Directors' Report The Board of Directors and the Managing Director of OEM International AB (publ.), CRN 556184-6691, with its headquarters in Tranås, Sweden, hereby present the Annual Report and the consolidated financial statements for the 2020 financial year. The Annual Report and the Consolidated Financial Statements, including the Auditor's Report, are given on pages 31-88. Figures for 2019 are given in brackets. THE GROUP Business review
OEM is a leading technology trading group operating in 14 selected markets in northern Europe, East Central Europe, the UK and China. Operations are conducted in subsidiaries in the Nordic countries, the UK, Poland, the Czech Republic, Slovakia, the Netherlands, Hungary, Estonia, Latvia, Lithuania and China. OEM is a value-adding link between its customers and leading manufacturers of products and systems for industrial applications. As one of Europe's leading technology trading groups, OEM brings value to its customers by offering an extensive range of products coupled with considerable technical product and applications expertise. With a strong marketing and sales organisation, OEM serves as the extended arm of the suppliers in each market and aims to make them a leading player in their niche. This makes OEM the best distribution channel for its suppliers in OEM's markets. Its extensive range of industrial components comprises products in the areas of electrical components, flow technology, installation components, ball bearings and seals, motors, transmissions, brakes and appliance components. The range is constantly evolving with the addition of new products and the replacement or discontinuation of unprofitable products. The clearly-defined product range that is marketed in each region and the added values created by the organisation form a distinct brand concept. The brand concepts are launched on new geographic markets as they grow in strength. The Group is structured and primarily managed as three market regions, • Sweden, • Finland, the Baltic states and China, • Denmark, Norway, UK and East Central Europe. The objective of this organisation is to consolidate OEM's long-term competitive edge and increase growth outside of Sweden. OEM's Class B share is listed on NASDAQ Nordic Mid Cap in Stockholm. Incoming orders, net sales and profit Incoming orders increased by 2% to SEK 3,368 million (3,303). At SEK 514 million, the order book was 21% up on the corresponding date of the previous year.
10
2,750
9
2,500 2,250 2,000
6
1,750 1,500
Region Denmark, Norway, UK and East Central Europe
11
3,000
5 2016
2017
2018
2019
Net sales SEK million, EBITA margin %.
2020
Region Finland, the Baltic states and China
7
12
3,250
Sales are conducted under the names of OEM Automatic, OEM Electronics, OEM Motor, Internordic Bearings, Telfa, Elektro Elco, Nexa Trading, Svenska Helag, Svenska Batteripoolen, Agolux, Ernst Hj Rydahl Bromsbandfabrik and ATC Tape Converting. Net sales rose 1% to SEK 2,013 million (1,995). Foreign currency exchange rate movements have had an adverse 1% impact on net sales, which means that organic growth in the region was 2%. The companies reporting strongest growth are ATC Tape Converting and Elektro Elco, whose sales rose 35% and 24% respectively in the period, while Batteripoolen and Nexa posted 4% growth. OEM Automatic, the Group's largest company, reported a 3% fall in sales year-on-year. Incoming orders rose 5% to SEK 2,085 million (1,986). In 2020, incoming orders were 4% higher than net sales. EBITA rose 6% to SEK 303 million (286). The increase in revenue is primarily attributable to cost savings and also, to some extent, support funding from governments for businesses during the pandemic. EBITA has also been positively affected by a SEK 1.9 million remeasurement of contingent considerations.
8
13
3,500
Region Sweden
Sales are conducted under the names of OEM Automatic, OEM Electronics, Akkupojat and Rauheat. In 2020, net sales for the region decreased by 1% to SEK 695 million (699). Exchange rate fluctuations adversely affected net sales by 1%, which means there was no organic growth in the region. The entity in China reported growth during the year with a 4% increase in net sales. Other entities in Finland and the Baltic states have not reached previous performance levels. The operations in the Baltic states and China are small and their impact on total growth in the region is marginal. The operations in Sitek-Palvelu were integrated with OEM Automatic in the fourth quarter through a new business area for pumps, process applications and pressure and flow components. Incoming orders for the region fell by 2% to SEK 698 million (711). Incoming orders were in line with net sales. EBITA rose 18% to SEK 83 million (71), due primarily to a lower cost base and, to some extent, government financial support measures during the pandemic.
%
SEK million
Net sales were down slightly year-on-year to SEK 3,283 million (3,299). Net sales fell by 1% for comparable entities, which is also the decrease excluding the impact of foreign currency exchange rate fluctuations. The majority of the Group's business activities have been adversely affected, mainly in the second and third quarters, by the market slump caused by the outbreak of Covid-19, and then began to recover in the fourth quarter. This means there is almost no change in net sales over the previous year. During the year, Elektro Elco, ATC Tape Converting and OEM Automatic in Norway and Hungary showed strongest growth performance amongst the entities. Operating profit before amortisation of acquisition-related intangible fixed assets (EBITA) increased 10% during the year to SEK 422 million (385). The increase can be attributed primarily to lower levels of activity in all operations which resulted in cost savings. The operating margin before amortisation of acquisition-related intangible fixed assets (EBITA margin) was 12.9% (11.7%). Profit before tax was SEK 401 million (367) and profit after tax rose 10% to SEK 317 million (289). The year's profit after tax corresponds to SEK 13.73 (12.50) per share outstanding.
Sales are conducted under the names of OEM Automatic, OEM Automatic Klitsö, OEM Electronics and Zoedale. Net sales fell by 5% to SEK 575 million (604) for the full-year 2020. Acquisitions boosted net sales by 6%, while foreign exchange movements had a negative 3% impact, delivering negative organic growth of 8% in the region. The operations in Norway and Hungary reported growth of 19% and 10% respectively during the year. Incoming orders decreased by 3% to SEK 586 million (606). Incoming
O E M 2 02 0
31
