Kongsberg Automotive New

So welcome to everyone participating here at this live event at Arctic. And of course, welcome also to those participating online. Sorry for the technical difficulties that we had here. I want to thank Arctic as well for allowing us to have this call at their facilities. So we jump straight into the key points for the quarter. We have had good debit growth and significant cash flow improvement in the quarter in spite of a challenging market. As most other players in the automotive industry, Kongsberg Automotive has also faced a challenging situation with the market. As a consequence, our revenues are down around 10% compared to the third quarter last year. So we had €162.9 billion in turnover in Q3 versus €181.6 million last year. And this is a direct result of the market situation in the global vehicle industry. The largest impact is in the market in North America due to the ongoing tariff situation there that has caused higher costs, market uncertainties and therefore also lower demand. In spite of those lower revenues, we see an improved EBIT of €4.9 million in the quarter. This is up from €1.1 million in the same quarter last year, which is a solid improvement from both previous quarters and also from Q3 last year. On cash flow, we see also a positive trend. We delivered €6.6 million in positive cash flow, which is 11.8 million improvement from Q3 last year. Cost reductions, we are moving forward with our programs according to schedule. On tariffs, we have been able to mitigate the cost this quarter and the net impact of tariff cost this quarter is close to zero. Then we have some challenges on warranties, and we will get back to that later in the presentation. Here we take a closer look at the financials, comparing those in the quarter versus the last four quarters. On revenues, we see the 10% drop in Q3, which is, as mentioned, caused by the market situation. We also have a currency effect due to a weaker dollar. of around 5.4 million euro, which is an implication of the business that we have in North America, where the contracts are in US dollar. On EBIT, we see the positive trend. We do see the dip in Q2, where we had significant warranty accruals. That was the main reason for the drop, but you see the underlying improvement going back from Q3 last year to until now. We also have some warranty accruals in this quarter. Erik will talk a little bit more about that later. But the positive thing here is that we've been able to improve EBIT in spite of lower revenues, which is good. It's not on the level far from where we want to be. There's still a lot of work ahead, but it's a positive indication. Pre-cash flow, positive trend also here, and you see the positive trend on the last 12 months. So last 12 months, we were close to zero now due to the positive result in this quarter. Result of lower cost base, reduced net working capital due to lower sales, and also more cash discipline when it comes to investments. So overall, I would say a positive indication on the trend on the profitability and cash flow that is very important for us. And as previously announced, we have the cost reduction efforts, which will give us around 40 million euro in improved cost base and a 4 to 5% improvement on EBIT on stable revenues. The cost saving programs are moving forward according to plan. We have completed the program that we launched in 24. We have completed the program that we launched at the beginning of 25. And we are on track with the program that we launched in May, which will be completed fully by Q3 26. We start to see the good results of these programs, which also Erik will show in the EBIT bridge later in the presentation. And also due to the lower market activity, we are also making additional adjustments in the cost base to align with the demand and to safeguard our profitability. This is mainly impacting manufacturing locations. On business winds, we report business wind with an estimated lifetime revenue of around 34 million euro. This is lower than the previous quarter and also during 2024. What we do see is that there is a lower activity in the market when it comes to new contracts. This is a consequence of the tariff situation and that the focus has been more on managing that situation and also the lower demand. We also see some of our customer programs being postponed. We have a strong focus on market activities. We keep a very tight dialogue with our customers. And we do continue with a good and strong pipeline of opportunities. And very importantly, we have not lost any major contract opportunities during 2025. So it's a number that we would like to see higher, but it's also a number I'm not too concerned about due to the current situation and the good pipeline opportunities that we still have. On the business wins, we also have done a revision of our investor policy. We have had a discussion with the board of directors and decided that we will only announce strategically important business wins going forward and our investor policy will be updated to reflect this.

Warranty cost.

This is an area that remains a concern for us. We reported in Q2 increased warranty accrual. In Q3, we have a total warranty cost of 2.7, of which 2.5 is increased accruals for future expenses. Due to the situation that we uncovered in Q2, we conducted a quite comprehensive review of our exposure to warranty liabilities across our entire product portfolio and also in our customer base. As a result, unfortunately, we have uncovered some additional risks on further and future warranty liabilities. The problems we see here is not primarily related to our ability to deliver quality products. The challenge here is historically unfavorable contractual terms when it comes to warranty and also that warranty management has not been very optimal. It is disappointing and it may potentially impact our profitability going forward. Those that have been responsible for this are no longer a part of the company as they were a part of the leadership change that took place in the beginning of the year. It's very hard to make any estimates on the net value of the total liabilities that we may be held accountable for. It's quite complex and a lot of different potential outcomes here. And we are working very hard to address these shortcomings. We have also implemented a much more proactive approach to warranty management and strengthened the team there. At this point, we cannot disclose any further details due to the ongoing discussions we have with the affected customers. And as soon as we have more information, we will provide that when we have more clarity on the potential financial impact.