Kongsberg Automotive New

So good morning, everyone, and welcome to the Kongsberg Automotive third quarter earnings call presentation for 2022. I will soon introduce Mr. Jörg Bohem, or CEO, and Frank Hefter, or CEO. My name is Mats Langor, and I'm responsible for the investor relation. Jörg, feel free to start whenever you're ready.

Thank you very much, Mats, as well from my side. A warm welcome to the entire audience. And as usual, I'd like to start with our executive summary. And yeah, the next slide, please. Looking on the numbers, I'm glad to share with you that our revenues increased despite challenging macroeconomical circumstances. So this reflects a 27% growth from the same quarter of 2021. The numbers, fairly to say, certainly include positive translation effects of roughly 9.7 million out of translation foreign currencies into Euro. But even with this, we could increase the revenue by 17%, which is a very remarkable result. The adjusted EBIT came out slightly above guidance, but with a 56% higher value as in Q3 2021. So this includes cumulated time delayed compensation of roughly 8.2 million for semiconductor spot by cost, which have been accrued in the first half of the year. But it's a very good result if you're looking into the development of Kongsberg automotive in Q3. The net interest bearing has been significantly reduced, which you can see on the right side compared to the previous year, which continuously leads to a leverage ratio at a stable two times. You can see above and that's 30% better than the last year. And this will be further improved to a very healthy 0.7 post our BRP Power Sports transaction, which we closed in Q4. If it comes to the free cash flow, still at the minus 1.5 million, as on one side, the net proceeds out of the recent power spot divestment arrived in October. And secondly, operationally, we decided in Kongsberg to keep the stock high in Q3 for being best prepared to serve the strong order books we've seen and in Q4 and ensuring availability in particular when it comes to our industrial market. So looking then more in detail on the segment, on the next slide, please. We see that P&C on the left side came in with higher revenues compared to previous quarter, but still didn't fully break through in Q3, as the over-average profitable truck market in China still hasn't relighted. So besides this, we have booked crisis expenses into Q3, while customer price compensation payments are confirmed but arriving time delayed in Q4. Very positively on the right side, the already seen strong EBIT recovery trend in specialty products is really encouraging because we see here in trend, which we have been seen already in Q2 and which is going to continue with 40% bullish revenue compared to 2022's quarter three. So real breakthrough proven by the third improved quarter in a row. So on the next slide, our market update, we are going to see how the global vehicle market has developed in Q3. And if it comes to the passenger vehicle market, in Q3, we see a 9.4% higher sales in Q2 versus Q2, and a 25.6 higher sales than in the same quarter of the previous year. Looking into KA's major focus market, It's the commercial vehicle market. This strong passenger vehicle recovery effect is still to come in commercial vehicle as the global truck market was in Q3 still waiting about the start of demand recovery in China, as mentioned before. This kept the growth so far still flat compared to the previous year and versus the quarter before. For when this recovery is expected, we do see in the outlook session later on in this presentation. moving to the next slide when it comes to the ongoing challenges in the automotive market we do see promising trends in particular when it comes to semiconductor shortage recovery and when it comes to the raw material sites as situation getting stabilized and even in certain areas clearly improved the next challenge on the other side in the industry is to master energy prices and inflation. And these are pretty consequences of the war conflicts, which are uncertain how long this is going to continue. So that means that the next focus is to accelerate efforts to reduce consumption, increase efficiency and looking into alternative power supply to further counter the hardly influential impacts from external. So looking on the next slide, we see KA's revenue growth in segments versus the market. And we do see in particular that KA couldn't fully participate on the passenger vehicle change. And this has two reasons. First, the passenger vehicle says that KA has been influenced in Q3 majorly by lower demand for manual shifter business in Europe, which we have honestly seen already in Q2. are still priorities laying on premium segments during these crisis days. Secondly, due to a generation change in the powertrain segment of our passenger vehicle business in China, with switching to the next generation at new customers, we expect to run up not before the quarter four. So very positively is the development in the truck area in our focus market, in particular in KA's biggest region, Europe, where we are gaining further market share. The substantial increase in others, which you'll see on the lower left side, coming from general market recovery, supported by the non-automotive, majorly industrial and aftermarket, where availability is the key for catching additional market share, what we are doing, and where CA's high inventory in this case helps. So moving to the next slide, we take a look together on our new business wins as usual. And we do see here two impacts as well. First, the sale to BRP impacting our order books in short term, which we see on Q2 and Q3 of this month. And secondly, customers showing currently less activities when it comes to the driveline area, as running programs rather get extended, instead customers spending further resources and new money into new programs. And further, the circumstances the sourcing originally scheduled for Q3 are literally moved out to Q4. So these are the main reasons for the current values, but nevertheless, The experience in Q4, in general, very encouraging activity already, and we are working actively with existing and new customers towards new contracts. In particular, and that's promising, in the electrical vehicle area and in industrial. So with this, I would like to hand over to Frank to provide us some more insights in the financials of quarter three. Frank, please, your turn.

