- Email: [email protected]
Camfil Farr, Sweden
August 2006
Filtration Industry Analyst
Camfil Farr, Sweden Profile The Camfil Farr Group is a global company operating in the air filtration sector. It operates in three business areas - Comfort Filters; Clean Processes; and Safety and Protection. The first segment consists of air handling systems for residential and office buildings, the second sector provides filters and associated applications to protect manufacturing processes, while the final unit includes filters for the nuclear power industry, research laboratories and dust collection systems. With its headquarters in Sweden, the Group has 19 production plants and R&D centres in four countries in the Americas, Europe and Asia Pacific. Analysis Camfil Farr had a good year in 2005 with net sales up 8% to SKr3083 million (2004: SKr2885 million), driven by strong growth in Asia, North America and its gas turbine operations. Based on fixed currency rates, sales increased by 6%. The group’s gross margin decreased slightly from the 34.1% posted in 2004, but remained at a healthy 33.1% for the year. The decrease was due to higher sales in its gas turbine division, where the margin is lower than the margin on ordinary filter sales. The decline also reflected increased sales in North America, where distributor networks are used and the gross margin is consequently lower than margins in Europe and Asia, where direct sales forces are employed. Camfil Farr’s operating profit, after depreciation and amortisation, reached SKr290 million in 2005 (2004: SKr233 million). This included SKr55 million from a restructuring reserve, established for the Farr acquisition in 2000, which was dissolved in 2005.The company’s underlying operating profit was SKr236 million, a decrease of SKr23 million on the previous year. Operating profit was impacted by restructuring costs of SKr18 million, mainly for building a new production facility in the UK, where three existing operating facilities will be combined into a single unit. Profits generated by Camfil Farr’s American companies increased by 35%, driven by higher sales volumes, better use of existing capacity and recent restructuring efforts. Europe remained its most profitable area, despite sales dropping below 2004 levels. Asian operations increased their earnings level and recorded a second year of profit.
Camfil Farr embarked on a five-year strategic plan in 2005 aimed at delivering sustained organic growth and increased profitability. The programme involves a palette of more than 100 points of action, of which more than 50 were completed in 2005 alone. Specific projects, for example, have focused on proactive sales activities and training as part of an overall sales development programme. The company also launched a supply chain initiative to speed up deliveries in Europe, a project that has led to improved inventory management routines and warehouse efficiencies for shorter lead-times and better customer service. In terms of geographic markets, Camfil Farr targeted expansion in Asia a few years ago and now has the market covered reasonably well. It has been riding the industrial wave in China and is expanding production in the country to encompass a wider range of products. During 2005 sales were up 42% in China. Other Asia Pacific markets also showed good growth, such as Australia where sales were up 24%. The company is currently sowing seeds in new markets like Brazil, seen as a hub for South America. While looking for growth, Camfil Farr is committed to capitalising on its core technology of air filtration. This expansion will include appropriate acquisitions, as underlined by the company’s June 2006 takeover of industrial filter manufacturers IF Luftfilter AB and Kaefer-Raco Engineering GmbH. Camfil Farr is confident of further progress in 2006, having begun the year with a historically high order backlog across its product range, as well as good levels of product inquiries. ■
Key Figures (SKr million) Camfil Farr Group
Year ended 31.12 2005
2004
2003
2002
2001
3083
2885
2691
2961
3237
1341.1 1568.7 173.1
1283.0 1412.8 158.9
1265.3 1265.8 159.5
1407.0 1384.0 169.9
n/a n/a n/a
Operating Income
290
233
161
192
170
Profit after Financial Items
265
210
139
149
96
Net Profit
186
147
86
77
47
Net Sales Of Which: Comfort Air Clean Processes Safety & Protection
Contact Details Camfil Farr President and CEO: Executive Chairman Address:
Alan O’Connell Jan Eric Larson Industrigatan 3 S-619 33 Trosa Sweden
Tel: +46 156 536 00 Fax: +46 156 167 24 Web: www.camfil.com
