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OEM International

Quarterly Report Feb 19, 2014

3090_10-k_2014-02-19_b6f21a56-ca63-4587-af5f-57cc213ee1de.pdf

Quarterly Report

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OEM INTERNATIONAL

FINANCIAL STATEMENT Full year 2013

FOURTH QUARTER 2013

  • New orders rose by 5% to 420 MSEK (398)
  • Net sales rose by 5% to 428 MSEK (408)
  • The pre-tax profit rose 41% to 39 MSEK (27)
  • The profit after tax rose 6% to 32 MSEK (30)
  • The profit per share amounted to 1.38 SEK (1.33)

FULL YEAR 2013

  • New orders rose by 1% to 1,649 MSEK (1,630)
  • Net sales rose by 2% to 1,668 MSEK (1,631)
  • The pre-tax profit amounted to 157 MSEK (159)
  • The profit after tax amounted to 121 MSEK (126)
  • The profit per share amounted to 5.24 SEK (5.47)
  • The Board of Directors proposes an ordinary dividend of 4.00 SEK per share (3.75)
  • The Board of Directors also proposes that the Annual General Meeting adopt a resolution to transfer to the shareholders an amount equivalent to 10,00 SEK per share via an automatic redemption procedure

AFTER THE REPORT PERIOD

• Two acquisitions with total annual sales of 61 MSEK were carried out in January

CHIEF EXECUTIVE'S REVIEW

Improvements in sales and earnings in the fourth quarter

Demand remained strong in the fourth quarter and sales amounted to 428 MSEK, an increase of 5% compared to the same period in 2012. Sales increased in all regions and, as far as companies were concerned, both OEM Automatic in Poland and Elektro Elco in Sweden had record quarters. There was also good progress in new orders, which rose by 5% compared to the previous year. The operating profit for the quarter rose to 40 MSEK (28), an increase of 45% compared to 2012. The rise in profits was due to a rise in sales and a strengthening of margins.

Summary January – December 2013

After a slow start, demand gradually strengthened in 2013 and sales for both the third and fourth quarters exceeded the previous year's sales for the same quarters. Overall, sales rose by 2% to 1,668 MSEK, though the operating profit fell by 2% to 159 MSEK. That gave an operating margin of 9.5%. The fall in profits was due to higher costs for market investments.

The highest growth outside the Nordic region

Operations in Poland experienced organic growth of 11% and operations in the UK increased sales by 10%, mainly due to acquisitions carried out in late 2012. Sales for our companies in Sweden rose by 3%, which was also mainly due to acquisitions. Demand in Finland slowed in the autumn due to the Finnish economic downturn. Despite this, sales rose organically by 3% for the whole year.

Acquisitions

There were no acquisitions in 2013, but there were two acquisitions after the reporting period. On 15 January 2014, we acquired most of the business of the Finnish company Mytrade, which focuses on marketing vision-systems. The business, which had sales of 9 MSEK in 2013, will be integrated in OEM Automatic Finland. On 27 January 2014, we acquired Nexa Trading AB, which markets products primarily in the Nordic region for such purposes as wireless control of lighting and security products for the home. Nexa had sales of 52 MSEK in 2013 and will be run as an independent company in future.

Strong financial position

Current operations generated a positive cash flow of 134 MSEK in 2013. Satisfactory liquidity, along with an high equity/asset ratio, places us in a strong financial position to continue to develop the business, even taking into account the proposed automatic redemption programme of 10 SEK per share.

A year of consolidation generates power for the future

The year was one of consolidation after a period of growth and acquisitions. Acquired businesses have been integrated and several activities have been reorganized during the year to generate power for continued growth. I detect a powerful momentum in the organisation and I am confident that we will continue to make good progress.

We celebrate our fortieth anniversary in 2014. That gives us a chance to demonstrate our pride in our history, but also to look forward. OEM remains a strong, responsive technology trading group in industrial components and systems. One of our key success factors is our corporate culture based on technical knowledge, focus on sales and professionalism. Thanks to our dedicated, skilled employees, we have evolved into a leading operator and I am confident that we will be equally successful next year!

