Q2 organic sales beat and EBITA +10%

Norway pick-up and SEK 21m order for Z&I

‘18e-‘19e EBITA raised by 5% and 6%

Organic growth and Process & Environment surprises
In Q2’18, sales were SEK 161m (vs ABGSCe 160m) and EBITA SEK 14.5m (+10% vs ABGSCe 13.2m), corresponding to a margin of 9.0% (7.5% in Q2’17) vs ABGSCe of 8.2%. Organic growth of 5.5% (if applying ABGSCe FX tailwind of 1.5%) was stronger than expected at 1.8%, driven by solid activity in both business areas. This was despite a probable lag in orders for Materials Technology, indicating decent volumes are likely in Q3’18e. However, the main take-away is in the business area Process & Environment, showing margins of 13.4% (4.1% in Q2’17) vs ABGSCe of 8.3%. This is partly explained by full consolidation of Zander & Ingeström, but even adjusted for acquired contribution, the underlying margin significantly beat our estimates. An important factor relates to positive earnings in Norway. When going from negative to positive numbers the leverage on the group is apparent. To put it into perspective, Norway was margin dilutive of 1.9 pp in 2017. Our estimates already imply a recovery in Norway in H2’18e, and even if it will not be a linear journey, our confidence in a recoup has strengthened.

Acquired Zander & Ingeström – an evident contributor
We raise our ‘18e EBITA by 5% when factoring in the announced order from Z&I and updated FX. Additionally, we conclude that four months after acquiring Z&I, the performance has been firm with a kick-start in Q1’18 followed by margins of >13% in Q2’18. We estimate 13.5-13.7% sustainable margins in Z&I for ‘19 and ‘20, but a higher contribution margin is demonstrated in some orders. For ‘19e-‘20e EBITA is raised 6% and 3%, with a margin of 9.0-9.2% (7.2-7.3% excluding Z&I).

Sustainable solutions and infrastructure for the long run
Regardless of partly project-based volumes, we acknowledge that CBTT’s tilt to sustainable solutions and infrastru