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Afry Ab
4/23/2024
ending.
Dear all, a warm welcome to this quarter one report, the presentation from AFRI. My name is Jonas Gustafsson, CEO of the company, and I will start to cover the overall for quarter one, and then I will invite Bo Sandström, our CFO, to go through the finances. And then, as always, we will have time for Q&As after our presentation. So again, a warm welcome. Starting with the summary of quarter one, and you have probably seen the numbers, but in general, it's a stable report for us. If you start on the top line, we ended up on sales of 6.9 billion with a total growth of 0.4%. But when adjusting for the calendar effect, we had 0.5% adjusted organic growth. I have a slide on the market, but in general, a bit mixed market, some very strong subsegments. And then we have seen in larger capex product and pulp and paper a lower volume in the quarter. What is very positive is that the order stock, we had some good growth of the order stock compared to last year, but also sequentially. And the energy division have an all time high order stock development. And we also saw a stable development in process industry. So the order stock development was very good in the quarter. Looking on the result, we ended up in an EBITDA of 590 million and EBITDA margin of 8.6%. Lower than last year, but when adjusting for the big calendar effect we had, we were even slightly ahead. And last year was a good start of the year. We had more challenges in the second and third quarter. So when we look on the margin on 8.6%, we are quite pleased that we have been able to stabilize the margin on good levels. And the cash flow, and Bo will come to that, was slightly better than last year. And of course, we continue now to work with improvement, driving, focusing on the margin, as we have said, the profitability margin. And I would say the infrastructure program goes according to plan. We started up that, ramped up the infrastructure program last fall. The big thing in the beginning was to come in balance when it comes to capacity. We have done that and now we continue to have a very clear focus on improving the margin and that program delivers according to plan. We are doing capacity adjustment now in process industry, because if you look on the report, that's the I would say the thing that varies from last year, that we have lower volume in larger capex project in pulp and paper that is affecting process industry. And of course, we are now taking actions to to balance capacity in process industries. And then in general, we will end with that flexibility is the key because we have some really strong sub segment and some segments where we need to act and reduce in capacity, but all over a stable result in the quarter. So the market and I touched upon that to say on the industrial side, it's a bit mixed. So we have some very strong segment automotive with the whole electrification and software development. We see strong development. Defense industry is another very strong segment where we are getting a lot of good orders. While, for example, then pulp and paper in the CapEx project, we have seen a reduction in the quarter. So it's a bit mixed in the industrial side, while on NURI it's very strong. I would say crossover in all sub-segment, and here AFRI have a very strong position. And if you look on the order stock, I would say NURI have an all time high order stock, and we were able to bring in some very good orders in the quarter. And infrastructure, the real estate continue to be weak. And we have adjusted and continue to adjust. But it's pretty weak in Sweden and in Finland, for example. But we are more in balance now than we were last spring, for example. And then public investment in infrastructure remains stable. So it's a bit mixed market with some very strong segment and some segment where we need to take action and adjust. So if you look on the divisional overview, and Bo will cover that. And of course, we always need to bear in mind that we have this big calendar effect. We saw then process industry coming down from high levels. So ended up at double digits, still 10.4% in a week calendar quarter. But you see the growth and minus 3.9%. So actually, that's where we saw the top line coming down. And this is purely driven of CapEx project in pulp and paper. We still see a lot of other interesting segment, of course, the green industrial in batteries, hydrogen mining, et cetera, et cetera. But of course, pulp and paper is a big part of our business. And that's why we saw the reduction of the top line in the quarter. But still, I would say keeping margin in a weaker calendar quarter about 10%. Energy, a slight growth, but margin stable around 10%. And again, the market in energy looking forward is very strong, and we had a good development on the order stock. management consulting slightly lower than last year more timing effects good growth and in general market is solid and it's been very solid over the last years as well so if you take away the fact that we had this reduction of volume in capex pulp and paper this cluster is still very robust for a3 On the infra side, and here I'm pleased to see that we are now remaining our EBITDA margin compared to last year when we had made a good quarter. We ended up at 8.1% and with 3.2% growth. And we are implementing all activities