Nordic Waterproofing’s business is affected by seasonal variations – the months of January, February and December being the weakest months. In 2018, sales in these three months accounted for almost 16 percent of the annual total, while the other nine months accounted for 84 percent which is in line with the five-year average.
The decline during the winter is explained by the cold and poor weather conditions and their impact on the construction industry. In general, there is a certain degree of stockpiling during the winter months, which transfers to a stock depletion during the summer months as a result of increased activity in the market. An early winter could, among other things cause many of the Company’s customers choose to postpone planned projects, in turn, having a negative impact on annual earnings. The same applies if the winter is long and the season starts late in the spring.
As a result of active efforts in the management of working capital, the average working capital requirement decreased between 2013 and 2016 but increased in 2017 and 2018 which is primarily a consequence of increased net working capital following the acquisitions made during the years. At the end of 2018, the net working capital was higher than historical end-year levels due to temporarily higher inventory levels in order to fulfil delivery obligations, but also by higher purchase of raw materials to secure a competitive price level, in the beginning of 2019.
Seasonal variations affect EBIT and the EBIT margin to the same extent as sales.