Boreo

Okay, so getting on going. So agenda is as normal in our webcast. I will discuss the key highlights first, and then Aku will discuss the business area group level performance and numbers in more detail. And please use the chat function if you want to ask any questions, and we will take those then after the presentation. So Q3 for us was a very similar quarter than Q2 of this year. So as the headline of the presentation already said, in terms of profitability, decent performance from from the group and from a cash flow point to be extremely good and positive development. So cash flow pouring in nicely during the quarter as also in the first nine months of the year. In regards to profitability, we were at 2.9 million operational EBIT slightly below the comparison period. I'm happy to see that the margins are improving. of EBIT margins. Cross margins of our companies continue to develop well. We've been successfully operating in the inflationary environment in the last couple of years and been able to maintain and slightly increase our cross margins. Now looking at this year, sales has been in demand and demand environment has been more challenging compared to 22. And because of that, the growth on a group level is somewhat negative during this quarter, whereas the companies we've acquired in the last year have contributed to the result as expected and positive. The firm's financial standing continues to be stable, so despite the fact that we executed one transaction depth in technologies bought in July 23, net debt to operational EBITDA supported with the strong cash flow remained at a stable level during Q3. If we look at a bit of the trending performance on our three strategic financial targets, we've grown in the last 12 months operational EBIT by 14%. 11.2% is where we stand currently with our return on capital in world target, and it's already 2.5 times net debt to operational EBIT. Important to note that if we look at the numbers, excluding the already discontinued Sunny excavator business here in Finland and in Sweden, the uplift, let's say that we would have already seen a further uplift in the profitability margins to 5.9%, earnings growth without Sunny is 19%, and return on capital employed is close to 12%. So although now, if you look at the last couple of two, so basically the two quarters, the earnings generation has been on a stable level compared to the comparison periods of 22, still looking at roughly 15% minimum annual average operational, or 15% minimum, or 15% operational EBIT growth. That's a decent number as we see. Then going a bit more further into our businesses, as I already mentioned in the beginning, happy to see the positive cross-matching developments or the stable cross-matching developments you see in this slide. Overall in the group level, somewhat of an improvement, in particular driven by the strong performance now in the last one to two years of our technical trade business portfolio. Also very important to note that if we look at the performance of our 22 companies, the majority of them, over two-thirds operate at very good profitability. looking at, for example, the important return on trade working capital metric that we measure quite also over roughly two-thirds of the companies are clearly below the 50% mark that we basically set for our businesses. And then if we look at the more negative parts of the performance, basically now in the quarter, as a result of three different businesses, the Exity Sunny business, the Singla Solutions Nordic operation, as well as Vobunua Bilverkstad in Sweden. the negative organic growth seen is because of these three companies. And if we look at the future prospects for this business, I think nothing has changed in our thinking with regards to the competitiveness of those companies in the mid to long term. And we are confident that we are able to bring the profitability of those companies back to the levels where they've been in 2020. So overall majority of the portfolio continued to perform well. There are clear signs of, or let's say there has been improved signs of more pressure on the demand side, so pressure on turnover in the last six months, but overall a good and a decent situation when we look at where our companies overall stand. Then clearly the highlight of the quarter is the excellent cash generation. So here in this slide, we have the last 12-month operative cash flow development of the group. So we updated our strategic targets in Q2 or Q3 22, so a bit more than a year ago, shifting clearly to focus more on capital efficiency and returns. And also, if you look at now what has happened during the last four quarters thereafter, we've roughly generated 10 million euro of operational EBIT with an operating cash flow of roughly 50 million euro. So a very significant and a good development driven by stable earnings development, but also clearly the reduction of working capital, roughly €8 million from the peak seen in August 2022. So a very nice development and a mark that we continue to move into the right direction. If we look at the important metric of return on trade working capital, so basically this is one of the key KPIs we look at and we drive at the group level for all of our companies. So since, I mean, during the last 12 to 15 months of positive development from 27% to 30%, When we look at reported numbers, if we exclude the discontinued sunny business from there as well, we are 32.5%, so a clear 5.5% improvement. There as well, a positive development as you see here, mainly with the electronics businesses as well as our technical trade business area. Whereas mainly due to the challenges related to the sunny operations, but also F&B in Sweden, the heavy machines has had a tough time. If we look at both the earnings and cashflow generation in the recent history. However, this continues to be, we see a positive trend going forward with this. There's a clear signal also that the companies and our organization starts to better capture the thinking and mindset of how important capital efficiency and returns overall are. And then we gradually continue to and expect to see a positive development with regards to this as well. Then a couple of words on our outlook. As you know, we don't provide guidance on a