Jörgen Zahlin Managing Director and Chief Executive Officer

THE GROUP

NEW ORDERS (MSEK)

New orders rose to 420 MSEK (398) in the fourth quarter, an increase of 5% compared to the same quarter of the previous year.

New orders rose by 1% to 1,649 MSEK (1,630) for the full year in 2013.

New orders were 1% lower than net sales for the full year in 2013. It is primarily in the region of Sweden where new orders are lower than net sales.

The order backlog fell by 7% compared to the previous year and amounted to 216 MSEK (231) at 31 December 2013.

Net sales rose to 428 MSEK (408) in the fourth quarter, an increase of 5% compared to the same quarter of the previous year.

Net sales rose by 2% and amounted to 1,668 MSEK (1,631) for the full year in 2013. Excluding acquisitions and currency effects, net sales were in line with the level for the previous year.

Operations in Poland, the UK, the Baltic States and Elektro Elco in Sweden experienced satisfactory growth over the year, whereas sales from the other operations were in line with the previous year's levels.

There were small percentage changes between the regions compared to the same period of the previous year. The changes were mainly due to acquisitions.

The operating profit rose to 40 MSEK (28) in the fourth quarter, an increase of 45% compared to the same quarter of the previous year.

The operating profit fell by 2% to 159 MSEK (162) for the full year in 2013.

The fall in operating profits was due to higher costs for market investments.

OPERATING MARGIN (%)

The operating margin for the fourth quarter was strengthened due to higher sales and amounted to 9.1% (6.8).

The operating margin was 9.5% (9.9) for the full year in 2013.

The return on equity for the fourth quarter was 4.2% compared to 4.1% for the same quarter of the previous year.

The return on equity was 17% (19) for the full year in 2013, which is below the target of 20%.

Shareholders' equity amounted to 725 MSEK (689) and the equity ratio was 65.9% (62.6) at 31 December 2013.

THE REGIONS

SWEDEN

Sales are carried out under the company names OEM Automatic, OEM Motor, OEM Electronics, Internordic Bearings, Telfa, Elektro Elco, Swedish Helag, Svenska Batteripoolen, Flexitron, TemFlow Control, Vanlid Transmission, Ronson Transmission and Fenix Transmission.

Full year Full year
SEK Million 2013 2012
Incoming orders 1 048 1 048
Net sales 1 072 1 045
Operating profit 137 128
Operating margin (%) 13% 12%

Net sales over the full year in 2013 were 3% higher compared to the same period of the previous year. Acquired growth affected net sales by approximately 26 MSEK compared to the previous year, which was equivalent to 3%.

Demand has gradually improved compared to the latter part of 2012. Elektro Elco and OEM Automatic experienced the biggest improvement over the previous year.

The operating profit for the full year in 2013 was 7% higher compared to the previous year.

FINLAND, THE BALTIC STATES AND CHINA

Sales are carried out under the company names OEM Automatic, OEM Electronics, Internordic Bearings and Akkupojat.

Full year Full year
SEK Million 2013 2012
Incoming orders 246 238
Net sales 248 235
Operating profit 15 16
Operating margin (%) 6% 7%

Net sales over the full year in 2013 were 6% higher compared to the same period of the previous year. The increase was also 6% in local currency. That increase was accounted for by business in the Baltic States and China, along with acquisitions. Acquired growth affected net sales by approximately 7 MSEK compared to the previous year, which was equivalent to 3%.

The operating profit for the full year in 2013 fell by 4% compared to the previous year. This was due to a higher cost base linked to acquisitions and marketing activities.

DENMARK, NORWAY, UK AND CENTRAL EASTERN EUROPE

Sales are carried out under the company names OEM Automatic, OEM Automatic Klitsö and OEM Electronics.

SEK Million Full year
2013
Full year
2012
Incoming orders 355 344
Net sales 349 352
Operating profit 23 30
Operating margin (%) 7% 8%

Net sales over the full year in 2013 fell by 1% compared to the same period of the previous year. Acquired growth affected net sales by 12 MSEK compared to the previous year, which was equivalent to 4%.

Sales rose in Poland, Hungary, Norway and the Czech Republic, though they fell in the other markets.

