Marine sector boosts Alfa Laval

May 02 2014

Speaking about the interim first quarter 2014 report, Lars Renström, Alfa Laval president and CEO said; “The order intake was SEK7.5 bill in the first quarter. Fewer large orders is the main explanation to the sequential downturn. Compared to the corresponding quarter last year, order intake increased with 5%.”

Within process technology the base business was stable, whereas the number of large orders decreased from the extraordinary levels of the fourth quarter. At the same time the order intake for marine & diesel increased from the high level that was established in the fourth quarter, boosted by the high contracting at the shipyards last year. 
“The environmental solution Alfa Laval PureSOx continued to developed well and several orders were booked from both existing and new customers. The marine service business gathered speed, lifted by an increased demand for spare parts as well as a higher repair activity. Equipment’s order intake decreased somewhat partly due to the cold winter in the US but also due to the prevailing uncertainty in Russia.  
“In Central and Eastern Europe, both Russia and Turkey were marked by political uncertainty, while the other markets in the region were stable. In Asia, the order intake increased somewhat as growth within the base business compensated for fewer large orders. In Western Europe, the order intake was slightly higher, whereas fewer large orders affected North America, which however had an unchanged base business.  
“On 7th April, we signed an agreement to acquire the Norwegian company Frank Mohn AS – a leading manufacturer of pumping systems for marine and offshore. We expect the transaction to be closed during May, after approval from regulatory authorities.”
“We expect that demand during the second quarter 2014 will be on about the same level as in the first quarter.” 
Overall, the order intake increased by 5% to SEK7.5 mill from SEK7.13 mill in 1Q14. Net sales increased by 2% to SEK6.6 mill (6.5 mill). Adjusted EBITA was SEK 1.1 mill (1.1 mill).
The result after financial items was SEK794 mill (SEK927 mill). Net income was SEK564 mill(703 mill). Cash flow from operating activities was SEK592 mill (971 mill).  
Compared to the previous quarter, the Group’s order intake, excluding currency effects, was 8.1% lower, which entirely was due to an organic decrease mainly explained by fewer large orders. Orders received from service (formerly parts & service) constituted 28% (28.9%) of the Group's total orders received during 1Q14.  
As for the order intake, the Marine & Diesel Division increased in 1Q14, compared with 4Q13, as the positive yard contracting development in 2013 continued to boost demand.   
The Marine & Diesel Equipment segment saw overall higher order intake in the first quarter, explained by last year’s yard contracting which generated good growth in demand for the marine equipment base business. Demand for equipment for diesel power plants, however, declined somewhat. Environmental products and solutions also declined, due to the non-repeat of a large Alfa Laval Pure Dry order, while ballast water treatment showed an increase. 
Marine & Offshore Systems reported lower order intake as demand for boilers, as well as offshore systems declined compared to the very strong fourth quarter. Exhaust gas cleaning systems however, recorded growth.  
Service showed a very good development due to increased parts sales as well as higher repair activity.  
On 7th April, Alfa Laval said that the company has signed an agreement to acquire Frank Mohn, a manufacturer of submerged pumping systems to the marine and offshore markets. 
The acquisition, which strengthens Alfa Laval’s fluid handling portfolio by adding a unique pumping technology, will further reinforce the group’s position as a leading supplier to the marine and offshore oil & gas markets, the company said. 
Alfa Laval had agreed to acquire Frank Mohn, with the product brand Framo, for NOK13 bill, on cash and debt free basis, from Wimoh, a company controlled by the Mohn family. 
Bergen-based Frank Mohn, generated sales of NOK3.4 bill and had an order intake of NOK6.1 bill in 2013. 
Renström, said of the acquisition: “Frank Mohn is an excellent company that we have been following closely for several years. It has highly skilled employees, high quality products and a market-leading position within segments offering attractive long-term growth prospects. The combination of Frank Mohn and Alfa Laval will provide a very attractive offering of products, systems and services and it will strengthen our leading position as a provider of critical systems for ships and offshore oil & gas production units, with unmatched service capabilities.
”The acquisition of Frank Mohn will be funded by existing credit facilities and a fully committed bridge facility. Alfa Laval’s net debt/EBITDA ratio on a pro forma basis (following completion of the acquisition) would be around 2.5x. The synergies are expected to reach about NOK120 mill annually, gradually realised over a three year period.   
“After closing, Alfa Laval intends to include Frank Mohn and the product brand Framo in the Marine & Diesel division. The company will be kept together and form a new segment in the Marine & Diesel division, under the same management as today. The activities in the Bergen area in Norway; the head office and sales & service facility at Askøy – as well as production facilities at Fusa, Flatøy and Frekhaug – will become Alfa Laval’s operational centre for marine and offshore pumping systems. The closing of the transaction is subject to approval from regulatory authorities,” he concluded. . 

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