that we have talked about to step by step improve the margin of infrastructure moving forward. So I'm quite pleased with the progress we are doing under Robert Larsson's leadership in infrastructure. And then finally, industry and digital solutions ended up at just above 9%, slight growth, and we have a bit mixed market, as we said, some very strong verticals like defense and automotive, and then there are others with a bit less like IT and telecom. So it's a bit mixed market, but all over, I would say, compared to last year, including the calendar that Bo will talk more about, a stable quarter when you look on the margin. And when you look at orders, as we said, we were pleased with the fact that we had a solid order stock growth. These are three very interesting projects. One is an EPCM project, which is actually in Finland, and that's also more than one division at AFRI included. And we are then involved delivering an EPCM product for the largest current terminal energy storage in Finland. Super interesting project, of course, exactly in our home market in Finland. Very proud of that project. We also received a big order over several years, an assignment to increase the capacity in the transmission grid for Svenska Kraftnät, also a project that involves more than one division for AFRI, also a good project with a good load for AFRI that goes over several years. Finally, not the biggest order, but a very interesting study that we have done looking at the forest impact on Europe and all the positive aspects we have from the forest industry. This assignment we did for FAM. and the report was released this spring and we are very proud of that because also it cements AFRI as a thought leader into bio industry and the forest industry. So these are three examples of very good orders that we brought in over the quarter that also are exactly in the core of AFRI's capability. So with that said, I will leave it over to Bo who will take you through the finances.
Thank you, Jonas. So I will, as usual, cover the main financials for Q1 2024. Starting with an overview, quarter one showed net sales of 6.9 billion and EBITDA of 590 million. In comparison to last year, the quarter was heavily affected by calendar effects on EBITDA more than the absolute deviation to last year. On rolling 12 months, we remain at 27 billion on net sales while decreasing to 1.9 billion on EBITDA. Noteworthy is that in the rolling 12 comparison to Q1 2023, We now have negative 31 hours in the base in calendar effect, corresponding to more than 300 million in EBITDA. Next two quarters will both have significant positive calendars. The negative calendar made the total growth negative in the quarter. Adjusted organic growth stayed on positive terms, 0.5%, supported by continued positive pricing at 4%. Thus, given FTE reductions in several divisions during the last quarters, we have negative volume in the quarter. A sequential view on adjusted organic growth shows the continuation of the declining trend since the peak in the beginning of 2023. The sequential decline of five percentage points is driven in equal terms from divisions infrastructure and process industries, both with segments facing significant market headwind, where we have made structural FTE reductions during the last quarters. All divisions except process industries show positive single-digit growth numbers. Order stock is reported at 20.4 billion, 2% higher than last year and 5% higher than last quarter. The year-over-year development turned back positive in the quarter, driven in particular from the energy division. This was the first quarter where energy order stocks surpassed 5 billion, and we continue to increase divisional FTEs to meet the high demand. The order stock for process industries remained significantly below last year's level, but now sequentially flat. EBITDA then came in at 590 million, and the EBITDA margin was at 8.6%, as in Q4, well in line with last year's calendar adjusted. On a divisional level, the calendar effect is the main driver on year-over-year Evita margin development. Divisions are in line or slightly ahead of last year adjusted for calendar, with the exception of process industries that report a continued strong margin, but a decline of approximately two percentage points on adjusted margin. Utilisation remained lower than last year, but the vast driver of the negative 0.7 percentage point decline relate to process industries. Infrastructure, industrial and digital solutions and energy all have utilisation levels in line or slightly above last year. We have no material project write downs in the quarter and only a minor restructuring cost reported as IIC. Cash flow from operating activities was stronger than last year in the seasonally weak Q1, which was particularly comforting on the back of a really strong Q4. Nonetheless, working capital development and cash flow generation continue to be a focus area for us. Available liquidity strengthened further and financial net debt increased somewhat to 5 billion. Given the net debt increase and the negative calendar effects on EBITDA, leverage increased to 2.6 times in the quarter. But except for the dividend payout in Q2, we are expecting to deleverage during the next quarters, supported also by the strong calendars. And with that, I leave back to you, Jonas.
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