short-term level, but clearly if you look at what are the key drivers and key focus areas at the moment in steering the firm, we continue to focus as at all times on creating profits, also creating cash flow. With regards to profitability, because of the signals that we've seen during the last six months roundabout, we have put already some months back additional focus on cost control. Expect that also to contribute during the next quarters positively to our earnings generation. And although we have already released quite significant amount of working capital from the existing companies, we still believe there is some room to go when it comes to reaching the sustainable normal level of working gap that should be tied to our businesses. So in Q2, we were at 32 million roughly. Now we are at 29 million for the current portfolio. There is still a few million euro of possibility to further optimize working capital and still operate at a very sustainable level. So that continues to be a very important focus area going forward as well. Then with regards to our financial standing, so we clearly want to, as we've successfully maintained a stable leverage during the last two to three years, we want to continue on this path and also reflecting the changes in the interest environment, rather push the leverage downwards from the existing 2.4, maintain it at the low end of our strategic target range, Also then when we're reflecting our M&A activities, we have doing this year completed three acquisitions, invested roughly 10 million Euro to acquisitions. That work, that important work for the longer term continues creating good new companies and targets for the group. However, increasingly important during these times is to make sure that the financial standing of the firm remains solid and and protects us for the future as well. Then finally, from my side, our board of directors made a decision yesterday to distribute the second part of the dividend to which there was a normalization given by the AGM. So we continue on the path of paying an increasing dividend per share, so altogether 0.44 euros. 44 euro cents this year and there you see the details related to that the record and the payment dates but importantly we see that balancing also and we're not talking about huge sums that do not really move the needle on a group level when it comes to our ability to continue deploying capital in a good and in an attractive manner. So I feel that also balancing between paying dividends and allocating capital to new ventures, this is the right thing to do as well. So that was released yesterday, the press release related to that. So that's my intro to the quarter, and I will then hand over to Aku to continue more in detail on the numbers.

Yes, good morning also from my behalf, and thanks Kari. I will continue with finance sales. Sorry about this, now we have some issues with the slides here. Here we go. A bit of repetition also, but starting from the rolling development. Sales and operational EBIT development, as seen from the graph, 9% growth compared to last year, third quarter in terms of sales, and 14% growth. improvement growth in operational EBIT slightly, as mentioned below our strategic yearly target of 15%. Quarterly figures, not going to net sales anymore here, but highlighting the improved profitability still in the quarter, operational EBIT margin improved from 6.2%. 8% to 7.1% despite of the challenges in some business units. Then how the sales developed in terms of different components, organic growth versus inorganic growth. So this quarter here was supported by the recent acquisitions that was done in the beginning of the year and also also Delphine technologies here in the beginning of Q3. However, in organic growth side that was unfortunately negative because of the moderate performance in some business units. And basically same development here in operational EBIT side, positive from the M&A side but then negative from organic from our old businesses so to say. Then a bit longer term time frame and development rolling 12-month figures in the direct cost ratio and indirect cost ratio on the left firstly the direct cost ratio which says that still the development in the in the pricing and in controlling the direct cost side was good. And that was supported also slightly by the near acquisitions and the near companies. But as seen here from the absolute rolling 12-month direct cost base, that has gone down now from the Q2. 23 should be there. So from previous quarter alongside with the sales. However, the situation is opposite in the indirect cost size when we have basically stable indirect cost absolute amount, but when the sales was now in rolling 12-month terms decreased, that increased also the indirect cost base or the ratio. Then moving on, some words from the business areas. Electronics first here. Operative EBIT margin 6.3. That was below last year's third quarter. Impacted, of course, on many, many things. But overall, from the Finnish operations side, I think the performance was still good. Overall, the outlook remains stable, although in some businesses, the demand outlook has been a bit weakened, for example, in YEE Finland's case. And as mentioned before, SSN impacted largely to the numbers in Q3. with the same reasons than was communicated in Q2 already. However, the newly-advised Delphin technologies in the beginning of July performed well and according to the expectations, as did the Baltic operations overall. So, very solid performance there. And capital efficiency also good development there, despite of the fact that rolling 12-month operational EBIT slightly came down from Q2 this year. Technical trade, very good operational EBIT improvement from last year. Also stable outlook. overall in all of the businesses except for in the construction side and there especially in machineries construction equipment department where the current market environment definitely impacted on the figures and diluted the performance. However still solid outlook in Mootticolmio side. Machineries power business still very strong performance and also what comes to outlook, no major issues seen from that side. And G-Matic Filterit both acquired this year for G-Matic in the very end of last year. but very good