Boreo

Good morning and welcome to the trading update of Borea BRC for the second quarter of 2024. Before we head off to to the traditional presentation. A note to inform and recap basically the changes that we announced last Friday. So we have appointed, following the information from June, Aku departing and leaving the company later this autumn, we have appointed Jesse Petai, who has headed our M&A practice since year 21 and co-headed our technical trade division during the last months, is appointed as the new CFO. from September 1 onwards. So I would like to take the opportunity to thank Aku for the good service and wish him all the best for the future. Aku has had a great role in the last four years. He joined the company in 2020 when the firm was still Yleis Elektroniikka. and I think we had at that point seven or eight companies. So a lot has happened since, and let's wish, and we all wish Aku the best for the future. Thank you. With that said, we continue to the traditional items. So as normal in these updates, I will start off with some highlights, and then Aku will dig deeper into company performance and group financials as well. So as the headline of our Q2 report noted, we view Q2 as a step in the right direction. We had a tough or a poor week, Q1, where following a significant sales decline, profits fell to 0.6 million euro in Q1. Now, even though sales we were able to restore the company's profitability back to the historical levels we have been in line with last year. So, pleased with the work that our companies and we have done together to secure profitability and an achievement of 7% operational EBIT margin is a good result under these circumstances. As I said, we will talk about the affecting contributors more in detail in the next slides, but cost actions, the minimum 1 million euro annual cost savings that we're targeting, we're well underway to achieve those savings. They contribute significantly to the positive result and also the successful management of gross margins during the first half of the year. The outlook going forward remains challenging. We don't expect the market to significantly help us in the latter part of 2024. However, through the order books we have in place in our companies, there is Solid ground, especially towards the end of the year, to support the performance and an improving performance going forward. However, if we look at the overall situation, the demand outlooks in our companies, we see that we're not going downwards anymore as we did in Q4 and Q1 this year, but our have reached the bottom and expect to gradually continue to improve performance on the sales side as well.