The lower net sales and the market investments led to a fall in the operating profit of 24% compared to the previous year.

OTHER FINANCIAL INFORMATION

Cash flow

The cash flow from current activities during the year amounted to 134 MSEK (126). The total cash flow amounted to -7 MSEK (20) during the year and, in addition to cash flow from current activities, it was affected by investments of -44 MSEK (-60) and financing activities of -97 (-46).

Investments

The group's investments in fixed assets amounted to 35 MSEK (72) and related to property, plant and equipment of 29 SEK (35), other intangible assets of 6 MSEK (13), and company acquisitions of 0 MSEK (24).

Liquidity

Liquid assets, consisting of cash and bank balances, amounted to 173 MSEK (181). Liquid assets along with credit facilities granted but not used amounted to 393 MSEK (383) at 31 December 2013. Further credit of 125 MSEK was granted in January 2014.

Intangible assets

Write-off of intangible assets of 19 MSEK (16) has been charged to the profit. The book value in the statement of financial position amounted to 145 MSEK (157) at 31 December 2013.

Equity/assets ratio

The equity/assets ratio was 66% (63) at 31 December 2013.

Employees

The average number of employees in the group during the period was 631 (623). At the end of the period, the average number of employees was 643 (622).

Share repurchases

The company did not repurchase any shares during the period. The total for own shares held amounted to 61,847 shares at 31 December 2013. That holding represents 0.3% of the total number of shares. The authorisation granted by the Annual Shareholders' Meeting is for up to 10% of the number of shares, which corresponds to 2,316,930 shares.

Revaluation of contingent considerations

The progress of acquisitions carried out in previous years led to a revaluation of contingent considerations entered as liabilities, which fell by 3.1 MSEK. This had a positive effect of 3.1 MSEK on the operating profit in 2013. No new acquisitions were added in 2013. Remaining contingent considerations entered as liabilities at 31 December 2013 amounted to 1.6 MSEK.

Accounting principles

This interim report for the group as a whole has been prepared in accordance with IAS 34 Interim Financial Reporting and the applicable provisions of the Swedish Annual Accounts Act. The interim report for the parent company has been prepared in accordance with Chapter 9 of the Swedish Annual Accounts Act, Interim Financial Reporting, and the Swedish Securities Markets Act. The same accounting standards and bases for calculation as in the previous annual accounts have been applied for the group and the parent company, with the exception of IAS 19, Employees Benefits, and IAS 1, Presentation of Financial Statements, which applied from 1 January 2013 with retroactive effect. These had no material effect on the consolidated financial statements. The parent company has chosen to report group contributions according to the alternative rule, which means that group contributions paid and received are recorded as appropriations. The previous year has been restated in accordance with this standard, which means that 120.1 MSEK has been moved from profit/loss from participations in group companies to appropriations.

Risks and uncertainty factors

The OEM Group is exposed to both operational risks and financial risks through its business activities. Operational risks include competition risks, structural changes and business risks and financial risks include liquidity, interest-rate and currency risks. The OEM Group's finance activities and management of financial risks primarily take place at the parent company. Frameworks exist for how risks should be managed and limited. Those frameworks are characterised by a low level of risk. The starting point is structured, efficient management of the financial risks that arise in the business. For a full account of the risks affecting the group, we refer to page 7 and pages 47 – 49 of the 2012 Annual Report. There is still no clear picture available of market progress for the group's three regions.

Contingent liabilities

The ongoing dispute that is subject to legal proceedings, described on page 46 of the 2012 Annual Report, was not settled at an ordinary court in 2013. Proceedings in court had been accomplished during February 2014 in the court of Lund, Swede. Verdict is expected late March 2014.

Transactions with closely-related parties

No transactions between OEM and closely-related parties significantly affecting the group's and the parent company's financial position and results took place during the period, except for internal group dividends.

The parent company

Net sales were 38 MSEK (41) and the profit after financial items amounted to 16 MSEK (31). Net sales related only to internal group transactions.

The risks and uncertainties stated above for the group also apply indirectly to the parent company. The parent company does not have any external operations of its own and its risks largely relate to the subsidiaries' business activities.