Yes, thank you, Jörg, and also a warm welcome from my side in this early morning hour. When we look at our revenues, again, an all-time high in this portfolio constellation with the new continued operation, certainly good news, although we have to clarify Take into account that the 27% growth versus the Q3 a year ago was supported by positive currency effects in the magnitude of 25 million. And additional reimbursements from our customers also contributed with additional 4 million. What's positive is that the price increases added some 15 million to the growth and that the underlying business grew around 4% organically. So very strong also compared to the last quarter, a 9% increase, certainly a very positive development. When we look at our adjusted EBIT on the next slide, then we came in with 12.8 million in Q3, significantly higher also than a year ago. And basically in the recent history also here, the best Q3 that we had to report on. The EBIT margin came in at 5.2%. In Q2, we guided that we expect around 5%, so slightly better here. And the recovery should continue also in the fourth quarter so that we will achieve our respective year-end targets. When we look at the segments, We see that on the adjusted EBIT side, PNC had a decline versus one year ago. That is basically driven by two factors. One, the mentioned challenges in our driveline business, especially in Europe. as well as a one-time 2.5 million accrual that we accounted for, for customs that we still need to pay for prior years, as we have decided to go for self-disclosure on errors that lie back up to 2013. And here we are expecting charges in the magnitude of around 3 million for the whole year. Positive development in specialty products, strong growth in off-highway and fluid transfer systems. And on top of that, significant reimbursements from customers for spot buys that have occurred predominantly in the first half of this year. With some positive foreign exchange effects, we then end up at the 12.8 million. When it comes to net income, certainly the increased adjusted EBIT supports an increase also in the net income. We had some additional restructuring costs for the portfolio transformation. Interest improved on the back of lower bond that we repurchased and then smaller financial other items. Also here, a positive FX effect supported growth in the net income. And then last but not least, 3.9 million on taxes reported where we also adjusted for certain tax loss carry forwards that we intend not to use in the future. So at the end, 8.5 million positive net income for the group. When we take a deeper look at the financial items, then very positively, it's a net positive 200,000 as the interest rate. and other accounts receivable securitization fees were offset by positive currency effects and smaller other items. So here again, a very positive development and the lower interest will also serve us positively in the future. When we look at the free cash flow, then it is slightly negative for the quarter. And you can see that with the operating activities, we generated 7.5 million, but we continued to invest in networking capital, an additional increase, a slight increase in inventory, but also some additional accounts receivables on the higher sales. that led to a negative 8.9 million here. Investing activities stayed relatively low with 7 million, and the financing activities came in at 18.2 million, of which around 10 million is used for the share buyback, which by now is executed... By around 70% of shares that we wanted to repurchase, we have already repurchased. So that's all going according to plan. Currency translations also in the cash flow positive 7 million. So that overall we came in at minus 10.7. If we now exclude the share buyback, then we end up at the minus 1.5. For the fourth quarter, we definitely expect a positive cash flow development. And also for the full year, we are still targeting the positive overall cash flow. When we look at the walk from December 31st last year to September 30th, then we see a very positive development in our cash position from 58.3 million up to 135 million. Certainly, the divestment proceeds supported this. On one hand, 162.8 million that we received, as well as the positive contributions from the discontinued and continued business in the operating activities. We have used around 137 million here to fuel the financing activities by repurchasing our bond with 75 million, repayment of our revolving credit facility in the magnitude of 20 million. And as I said, by now we have repurchased around 55 million shares As of September, so 14 million euro went into the share buyback so far. And positive translation effects added some 16.8 million, bringing us to a very comfortable 135 million cash on the balance sheet. This is nevertheless slightly lower than in Q2 2022 or at end of Q2 2022. as we have also in the third quarter used 10 million for the share buyback in the financing activities. We did pay the bond interest. in the third quarter of 5 million and that took some money off the balance sheet, whereas from the operating activities, we earned enough cash to also finance our investing activities of 7 million in the quarter. when we look at our headroom and the liquidity development overall we are still in a very comfortable position of 210 million of headroom slightly lower than at the end of q2 also here i want to highlight the share buyback 10 million which basically constitutes the difference The other items, adjusted EBIT, is kind of financing the working capital and investment activities. And then the smaller items wash each other out against the currency effects. So very comfortable. And as we will continue with the share buyback program, that is a planned development. And we accept that for sure. Last but not least, looking at some key financial ratios, very positive development here as well. The gearing ratio stayed at two, including IFRS 16 effects, 1.1 excluding these, so same as in quarter two. The ROSI even increased on the higher EBIT and basically stable capital employed. So the increase in net working capital did not lead to an overall increase in capital employed as fixed assets and IFRS assets decreased. So once the network and capital elevated levels normalize, the capital employee should improve even further. Last but not least, on the lower left side, our equity ratio slightly improving from 35.8 to 35.9. So also here, very healthy and strong. So on this end, we can be very sure that we have enough equity to also fund our future. With this, I would like to hand it back to our CEO, Jörg Buchheim. Please, Jörg.