Priorities remain as they've been in the last couple of

During the last couple of quarters, profit generation, working with our existing companies, strategy, I mean, not only cost optimization, not only, let's say, securing short-term profitability, but continuing to invest in long-term profit growth, and good strategic steps taken in many of the businesses in the last months. leverage is too high versus where we would like it to be at 2.8x at this point of time. Considering the pressure that the hybrid instruments also bring to our cash flow, the target is to continue leveraging in the next months and quarters to come. Briefly, long-term targets, the same headline as in Q2, temporarily far away from long-term targets, so priorities being, as I explained, I mean, we have since 2020 improved and grown results over 20% per annum. So overall, if we look at it, a significant growth of sales. However, as the bars clearly show from Q2 2023 onwards, tough time in generating earnings. And then because of that, basically now we're looking at a minus. minus low to minus 20 on rolling 12-month basis when it comes to our growth rates on earnings. Returns are stable. The profitability, due to the restoring of the profitability back to the levels where we were a year ago. Balance sheet continues to be, as I mentioned, too stretched and we're working our way to deleverage in the coming quarters. If we look at the performance, first of all from a sales point of view in a bit more detail, now we are at roughly 144 million of rolling 12-month sales compared to plus 170 where we were 12 months, 15 months ago. The decline is mainly due to the pressure that is there in the market to our construction businesses. So looking at the minus €8.5 million revenue decline of that, almost close to €7 million is from our construction businesses. So Putschmeister operations, uh mainly uh challenges more in here in in the finnish market um also quite quiet in in the estonian market compared whereas uh more positive outlooks in in in sweden in addition to that the machinery construction business uh uh revenue levels are are are low the same goes with our multi-colonial business here in finland however On the result side, the strong cross-marching profiles and the renovation in the construction industry part continues to support the profit generation there. There are some positive developments in part of the company. where we had a tough 23 due to reorganizations, implementation of a new ERP system and so forth. Now, if we're looking at already the last 12 months sales, F&B starts to be on the historical levels where it was at the point of acquisition in 21. Very good work and very pleased with those developments. filter it had a strong water in q2 outlook continues to be rather stable infradex our thermal camera distribution business here in finland the same thing as well as our career logistics business eskp here in finland so more and more positive outlooks going forward if we quarters, especially towards the end of this year. The most positive news from the report today is basically the margin development. So two things, cross margins first. You can see here in the graphs, especially on the side of the technical trade division, a heavy uplift in our cross margins. This is a result of a couple of things. One, a good management and good development on an organic basis in many of those technical trade companies. The sales mix impact is the biggest contributor. In a situation where there are lesser of big machine sales, more big machine sales with low margins, increased share of aftermarket business with higher margins. This is what happens for those companies. So, of course, in a good way, a sign of a certain level of resiliency of the portfolio in a tough environment where where the margin and the business mix overall supports margin development. I'm very happy about that. Going forward, as we assume there will be more machine deliveries at the end of the year, also next year, then there will be surely some sort of decline in those margins on the other hand. The other positive thing where we have succeeded well is the cost-saving actions that we started to implement at the already in Q basically a year ago and at the end of 23. Cost declined now in Q2 as planned even a bit more than we expected. We have communicated a minimum target of 1 million euro starting from Q2 20 or basically H2 24 onwards, and I believe we are well underway to achieve those savings as well. Continue to monitor and adapt to the market situation. There are also growth investments we're doing in a number of our businesses, but all in all, we are significantly below in our fixed cost levels compared to a year ago and also the beginning of this year. Cash flow, on the other hand, I mean, we had a really strong quarter. Q1 operational cash flow was about 6 million euro. Now in Q2, negative by 1.9 million euro, as expected, except for a few companies where some inventories did not decline quite as we planned. However, quite close to the targets we had when entering the quarter. So trade working gap at the moment at around 28 million euro. However, now in Q2, mainly as a result of accounts payable coming significantly down, so inventory levels are continuing to trend downwards, and I believe there will be in the coming quarters a development that we expect to see towards the 25 million euro mark that we have communicated in the last quarters as well. Overall, in the last 12 months, 12.1 million euro of operating cash flow shows that we've been able to manage our balance sheet in a quite good way during the tough times and decline of the market. Returns, very briefly, look stable, quite mediocre, as I said, already in the very beginning. So return on trade working capital that we measure in all of our companies at the group level, quite stable. Profitability has been declining, these numbers downwards. Cash flow, on the other hand, and release of working capital to the positive direction. This continues to be the metric that we use in our steering going forward. Final slide from my point of view, summarizing the views towards the future. As I mentioned in the very beginning, we don't expect a significant change to happen in the marketplace. during the second half of the quarter. We have certain evidence through our order books that there will be a better time ahead. In particular, for example, the significant deliveries that we were able to secure in our Putsmeister operation in Finland with with one of our major customers there. Delivery is expected to start from Q4, 24 onwards. Also, Flop New AB Werkstad, a good development with regards to order book milk on our defense industry business, also had had a tough H1, but expect that H2 will be significantly better. So order box support the development that our view that we expect to be able to perform in a decent way, even though the market conditions overall remain continue to be tough. Cost actions, the one million euro, I think we're very secure on that. I believe there's a fair chance that we will achieve a significantly higher number. than the one million euro going forward, but we want to be conservative in terms of managing the expectations there, as things can happen. When working with cost-saving initiatives, however, the target is to come out with a much higher saving number than the one million euro that we communicated this far. And also, just to note, there are a number of companies which continue to have a stable outlook there. The construction businesses, or the hold that the construction business has caused to our revenues at this point of time continues to be there. However, on the positive side, especially in the Putzmeister business, we have not lost our dominant market share. We continue to be number one in all of our markets, in the three markets, and once the market stabilizes or comes back, we expect that our position will be even stronger than in the future. So that overall, we see that short-term outlook is say decent or somewhat stable, however a significant improvement potential is there when the market starts to help us on the demand side as well a bit. So I would end with that and hand over to Aku for further review please.