Events after the end of the reporting period

On 15 January 2014, OEM International acquired most of the business of the Finnish company Mytrade, which focuses on marketing vision systems. The business, which had sales of 9 MSEK in 2013, will be integrated in OEM Automatic Finland.

On 27 January 2014, all the shares of Nexa Trading AB, with head office in Gothenburg, were acquired. The company markets products primarily in the Nordic region for such purposes as wireless control of lighting and security products for the home. The company's sales were just over 52 MSEK in 2013.

From and including 2014, the parent company's shares are listed on NASDAQ OMX Nordic Mid Cap in Stockholm.

The Nomination Committee

The Nomination Committee that is to work in advance of the Annual Shareholders' Meeting on 29 April 2014 is made up as follows: Lars-Åke Rydh (Chairperson) Hans Franzén Jerker Löfgren, Orvaus AB Agne Svenberg Bengt Stillström, AB Traction The Nomination Committee may be contacted through Lars-Åke Rydh, tel. 0705-924570 or e-mail [email protected]

Dividend

The Board of Directors proposes an ordinary dividend of 4.00 SEK per share (3.75). The proposed dividend amounts to 93 MSEK (87).

In view of OEM International's strong financial position and as a step towards changing the company's capital structure, the Board of Directors proposes that the Annual Shareholders' Meeting adopt a resolution to transfer to the shareholders an amount equivalent to 10,00 SEK per share in addition to an ordinary dividend. This represents a transfer of 232 MSEK, which, in accordance with a proposal put forward by the Board of Directors, should be implemented via an automatic redemption procedure. Details of the programme will be made available subsequently in a separate brochure and in the annual report.

Annual Accounts

The 2013 Annual Report will be distributed at the end of March 2014 and will be available at the head office and on the company's website from week 13 onwards.

Annual Shareholders' Meeting

The Annual Shareholders' Meeting will be held in Tranås, at Badhotellet, on 29 April 2014 at 16.00 hours.

Financial information

OEM will issue financial information at the following times: Annual Shareholders' Meeting 2014 29 April 2014 Interim report for the first quarter of 2014 29 April 2014 Interim report for the second quarter of 2014 14 July 2014 Interim report for the third quarter of 2014 21 October 2014 Press release of unaudited annual earnings figures 2014 17 February 2015

Tranås, 19 February 2014

Jörgen Zahlin CEO and Group CEO

The report has not been subject to specific review by the company's auditors.

For additional information please contact CEO Jörgen Zahlin, +46 75 242 40 22, or CFO Jan Cnattingius, +46 75 242 40 03.

The information in this report is information that OEM International AB (publ) is required to publish in accordance with the Swedish Securities Market Act. The information was issued to media for publication on 19 February 2014 at 14.00 hours.

THE REGIONS' SALES AND EARNINGS

SALES & EARNINGS BY REGION *

Net sales (SEK million) *

Jan- Jan
dec dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Sweden, external income 1 072 1 045 275 244 282 271 264
Sweden, income from other segments 82 81 22 21 19 19 18
Finland and the Baltic States, external income 248 235 62 58 65 63 57
Finland and the Baltic States, income from other segments 3,3 4,4 0,7 1,0 0,7 0,8 0,7
Denmark, Norway, the United Kingdom and
Central Eastern Europe, external income 349 352 91 88 88 83 86
Denmark, Norway, the United Kingdom and
Central Eastern Europe, income from other segments 0,7 1,1 0,2 0,2 0,2 0,2 0,3
Other operating segments/elimination -86 -86 -23 -22 -20 -20 -19
1 668 1 631 428 389 434 417 408

Operating profit (SEK million) *

Jan- Jan
dec dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Sweden 137 128 33 36 33 35 24
Finland and the Baltic States 15 16 4,1 3,5 3,5 4,3 1,6
Denmark, Norway, the United Kingdom and
Central Eastern Europe 23 30 6,0 7,3 4,5 4,9 6,5
175 174 43 47 41 44 32

Consolidated profit/loss (SEK million) *

Jan- Jan
dec dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Operating profit segment above 175 174 43 47 41 44 32
Group functions -16 -11 -3,8 -1,8 -5,3 -5,2 -4,1
Net financial items -1,9 -3,8 -0,3 -1,0 0,1 -0,6 -0,3
Pre-tax profit/(loss) 157 159 39 44 36 38 27

