Kongsberg Automotive New

We are back here at Arctic Securities in Oslo and we are here together with our president and CEO Trond Fiskum and CFO Erik Magelsen. We are joined by participants joining us on the webcast as well as physically here in Oslo. On the screen, you see today's agenda and as always, we will conclude today's presentation with a Q&A session. If you're joining us here physically, you can raise your hand and we will be walking around with a microphone. And if you're joining us through the webcast, you can use that tool to raise your question. So with that, I will hand the word over to our president and CEO, Trond Fiske.

Good morning to everyone. We start with Q4 highlights. Overall we had a good quarter with strong earnings improvements and solid cash generation in a market that is stabilizing. Our Q4 revenues reached 167 million euros compared with 185 million euros in Q4 last year. This is 9.6 percent down from Q4 2024. However, it's up 2.8% compared with Q3. So this reflects that the market conditions are stabilizing, which is positive. Regarding profitability, we delivered a strong EBIT improvement when we compared with Q4 last year. We have a Q4 EBIT of €9.4 million and an EBIT margin of €5.6 million. This is compared with €1.1 million and an EBIT margin of €0.6 million in the same quarter last year. It is an improvement that is primarily driven by structural cost reductions. We have some reduced warranty accruals and it is also supported by one-time positive effects of 4.9 million euro that we'll come back to. Cash flow development was also solid and on an improving trend. Operating cash flow improved to 11.5 million euro up from 4.2 million euro in the same quarter last year. The risk of certain warranty liabilities, they remain. They are well identified and being very actively managed with also mitigation actions in place to avoid a reoccurrence. We held Capital Markets Day in December last year, where we presented our revised EBIT margin target, the long-term EBIT margin target of 6.5%, and also together with how to achieve that. Finally, the market outlook has slightly improved from the second half of 26. This is uh something that provides a more supportive environment for us to continue improving our financial performance overall we see a stabilizing trend in revenues we see a step change in profitability a solid cash flow generation for the quarter and a more supportive outlook as we close 25 and move into 26. Some more details on the Q4 financials. Erik will, of course, go into even more details afterwards. Starting with the revenues, we ended up with, as I mentioned, €167.5 million in Q4. It's €17.7 million less than Q4 last year, 9.6%. A meaningful part of this reduction is related to a weaker dollar, 6.7 million, while the remaining impact reflects basically a weaker market compared to Q4 last year, but in particular in North America. As mentioned on the previous slide, we do, however, see that the market is stabilizing, which is encouraging with the increase from Q3 to Q4 of 2.8%. Moving to profitability and EBIT. In spite of the lower revenue levels, EBIT improved to 9.4. It is a strong improvement from Q4 last year, and as mentioned, a result of structural cost savings. the lower warranty accruals. And it's also important to note that this one-time effect of €4.9 million is a reversal of accruals that we made. These are related to some customer contracts and operating costs, and it's a result of a year-end evaluation of accruals that we made across all legal entities in the group. Finally, on cash flow, our free cash flow reached 11.5 million, which is a 7.3 million improvement compared to Q4 last year. Again, it's a reflection of several elements, cost-saving programs, network and capital reductions, and generally an improved financial discipline. The cash flow development is now positive over several quarters. And we do also see that this has a positive effect on very important financial ratios for the company that Erik will show later in our presentation. Overall, a good quarter in terms of progress. There are still a lot of work that we need to do in order to get to the levels that we want on a longer term view, but it's strong indications that we are on the right track. As we reported in Q3, we did a comprehensive review of our warranty liabilities during 2025 and we did identify some additional risks. The identified cases are related to certain legacy contracts combined with management practice or warranty management practices that were far from optimal. At this stage, the potential financial impact is uncertain. The cases are complex and the variability of potential outcomes is significant. And we have taken proactive measures to reduce future risks and to prevent a reoccurrence. It includes a significant strengthening of our warranty management practice and also an improved process to ensure that we have more robust customer contracts in place. We will provide further details on these cases once there is greater clarity. And due to ongoing discussions and negotiations with customers, we cannot go into more details at this point. We are working constructively with our customers on this and also other stakeholders to resolve this. And handling these cases is a top priority for the management. And I'm personally involved in handling some of these cases. Regarding business wins, we secured in Q4 new contracts with an estimated lifetime revenue of 77.6 million euro. The majority of the contracts came from the business area flow control systems with 56 million euro. Drive control systems contributed with 21 million euro. By customer segment, the largest segment is commercial vehicles, which you see on the truck, trailer and bus. which also reflects that this is our biggest customer segment overall in the company. For the full year, we secured contracts representing €339 million in estimated lifetime revenues. While the business wins are lower in 2025 than previous years, we have not lost any major new opportunities during the year. We do continue to have a very strong portfolio of business opportunities, and we are optimistic and confident about our future growth prospects. Also, as we communicated in Q3, we have revised our investor relations policy, and we will now only announce strategically important business wins for KA. between the earnings calls. What we mean by strategically important business wins are those that are considered basically to be inside information, meaning business wins that are likely to have significant impact on the share price. This is an issue that has been thoroughly discussed in the board of directors. It's also a policy that is in line with the Oslo Stock Exchange disclosure guidelines. And I think in particular, we want to avoid as a frequent announcement of smaller contracts that are not strategic and should not have any significant effect on the share price. And this is in order to avoid unnecessary market volatility and speculations.

But again, very much in line with this also stock exchange disclosure guidelines.