40 -188 95 178
Net financial items 24 26 22 19 20 20 22 20 14
Paid tax 36 42 23 14 21 61 37 34 30
Net investments -41 -41 -38 -104 -54 -73 -31 -79 -1,787
Operating cash flow 52 127 -34 5 -6 47 -161 69 -1,565
Average total assets 7,873 7,767 7,547 7,247 7,072 7,061 6,923 6,748 5,112
Average cash and cash equivalents -552 -574 -616 -620 -581 -657 -682 -639 -558
Average non-interest-bearing liabilities -1,844 -1,763 -1,676 -1,587 -1,529 -1,478 -1,478 -1,527 -1,141
Average capital employed 5,477 5,430 5,255 5,040 4,962 4,926 4,763 4,581 3,412
Annualized operating result 552 399 271 344 159 371 359 490 398
Return on capital employed, % 10.1 7.3 5.2 6.8 3.2 7.5 7.5 10.7 11.7
Interest-bearing long-term liabilities 186 2,575 2,559 2,504 2,477 2,563 2,595 2,647 2,666
Interest-bearing short-term liabilities 3,213 935 826 840 681 618 555 228 883
Cash and cash equivalents -509 -596 -552 -679 -561 -601 -713 -651 -628
Net debt 2,890 2,915 2,834 2,665 2,597 2,580 2,437 2,224 2,921

RECONCILIATION ALTERNATIVE PERFORMANCE MEASURES – JANUARY - SEPTEMBER

MSEK 2018 2017 2016 2015 2014
Operating result 305 222 222 181 104
Amortization of assets identified in conjunction with
acquisitions 48 47 24 16 14
EBITA 353 269 245 197 118
Average total assets 7,710 6,997 4,327 3,558 2,900
Average cash and cash equivalents -584 -632 -542 -414 -276
Average non-interest-bearing liabilities -1,760 -1,504 -959 -825 -605
Average capital employed 5,366 4,862 2,826 2,319 2,019
Annualized operating result 407 296 295 241 139
Return on capital employed, % 7.6 6.1 10.4 10.4 6.9

RECONCILIATION ALTERNATIVE PERFORMANCE MEASURES –THIRD QUARTER

MSEK 2018 2017 2016 2015 2014
Operating result 138 40 100 64 27
Amortization of assets identified in conjunction with
acquisitions 16 15 12 5 5
EBITA 154 55 112 69 32
Average total assets 7,873 7,072 5,112 3,526 3,307
Average cash and cash equivalents -552 -581 -558 -389 -354
Average non-interest-bearing liabilities -1,844 -1,529 -1,141 -794 -746
Average capital employed 5,477 4,962 3,412 2,344 2,206
Annualized operating result 552 159 398 256 108
Return on capital employed, % 10.1 3.2 11.7 10.9 4.9

RECONCILIATION ALTERNATIVE PERFORMANCE MEASURES – FULL YEAR

MSEK 2017 2016 2015 2014 2013
Operating result 308 344 292 175 131
Depreciation, amortization and write-downs 255 172 136 117 98
EBITDA 563 516 428 292 229
Operating result 308 344 292 175 131
Amortization of assets identified in conjunction with
acquisitions 63 40 21 19 8
EBITA 371 384 313 194 139
Average total assets 7,154 5,132 3,559 3,017 2,363
Average cash and cash equivalents -639 -573 -418 -336 -192
Average non-interest-bearing liabilities -1,532 -1,131 -816 -671 -461
Average capital employed 4,983 3,428 2,325 2,010 1,710
Annualized operating result 308 344 292 175 131
Return on capital employed, % 6.2 10.0 12.6 8.7 7.7

DEFINITIONS

Average number of employees The number of employees at the end of each month divided
by number of months.
Average number of shares Weighted average number of shares outstanding during the
period.
Capital employed Total assets less liquid funds and non-interest bearing
liabilities.
Debt/equity ratio Net debt in relation to reported equity, including non
controlling interests.
Earnings per share Result for the period attributable to parent company
shareholders divided by the average number of shares.
EBIT Earnings before interest and taxes; operating result.
EBITA Earnings before interest, taxes and amortization; operating
result plus amortization of assets identified in conjunction
with acquisitions.
EBITDA Earnings before interest, taxes, depreciation and
amortization; operating result plus depreciation, amortization
and write-downs of intangible assets and tangible fixed
assets.
Equity ratio Equity, including non-controlling interests, in relation to total
assets.
Interest coverage ratio Operating result plus interest income divided by interest
costs.
Net debt Interest bearing liabilities less liquid funds.
Operating cash flow Cash flow from operating activities and investing activities,
adjusted for paid taxes and financial items.
Operating margin Operating result in relation to net sales.
Return on capital employed (ROCE) Operating result in relation to average capital employed.
Return on equity Result for the year in relation to average equity.
Return on total assets Operating result plus financial income in relation to average
total assets.

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