* Continuing operations

THE GROUP'S PERFORMANCE AND FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME (SEK MILLION)

Jan- Jan
dec dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Continuing operations
Net sales 1 668 1 631 428 389 434 417 408
Other operating income 3,1 3,1 2,0 0,7 0,4 0,0 0,7
Operating costs -1 439 -381 -334 -389 -369 -372
Depreciation of fixed assets -1 474 -33 -9,7 -11 -9,7 -9,0 -9,3
Operating profit -39
159
162 39 45 36 39 28
Net financial income/expense -1,9 -3,8 -0,3 -1,0 0,1 -0,6 -0,3
Pre-tax profit/(loss) 157 159 39 44 36 38 27
Tax -36 -32 -6,7 -11 -8,9 -9,5 2,9
Profit/loss for the period from
continuing operations 121 126 32 33 27 29 30
Discontinued operations
Profit/loss for the period from discontinued
operations, net after tax 0,0 -0,1 0,0 0,0 0,0 0,0 -0,1
Profit/loss for the period 121 126 32 33 27 29 30
Other comprehensive income
Items that have been transferred or may
recycled to net income
Exchange differences for the period on
translation of overseas operations 3,7 -4,2 4,5 -0,7 7,0 -7,1 3,2
Items that can not be recycled to
net profit
Revaluation of defined
benefit pension plans -2,0 1,1 -0,5 -1,7 0,2 0,0 0,1
Other comprehensive income for the period 1,6 -3,1 4,0 -2,4 7,2 -7,1 3,3
Comprehensive income for the period 123 123 36 31 34 22 34
Earnings per outstanding share, SEK* 5,24 5,47 1,38 1,45 1,17 1,24 1,32
Earnings per outstanding share
from continuing operations, SEK* 5,24 5,47 1,38 1,45 1,17 1,24 1,33
Earnings per total shares, SEK* 5,23 5,46 1,38 1,44 1,17 1,24 1,32
Earnings per total shares
from continuing operations, SEK* 5,23 5,46 1,38 1,44 1,17 1,24 1,33

* Attributable to shareholders of the parent company. There are no dilution effects.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (SEK MILLION)

2013-12-31 2012-12-31
Fixed assets
Goodwill 67 66
Other intangible assets 78 91
Total intangible assets 145 157
Property, plant and equipment 211 202
Total property, plant and equipment 211 202
Financial assets 0,2 0,1
Total financial assets 0,2 0,1
Total fixed assets 356 359
Deferred tax assets 2,0 1,5
Current assets
Inventories 302 295
Current receivables 267 264
Cash and cash equivalents 173 181
Total current assets 742 740
Total assets 1 100 1 101
Equity 725 689
Non-current interest-bearing liabilities 28 22
Provisions for pensions 3,9 0,9
Non-current non-interest-bearing liabilities 0,0 0,7
Deferred tax liabilities 64 63
Total non-current liabilities 96 86
Current interest-bearing liabilities 84 98
Current non-interest-bearing liabilities 194 228
Total current liabilities 279 326
Total equity and liabilities 1 100 1 101

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (SEK MILLION)

2013-12-31 2012-12-31
At beginning of year 689 648
Effect of change in accounting principle - -1,4
Comprehensive income for the period
Profit/loss for the period 121 126
Other comprehensive income for the period 1,6 -3,1
Comprehensive income for the period 123 123
Dividends paid -87 -81
At the end of the period 725 689

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (SEK MILLION)

Jan-
dec
Jan
dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Operating cash flows
before movements in working capital 158 154 47 43 34 34 36
Movements in working capital -24 -28 12 -14 -3,7 -19 12
Operating cash
flows 134 126 59 30 30 15 47
Investing cash flows -44 -60 -12 -12 -5,6 -15 -18
Cash flows after
investing activities 90 66 47 18 25 0,2 29
Financing cash
flows
- Change in financial liabilities -10 35 -18 -11 11 8,3 16
- Dividends paid -87 -81 0,0 0 -87 0,0 0,0
Financing cash flow -97 -46 -18 -11 -76 8,3 16
Cash flow for the period -7,3 20 29 6,8 -51 8,5 45
Cash and cash equivalents at the beginning of the period 181 162 138 138 188 181 135
Exchange rate difference -0,7 -0,7 0,3 -0,4 0,8 -1,4 0,5
Cash and cash equivalents at the end of the period 173 181 166 144 138 188 181