9
COMPANY PROFILE
COMMENT
Filtration Industry Analyst
Camfil Farr, Sweden Profile The Camfil Farr Group is a global company operating in the air filtration sector. It operates in three business areas - Comfort Filters; Clean Processes; and Safety and Protection. The first segment consists of air handling systems for residential and office buildings, the second sector provides filters and associated applications to protect manufacturing processes, while the final unit includes filters for the nuclear power industry, research laboratories and dust collection systems. With its headquarters in Sweden, the Group has 19 production plants and R&D centres in four countries in the Americas, Europe and Asia Pacific. Analysis Camfil Farr had a good year in 2005 with net sales up 8% to SKr3083 million (2004: SKr2885 million), driven by strong growth in Asia, North America and its gas turbine operations. Based on fixed currency rates, sales increased by 6%. The group’s gross margin decreased slightly from the 34.1% posted in 2004, but remained at a healthy 33.1% for the year. The decrease was due to higher sales in its gas turbine division, where the margin is lower than the margin on ordinary filter sales. The decline also reflected increased sales in North America, where distributor networks are used and the gross margin is consequently lower than margins in Europe and Asia, where direct sales forces are employed. Camfil Farr’s operating profit, after depreciation and amortisation, reached SKr290 million in 2005 (2004: SKr233 million). This included SKr55 million from a restructuring reserve, established for the Farr acquisition in 2000, which was dissolved in 2005.The company’s underlying operating profit was SKr236 million, a decrease of SKr23 million on the previous year. Operating profit was impacted by restructuring costs of SKr18 million, mainly for building a new production facility in the UK, where three existing operating facilities will be combined into a single unit. Profits generated by Camfil Farr’s American companies increased by 35%, driven by higher sales volumes, better use of existing capacity and recent restructuring efforts. Europe remained its most profitable area, despite sales dropping below 2004 levels. Asian operations increased their earnings level and recorded a second year of profit.
Camfil Farr embarked on a five-year strategic plan in 2005 aimed at delivering sustained organic growth and increased profitability. The programme involves a palette of more than 100 points of action, of which more than 50 were completed in 2005 alone. Specific projects, for example, have focused on proactive sales activities and training as part of an overall sales development programme. The company also launched a supply chain initiative to speed up deliveries in Europe, a project that has led to improved inventory management routines and warehouse efficiencies for shorter lead-times and better customer service. In terms of geographic markets, Camfil Farr targeted expansion in Asia a few years ago and now has the market covered reasonably well. It has been riding the industrial wave in China and is expanding production in the country to encompass a wider range of products. During 2005 sales were up 42% in China. Other Asia Pacific markets also showed good growth, such as Australia where sales were up 24%. The company is currently sowing seeds in new markets like Brazil, seen as a hub for South America. While looking for growth, Camfil Farr is committed to capitalising on its core technology of air filtration. This expansion will include appropriate acquisitions, as underlined by the company’s June 2006 takeover of industrial filter manufacturers IF Luftfilter AB and Kaefer-Raco Engineering GmbH. Camfil Farr is confident of further progress in 2006, having begun the year with a historically high order backlog across its product range, as well as good levels of product inquiries. ■
Key Figures (SKr million) Camfil Farr Group
Year ended 31.12 2005
2004
2003
2002
2001
3083
2885
2691
2961
3237
1341.1 1568.7 173.1
1283.0 1412.8 158.9
1265.3 1265.8 159.5
1407.0 1384.0 169.9
n/a n/a n/a
Operating Income
290
233
161
192
170
Profit after Financial Items
265
210
139
149
96
Net Profit
186
147
86
77
47
Net Sales Of Which: Comfort Air Clean Processes Safety & Protection
Contact Details Camfil Farr President and CEO: Executive Chairman Address:
Alan O’Connell Jan Eric Larson Industrigatan 3 S-619 33 Trosa Sweden
Tel: +46 156 536 00 Fax: +46 156 167 24 Web: www.camfil.com
9
COMPANY PROFILE
COMMENT