Afry Ab

Good morning and warm welcome to AFRI's earnings call for the fourth quarter 2024. My name is Linda Pålsson and I am the new CEO here at AFRI. And while I assumed this position only a few weeks ago, I have a long background within AFRI, most recently from heading our energy division. With me today, we will have Bo Sandström, our CFO, and we will present both the fourth quarter and full year results of 2024. I will also take the opportunity to share some insight about this next chapter on the A3 history, which we are now entering, and I will come back to that later in the presentation. And of course, we will have a Q&A session in the end and you will have the opportunity to ask your questions. With that said then, I would like to begin by shortly summarizing the full year 2024, where we delivered stable performance despite facing a market that was overall less favorable. I'm happy to see the strong global position that we have in our key segments, as we have continued to win and deliver on important clients throughout the year. Our leading position has also been confirmed by the new ENR global ranking, which I will come back to later in this presentation. Looking at the market, it has been very strong in the energy sector during the year. This is driven by the large industrial investments in the energy transition. In other areas, the market has been more challenging, and that has been most evident to us in the real estate market, in the pulp and paper segments, as well in the market for IT consultants. In this market, we have delivered improved profitability and net sales that was in line with last year. The margin improvement was mainly driven by infrastructure that has consistently delivered on its improvement program. This has balanced against the declining margin in process industry, and we have throughout the year adjusted capacity to meet the lower demand in the pulp and paper segment. Cash flow was at a solid level for the full year. We have strengthened our financial position, which provide a good foundation going forward. We also increased our profit, which reflects in the earnings per share. Given these conditions, the board of directors has proposed an increase of the dividend to six SEK per share for 2024, which is in line with our dividend policy.

Going to the Q4 highlights then.

Our financial performance in the fourth quarter was in line with the trend that we have seen during the year with flat growth and steady improvement of the profitability. Net sales declined slightly compared to the same quarter last year. The strong growth that we saw in the energy division was offset by the lower volumes in process industry. Our order backlog increased 4% year over year. This was mainly driven by the energy division. We have won important projects throughout the year in all our sub-segments within energy production, transmission and storage. In the quarter, we saw a negative calendar effect of four hours, which corresponds to approximately minus 42 million SEK on the EBITDA level. When we adjust for the calendar, our margin improved from 7.8 to 8.3%. Improvement again was driven by infrastructure as well as the strong growth and performance in energy. We also ended the year with a strong operating cash flow of 1.3 billion SEK in the fourth quarter. So all in all, this was a stable quarter for us. If we then look into the market, we don't see any major changes compared to the update we gave in Q3. The market in the industrial sectors continues to be mixed, a challenging market in the pulp and paper segment. although we are starting to see some signs of increased market activity in Latin America. The energy sector is strong across the board with a lot of client activity and new projects in all our markets. And finally, we see a stable demand in industrial related infrastructure and transportation, while real estate market remains weak. If we then go from the market and looking into our division, we see that they reflect the mixed market we are experiencing in the different segments. Starting with process industry, sales and profitability declined as a result of the low demand in the pulp and paper segment. We are working continuously with capacity adjustments and tight cost control to meet the lower market and protect the margins in these conditions. The energy division continues to grow and improve the margin from high levels. The strong demand in the energy sector is also viable in management consulting, but the growth there was impacted by weaker demand in the bio-based industry. And I have to mention infrastructure continue to improve the margins driven by successful activities in the ongoing improvement program. Industrial and Digital Solutions was impacted by the mixed market in the industry sector and had a low utilization rate in the quarter. The utilization rate was also impacted by the new Agency Work Act that took effect in October 2024. While these effects are expected to phase out, the division will continue to adapt the business in close collaboration with our clients. We have won a lot of cool projects in the quarter, but I would like to highlight a few of them here. In the pulp and paper segment, we have been awarded an EPCM contract from the global forest industry company Arauco. They are building now a new pulp mill in Brazil, which will be the largest pulp mill in the world. And AFRI is responsible for detail engineering, procurement and construction management for the balance of plant. This is, of course, a very important project for us as the global leader in pulp and paper and with Latin America being one of our key markets. On the energy side, we were awarded a design project within the lifetime extension program of the Pax Nuclear Power Plant in Hungary. This project will ensure continued safe and reliable operation of one of Hungary's most critical energy facilities. The project aligns well with AFRI's commitment to drive secure and efficient energy transition. We have extensive experience in power plant designs and modernization, and we also see a strong potential in this area going forward. And finally, in Finland, we have received a design contract for the new tramway route in Tampere. We have previously been involved in the planning phase of this project, and now we've been trusted to continue the assignments also on the implementation phase. And this is a project that promotes green mobility and sustainable urban development. And I am happy that we can contribute with deep expertise in this project.