KEY PERFORMANCE INDICATORS

Jan- Jan
dec
2013
dec Q4 Q3 Q2 Q1 Q4
2012 2013 2013 2013 2013 2012
Return on equity, % 17,1 18,9 4,2 4,6 4,2 4,1 4,1
Return on capital employed, % * 20,3 21,8 4,8 5,7 4,8 5,0 3,4
Return on total capital % * 15,2 15,8 3,6 4,4 3,5 3,7 2,5
Equity/assets ratio, % 65,9 62,6
Earnings per outstanding share, SEK 5,24 5,47 1,38 1,45 1,17 1,24 1,32
Earnings per outstanding share
from continuing operations, SEK* 5,24 5,47 1,38 1,45 1,17 1,24 1,33
Earnings per total shares, SEK 5,23 5,46 1,38 1,44 1,17 1,24 1,32
Earnings per total shares
from continuing operations, SEK* 5,23 5,46 1,38 1,44 1,17 1,24 1,33
Equity per total shares, SEK 31,28 29,74
Average number of outstanding shares (thousands) 23 107 23 107 23 107 23 107 23 107 23 107 23 107
Average total shares (thousands) 23 169 23 169 23 169 23 169 23 169 23 169 23 169
Operating margin, % * 9,5 9,9 9,1 11,4 8,3 9,3 6,8

* Marked KPIs apply to continuing operations. Comparative figures do not include discontinued operations.

Other KPIs apply for the total operations (including discontinued operations) when the Statement of Financial Position for the comparison periods, in accordance with IFRS 5, is not recalculated.

THE PARENT COMPANY'S PERFORMANCE AND FINANCIAL POSITION

CONDENSED INCOME STATEMENT OF THE PARENT COMPANY (SEK MILLION)

Jan- Jan
dec dec Q4 Q3 Q2 Q1 Q4
2013 2012 2013 2013 2013 2013 2012
Net sales 38 41 21 5,5 5,6 4,9 27
Operating costs -43 -38 -11 -9,0 -12 -11 -10
Depreciation -5,7 -4,2 -1,5 -1,4 -1,4 -1,3 -1,7
Operating profit -11 -0,7 8,7 -4,9 -7,8 -7,0 15
Income from investments
in Group companies 26 31 -4,1 0,0 30 0,0 0,0
Net financial income/expense 1,2 1,3 0,0 0,5 0,0 0,7 0,2
Profit/loss after
financial items 16 31 4,6 -4,5 23 -6,3 16
Year-end appropriations 107 97 107 0,0 0,0 0,0 97
Pre-tax profit/(loss) 124 129 112 -4,5 23 -6,3 113
Tax -22 -26 -26 1,0 1,7 1,4 -30
Profit/loss for the period 102 103 86 -3,5 24 -4,9 83

CONDENSED BALANCE SHEET OF THE PARENT COMPANY (SEK MILLION)

Assets 2013-12-31 2012-12-31
Intangible fixed assets 23 21
Property, plant and equipment 20 21
Financial assets 324 326
Total fixed assets 367 368
Current receivables 237 226
Cash on hand and demand deposits 139 124
Total current assets 376 350
Total assets 743 718
Equity and liabilities
Equity 400 385
Untaxed reserves 177 153
Deferred tax liabilities 1,8 1,7
Non-current non-interest-bearing liabilities 0,0 0,7
Total non-current liabilities 0,0 0,7
Current interest-bearing liabilities
Current non-interest-bearing liabilities
0,0
164
0,0
178
Total current liabilities 164 178
Total equity and liabilities 743 718
Pledged assets 7,5 7,5
Contingent liabilities 192 182

OEM is one of Europe's leading technology trading companies and consists of 29 business units in 14 countries.

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