Flsmidth & Co A/S B Shs

I would like to welcome you all to FL Smith annual report presentation of the 2024 result. As a summary, we are posting record profitability in FL Smith for a long time. It has been a good year despite weak market conditions. And as we promised before, there's no compromise on quality of earnings, no compromise on quality of the order intake. Some of the highlights of the year and the quarter. We highlighted to you all earlier in the year and in the meetings that we have a few areas of focus for growing the business. HPTR, we have record year in order intake and we sold the largest HPTRs in the world, which is cementing our market-leading position with regard to that technology. We are advancing well with the service contracts and service of the HBCR fleet around the world. Second focus area has been pumps. In pumps, we have increased market share globally through the conversions. Third focus area, midliners. Again, midliner has been fast-growing product in our portfolio. So that is a little bit behind the order intake numbers, annual level, 2% growth, strong quarter. But quarters are different and therefore it's best to look at average of four quarters. Mining product market continues to be weak, but in the weak market we are getting the product orders and technology orders that we want. We continued improving our profitability and are posting record profitability in many areas. In seventh business, we are in the middle of the sale process and we are happy with the order intake for services, which is significant for the process. We continue to progress in all our science-based targets. We are also winding down the non-coactivities and discontinue reporting that segment going forward. And that is well ahead of the original plan of winding it down in three years. We are one year ahead of the schedule. If I pick up one area from sustainability, which is most important to me and to our customers, it is safety. We are not yet meeting the targets that we have for safety, but there has been improvement, but that continues to be our focus area going forward. And that is the most important KPI on this chart for me and to our customers. Strong quarter for the order intake in services. We noted in the last quarter that the quarter three this year was slightly weaker, but then if you look at the average of the four quarters for the year, we are at the level that we planned in the beginning of the year. Very happy with the service order intake. In products, we continue to win critical product orders that we want to win, especially in the HBCR space. That has been a big success for the year. If you look at the order intake for the last quarter, just shy of 4 billion, for me that is a good level. And also mix is important to highlight that if you look ahead, mix between service and products, 73%. Optimal for us would be 65% to 70%, but that of course depends on the status of the capital market. Important to note that we are back on track in service revenue. We had a couple of quarters that we were a little bit behind and now the revenue for the service 2.8 billion is at good level. So we are happy with that one. And then product revenues deliveries reflect basically backlog and timing of the backlog. But I'm especially happy about service revenues in this page. Adjusted EBITDA margin of 14% for Q4. That's for the organization and for myself. It's a tremendous result. Very happy about that one. And then if you look at underneath reported margin EBITDA improvement year on year. about four percentage points you don't often see that fast improvement in profitability so we are really happy with this result and it's reflecting transition that we do in the company it is like a train that continues nice steady continuous improvement we've done it so far continue to do so in the future as well few highlights for cement We are in the middle of the sales process, but the number that you need to look at, which is important for Cement is service order intake. 650, 700, anywhere thereabouts, we are happy. Then it shows that it's year on year, like for like, small growth or steady service business with a good profitability. At the same time we've done portfolio choices for cement that we don't take projects, we focus on service and products only. And now it's also reflective in the revenues. So the revenues of the products are going down quite fast by choice. We don't want to do loss making bad business in cement. The level of revenues is good and also mixes getting better is 66% service, but it continues to improve going forward. And as I said, service is the key number here to look at both in orders and revenues because of the sell process. I'm also happy to report that Cement has met the long-term EBITDA target that we announced in the capital market today, and we are there quite early. And there was a little bit of lack of confidence after the capital market that we could ever reach 8% EBITDA in Cement, and now we've done it in two years. Also one area where I'm extremely proud is that we are out of the NCA at record time. It has been internally an externally painful process, but now we are out of it and we are moving the remaining tiny backlog to the mining products, mining capital business. We have few people remaining, just dealing with the backlog related matters. It's fully provided for, but for all intents and purposes, we are closing down the segment. And that is, I would say, a big achievement from the organization. Then I hand over to Roland for more detailed numbers.

