Why do we invest in Nordic industrial firms?


## **Introduction**

The global machinery market has witnessed the remarkable ascent of Nordic companies, setting new performance benchmarks for growth, margins, and other key metrics. While Germany has long been recognized for its quality and efficiency in the machinery sector, the recent years have seen the German machinery market facing intense margin pressure. On the other hand, Nordic machinery companies have been steadily gaining ground and now surpass German players on important metrics such as profitability, resilience, and growth.

![Graph comparing the financial performance of Nordic machinery companies to German counterparts over the past 5 years](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Why%20do%20we%20invest%20in%20Nordic%20industrial%20firms/nordic-machinery-companies-have-seen-robust-financial-performance-over-the-past-five-years-outpacing-their-german-peers.-min.webp)

The Nordic machinery market has emerged as a new global force, with a 5.7 percent annual growth from 2016 to 2019, outpacing Germany's reported growth rate of 5.2 percent during the same period. Furthermore, Nordic companies exhibited greater resilience in 2020, maintaining margins of about 9 percent compared to 4 percent for German companies. A closer examination of Nordic companies revealed their superior performance in productivity, salary management, and capital management. Although German companies scored higher in controlling product costs, Nordic companies excelled in these areas, providing them with a competitive edge.

![A bar chart showing the growth of nordic companies](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Why%20do%20we%20invest%20in%20Nordic%20industrial%20firms/nordic-companies-saw-fairly-stable-margins-from-2016-through-2019-and-outperformed-their-german-counterparts-in-most-areas.-min.webp)

Among the Nordic machinery companies, several standout performers have exemplified success through distinct strategies. These success factors include:

**Focus on sizeable niche markets:** Well-performing Nordic machinery companies concentrate on serving industries that generate substantial demand but have limited competition. They establish themselves as market leaders and are recognized as visionaries in their respective niches.

**Emphasis on performance culture and delegation:** Almost all Nordic machinery players foster a culture that holds managers accountable for profits and losses. This deep-rooted belief extends up to three levels below the CEO, ensuring a strong emphasis on profit-and-loss metrics and practices that increase the likelihood of success.

**Systematic, programmatic M&A activities:** Top performers in the Nordic machinery market actively engage in acquiring and divesting companies. Their strategic moves are designed to maintain relevant and focused portfolios, positioning themselves for sustainable long-term growth. Some companies have pursued M&A to capture opportunities related to sustainability, which has become a major concern in the machinery sector.

## **Progressing in the machinery industry**

While progress is being made with the development and administration of COVID-19 vaccines, the machinery sector continues to grapple with the ongoing economic repercussions of the pandemic. These challenges are expected to persist throughout 2021. The industry is facing significant price pressures as end customers, particularly those in the automotive and aerospace sectors, strive to curtail capital expenditures. Additionally, machinery companies are confronted with the dual challenge of managing escalating salaries and stagnant productivity, along with rising material costs. However, amidst this demanding landscape, there are opportunities for machinery companies to enhance their performance by implementing four effective strategies that have proven successful among leading Nordic players.

![](https://hedonova.b-cdn.net/Hedonova%20images/%20All%20Hedonova%20blogs/Why%20do%20we%20invest%20in%20Nordic%20industrial%20firms/only-half-of-2017%E2%80%99s-top-performing-nordic-machinery-companies-stayed-on-top-min.webp)

1. **The resilience and stability of Nordic industrial firms:** One of the primary factors that attract Hedonova to Nordic industrial firms is their remarkable resilience and stability. The Nordic region has built a reputation for its strong economic fundamentals, including sound governance, robust legal frameworks, and fiscal discipline. This stability provides a solid foundation for industrial firms to thrive, even during periods of economic uncertainty. Hedonova recognizes the value of investing in companies that have proven their ability to weather downturns and generate consistent returns.
2. **Innovation and technological advancements:** Nordic industrial firms are renowned for their commitment to innovation and technological advancements. These companies prioritize research and development, continuously seeking new ways to improve processes, enhance productivity, and stay at the forefront of their respective industries. Hedonova sees immense potential in investing in these forward-thinking firms that have a track record of leveraging innovation to drive growth and maintain a competitive edge in the global marketplace.
3. **Environmental consciousness and sustainability:** Sustainability is an integral part of Hedonova's investment philosophy, and Nordic industrial firms align well with this focus. These companies have embraced environmental consciousness and are at the forefront of implementing sustainable practices. From reducing carbon emissions and optimizing energy consumption to implementing circular economy principles, Nordic industrial firms recognize the importance of sustainable operations. Hedonova believes that investing in such environmentally conscious companies not only aligns with its values but also positions them for long-term success as the world increasingly demands greener solutions.
4. **Robust infrastructure and skilled workforce:** Nordic countries boast an exceptional infrastructure and highly skilled workforce, providing a favorable environment for industrial development. Advanced logistical capabilities, efficient supply chains, and reliable transportation networks are key advantages that Nordic industrial firms leverage. Additionally, the region's emphasis on education and talent development ensures a steady supply of skilled professionals. Hedonova recognizes the value of investing in companies operating in such an environment, where strong infrastructure and a skilled workforce contribute to increased operational efficiency and competitive advantage.

## **Conclusion**

Hedonova's investment in Nordic industrial firms stems from a comprehensive evaluation of the region's unique strengths and advantages. The resilience and stability of the Nordic economy, coupled with the innovative nature of industrial firms, provide a promising investment landscape. Furthermore, the focus on sustainability aligns with Hedonova's values and positions these firms as leaders in addressing global environmental challenges. Lastly, the robust infrastructure and skilled workforce create an enabling environment for industrial growth and serve as catalysts for long-term success. Through its investments in Nordic industrial firms, Hedonova aims to capitalize on these factors and generate sustainable returns while contributing to the growth and development of the region's industrial sector.


Nordic machinery companies have outperformed their German counterparts in terms of growth, profitability, and resilience. Their success is attributed to their focus on niche markets, performance culture, and strategic M&A activities. Despite challenges caused by the pandemic, Nordic machinery firms exhibit resilience and stability, prioritize innovation, embrace sustainability, and benefit from a robust infrastructure and skilled workforce. Hedonova recognizes the value of investing in these firms due to their unique strengths and potential for long-term success.

Why do we invest in Nordic industrial firms?

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