Swedish industrial equipment producer Alfa Laval closes the first quarter, a period affected by the coronavirus pandemic, with a profit of SEK 1 billion against SEK 1.2 billion from the same period of last year – a decline of 16 percent.

Net revenue, on the other hand, increased slightly from SEK 10.1 billio (EUR 930 million) in Q1'19 to SEK 10.6 billion in the first three months of 2020.

"The financial performance in the first quarter was stable with order intake, sales, and operating income on about the same level as last year. Several important end markets, like energy efficiency solutions in HVAC as well as biotech and marine pumping systems, continued with strong demand," writes Alfa Laval Chief Executive Tom Erixon in the interim report.

The group's energy division noted a fall in total orders during the period compared to last year's Q1. The Food and Water unit and the Marine division, though, went forward.

Erixon notes that China has rebounded well after the lockdown, and the company's order intake from that market was higher than comparable period of 2019. Although the situation, which also entailed lower demand for oil and gas, has impacted the manufacturer's North American order intake.

"Operationally, the quarter was demanding and at times turbulent. Despite several lockdowns of our supply chain in important markets, deliveries to our customers have continued with limited disturbances," Erixon adds.

Important production units in China, Italy and France are once again fully operational after short disruptions, whereas the national shutdown in India is still limiting Alfa Laval's own production as well as output from some of the group's suppliers.

Guidance downgrade for Q2 and forward

The coronavirus pandemic has also left a mark on Alfa Laval's willingness to invest.

"After a three-year period of elevated investing into a more competitive platform regarding both manufacturing footprint and product offering, we are now adjusting to a weaker business climate," the CEO writes.

Investments fell by 50 percent in the first quarter of 2020 compared with last year. Research and development costs, however, increased relative to 2019, resulting from sustained high activity within product launching.

"Going forward, R&D costs as well as sales and administration costs are planned to decrease considerably. The earlier announced fixed cost reduction program of SEK 1 billion is on track and is expected to have full effect by the end of the second quarter," Erixon says.

He expects that a weaker global economy will negatively impact Alfa Laval from the second quarter and forward.

"The company is well prepared to adjust the organization to future demand fluctuations. With the recent announcements to withdraw the dividend proposal for 2019 and the prolongation of the existing revolving credit facility with one year until 2022, Alfa Laval has secured the long term financing. The company is in a good position to serve our customers during these turbulent times," Erixon writes.

English Edit: Daniel Frank Christensen

(This article was provided by our sister media, CleantechWatch)

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