Thank you for that, Mikko. So having a look at the quarter's consolidated financial performance, a revenue of 5.33 billion with a gross profit margin of 33.7%, SG&A of a bit more than a billion and an adjusted EBITDA margin of 12.1%, and after tax and financial costs, a profit and loss for the group of 360 million. If we have a look at the gross margin, I think I'll just spend two minutes explaining a reclassification we have done. So we have decided to reclassify IT-related costs from SG&A to gross profit. And the reason why we're doing it is that it follows typically the staff-related IT costs. And that means that we get swings in the SDNA as and when blue colors move in and out of the P&L. And secondly, it belongs more rightfully on the production costs. The way we have done it, we have reclassified in 2023, 127 million. of IT costs from SG&A to gross profit. And we have put it all in Q4 2023. So that's negatively impacted by this reclassification. Similarly, we have reclassified 127 million GKK for the year 2024. And we have put it all in Q4 2024, so negatively impacting gross margin in Q4. It's a pure coincidence that it's 127 million for both years. So if you look at the gross profit hereafter, it's basically like for like that the gross profit from Q4 last year to Q4 this year is increasing significantly. Also, Q1Q, Q3 to Q4, our gross margin is improving, despite of the reclassification. Gross profit is increasing both in mining and cement, and even NCA had positive gross profit this time as we're closing out the last business pieces before virtually shutting that segment down. And that moves us to ST&A. where we have the same reclassification. This is obviously negatively impacting this, sorry, positively impacting this one as costs are taken out and moved to production cost. And hereafter, we have 1,885,000,000 in Q4 24. 51 million of those are called out as transformation and separation costs. And then we have restructuring provisions in that quarter also predominantly severance in both mining and cement of about 200 million DKK. Group EBITDA as And Miko also went over combining it obviously also moves forward to an adjusted EBITDA of 12.1 and reported group EBITDA margin of 11.1. And there on the right hand side our traditional margin bridge. So taking integration costs out from last year brings us to an adjusted group of 9.2. Then we have less revenue now in CA out and capital revenue down in mining and a bit also in cement. Gross margin significantly improved, and then negative flow in SG&A and others, leaves us with adjusted group EBITDA margin of 12.1%, and then we have transformation and separation cost of 1%, and that gives us a group EBITDA margin in Q4-24 of 11.1%. Networking capital slightly better in Q4 than Q3 predominantly driven by significant trade receivables collections and then a few other bits and pieces moving work in progress and offset by trade payables increase. If we then look at the combined cash flow, that gives us a CFFO over 621 for the quarter. And deducting a CFFI, including acquisitions and disposals of 222, leaves us with a free cash flow for the quarter of 422 million. That we spend on reducing our debt, and that means that we come out of the year with a leverage ratio of 0.4x and a NIBG of 847 million. Then we're ready with the new full year guidance for the year 2025. And we expect mining to deliver a revenue of about 15 billion plus minus. And an adjusted EBITDA margin of 13.5 to 14%. And we'll be calling out the one-off cost to transformation and separation of about 200 million as one-off cost for the full year 2025. In cement, we will be guiding revenue of about $4 billion and an adjusted EBITDA margin of 9% to 9.5%, and excluding 50 million Danish kroner for transformation and separation costs. And adding that up, the group will deliver revenue of about $19 billion and an adjusted EBITDA margin of 12.5% to 13%, and reported EBITDA margin of 11% to 11.5%. Our transformation work streams are progressing quite well. We still have some simplification to do and the operating model also needs to fall in place during the course of twenty twenty five moving predominantly support functions to global business service centers and a few other adjustments. We will continue to follow that closely. Commercial investments and risk management and de-risking is basically done. It's not like we won't do it anymore, but we will stop reporting on it as a strategic initiative. This is now fully ingrained as part of doing business in F.L. Smith. And similarly for cement, risk management and de-risking is fully implemented, and also the simplification and the operating model is roughly done, so we will stop reporting on that. And that means that this follow-up slide here will be a bit simpler as we move forward. NCAA is virtually done and will exit the P&L as from 25 and onwards most likely. And thereby back to Mikko.

I'm just highlighting some of the key priorities for 2025. Just as a reminder on the map, what we launched in the capital market today, where we defined the core, streamline the portfolio, make portfolio decisions, value over volume and so forth. I hope that this is the last year of major transformation. Of course, everything is a transformation in a bit when you're pushing forward. But hopefully most of the big ticket items are done this year and completed. And therefore, we are creating foundation for future growth. And why do I say foundation? As I said in the beginning, we make no compromises on order intake quality and quality of the earnings. So there will be no nasties when the growth comes up. comes back from the backlog. So we want to have a clean, good backlog to execute when the market is back. Some of the focus areas today is that we see lots of volatility in the supply chain and we still can improve the supply chain a lot, operating in all key supply markets. And of course, geopolitics is creating new dynamics for that supply chain market. And sometimes there are also opportunities that we can take advantage of in this instance. procurement, supply chain, logistics for improved efficiency and reliability. We are also looking to expand our market presence. We still have a few white spots in the market that we don't cover well enough, and then we will be driving sales excellence. During 2025 we will have new initiatives how we deepen customer intimacy and create stronger relationships. We will have some ideas that we believe that nobody else is doing in the market that we can take us much closer to the customers, customers business planning, customers operations than typically is done. So we are launching those initiatives during the year. And we continue to try product innovation and first market references. And that's why, for example, the win in India for Deloitte's HPCR was particularly important because that is the biggest, largest, modern HPCR in the market. And then it's setting us apart from anybody else in the market. So we are by far the largest. play in the HPGM market and at the same time we have the largest ones that will be in operation in India. We continue to transform the company, one mining which is simplifying the way of doing business, simplifying operations at the same time looking at the principal company model. And we talked earlier about new corporate model means that we will have a lean and mean head office model and then most of the resources are close to customers, part of the business lines and regions or then in shared services setup in our global business centers in Mexico, Romania and in India. And that will generate us efficiency, not only cost savings, but efficiency and scalability when the market will come back. And we are of course middle of the disposal of the cement asset. And then we go to the Q&A.