performance and supported business area there. One thing I want to highlight here, capital efficiency, although return on trade working capital here is quite stable over the quarters, but still it's rolling 12-month figures, so there is a bit of a delay also in that sense, but good performance. release of working capital according to bands that we communicated already due to and there is still room to improve that site. Then heavy machines again good stable performance in Putschmeister business overall as Kari mentioned the quarter was negatively impacted by FNB's challenges still in the ERP implementation side, and with that also the delivery capability side, but that we expect to ease up in the coming quarters. However, operational EBIT margin a bit improved, from last year level, and as did return on capital employed also from the previous quarter, and now we start to see gradually the positive development there after the exit from Finnish and Swedish sunny businesses. Finally, other operations, very stable through the time series here, 1.2 million euro net sales and still the margin development very stable, despite of some inflatory balances that we have seen during the past quarters. Then two very important KPIs, return on capital employed. That is our strategic target also. As we can see now, the previous quarters have been very stable in the development. I'm definitely not satisfied with that one. As I said, sunny exit is still in the numbers, and sunny performance is still in rolling 12-month numbers. But that will, in the coming quarters, will be over. However, The capital employed, if we look at that one, that has been now very stable during the past quarter, despite of the three, four acquisitions that we have also done. So that also tells about the successful release in the working capital at the same time, offsetting that increase. And then return on equity now dropped from previous quarters 11.3%. level to 8.4, and that was purely because of the performance and also impacted by the increased financing costs because of the increased interest rates. So that impacted on the rolling 12-month figures also. As mentioned before, net debt to operational EBITDA, still very stable, 2.4 level in the end of Q3, despite of the acquisition that was done now in Q3, and cash conversion extremely good now in the quarter, 150-50%. And then, finally, To end with, on the left, we have earnings per share, operational earnings per share, and now we took also the operational net cash flow per share as a comparison. So as we can see from this graph, again, in Q2, Q3, where the heavy focus has been put on the cash flow and release of capital, that has definitely increased bear fruit, resulting with very good operational gas flow per share. And if we then look at the gray bars, there we see a clear drop from the previous year's Q3 in terms of earnings per share, and as mentioned, the main contributor has been the increased financing costs, but also, of course, in the EBIT side. And one thing I want to mention there, when we do the comparison quarter-on-quarter basis, last year in Q3, we saw one of financing gain from from the hedging instrument that we released or issued in Q2 last year. So that was one of, in the comparison period, that we will not see anymore in the coming quarters. And on the right, cash flow, as mentioned, €9 million release, or operational net cash flow during the past, two quarters heavily supported by the good performance in the working capital release. So I will end up with this and now we go back to the Q&A. Yes, thank you.

Thank you, Aku. Thank you. There's a good amount of questions. I think let's start with the questions looking at the history. First of all, there is a question about cash flow improvement. The question goes, could you say a bit more about the elements contributing to this big improvement? It's a good question. I mean, the major contributors to now for Q3 are related to A, to machinery's good performance, So I think we commented that already in Q2, that the machinery's working capital was unusually high in Q2 and early this year, and thereafter successfully we brought down working capital to levels where it has historically also been. Some room to go still, and I'm expecting some positive improvements in the coming months as well. And then secondly, overall, the Bootsmeister operations as part of the heavy machines business area, also a good working gap and cash flow development there. And then thirdly, then I would say with small good things here and there, movements here and there, as normal, but overall, I think working capital and cash flow is well managed at the moment by our companies. Then there are a few questions on the business areas. So number one, let's take that. So electronics business area. So sales declined despite the Delphin acquisition. How much of this was explained by I mean, I would say, you can further comment, but it's mainly so that the Delphin A contributed as we expected, not going to precise number as we don't go to comment directly on company level figures, but nevertheless, as we expected when we acquired the company in July and SSN, it was pretty much the whole of the impact seen in the electronics business is because of SSA. So, that's clearly. And also, there is another question related to SSA and as where they're bridging from their dialect. So, how is the outlook? Since the summer, we saw a clear bottom in the summer, thereafter gradual positive development in Finland, in Poland, as well as in, especially in Sweden, in the signal businesses. And we are proceeding in accordance with the plans we put in place and the estimates we put in place during the summer. And basically, we are still, I mean, compared to the strong last year, we are below those levels and expect to remain below the levels, but gradually going to the right direction and doing development work with both existing customer base, but also new customers, which we expect to strengthen the business in the long run. So we are progressing well with regards to that. Then there's another question on heavy machines BA. So heavy machine sales declined by 24%. How was this divided between effect of sunny exit challenges in F&B and other decline? Akko, maybe you can take that. Yes.