Addtech AB (publ.)

Good morning and most welcome everyone to ADTEC's second quarter report presentation. The setup is as usual that Malin and I will spend approximately 15 minutes to summarize the highlights and give our comments on the results and then followed by a Q&A session. So a brief overview. We conclude a good quarter for ADTEC on the whole with high activity and continued growth. We increased our sales with 5%, of which 2% were organic, and we defend our high-level margins at 14.9%. The cash flow remains strong. We kept up the high pace of acquisitions also during the second quarter and have year-to-date announced nine acquisitions, adding a total of approximately 1.2 billion SEC in sales. All in all, satisfying to see that the group continued to deliver growth in a partly challenging market. Looking a bit more into sales in the quarter, given, as I said, the market uncertainty, it's great to see that four out of five business areas contribute positively, and three of five with continued organic growth. And the basis for this is that the overarching market situation remains stable at the high level, but with clear variations between segments and our units. The order intake during Q2 was good and with a sequential increase month by month, which is, of course, comforting in a short-term perspective. However, the uptick in demand after summer that many expected has been postponed. And right now, there is still a weaker sentiment among customers in parts of the business. For instance, OEM components towards customers in Europe, so Germany and other markets in Central Europe, partly due to still high inventory levels and also We see a weaker market in special vehicle segments. We still see hesitations for larger projects. Customer activity remains high. And by that, I mean that our companies are in, so to say, pole position when investment climate eases up. But we still see that the decisions keep being postponed. But as we always point out, the strength of running a well-diversified portfolio as we do is that when some units or markets are struggling a bit, something else has tailwinds. And as you can see in the lower graph, energy's total sales stands out on the positive side with a broad-based growth. Although, of course, transmission and distribution remains a key driver. also a continued positive trend in process technology. I will come back with a bit more details about market development within the different areas. Moving over to EBITDA development in the quarter, it was also up 5%, partly hampered by negative currency effects and a weaker result within automation. The EBITDA development in automation is mainly explained by the lower sales volume in the quarter. Also worth to mention here, industrial solution had a drop in the quarter, but when adjusting for unrealized currency effects, they landed on a satisfying par compared with last year. Once again here, as you can see in the graph, mitigated by a very positive trend in energy. which is a combination of improved product mix, a strong market, high pricing power, and the good contributions from acquisitions. And as I said in the beginning, unchanged EBITDA margin at the high level, very much in line with the plan. I would also like to highlight that our strong trend in increasing our R3RK from already record high levels continued and the cash flow also remains strong. Malin will come back to that within short. This picture summarizes the market situation and development per business area during the quarter. Some brief comments. Automation, all in all, a fairly stable business situation. Sales were down, as I said, partly due to challenging comps. But also negative effects from, as I mentioned, a softer demand in continental Europe. Looking in the segment, demand within mechanical process industry were stable, while the medical segment was still a bit weak, which is due to inventory reductions at some customers. So we still had that issue in some companies. But this was partly offset by a good market situation supplying to defense industry. And the lower sales volume in the quarter hit EBITDA with a weaker margin as a result, as I said. But gross margin improved in a satisfying way also this quarter. So we have a good product mix in automation and good pricing power. Electrification delivered a good quarter. Market situation was overall stable, but with variations between segments. A solid demand within mechanical, medical, electronics, and also defense. Special vehicles and energy were more stable. We've been talking about the battery group. And as we talked about going into this year, we said that we would have a comeback this year. And the market situation has clearly improved, and the order intake was strong for the battery group this quarter. Business situation for energy. I mean, it's a really strong quarter for energy. Strong growth in sales. The key segments infrastructure products for transmission and distribution remains very good. stable in mechanical industry, what we are supplying there to industry, and also a bit still improvement within wind power. Fiber optic networks remain weak, but components to data centers still developed very strongly. So all in all, a good momentum in energy, as you can obviously see. Industrial Solutions, stable as a whole. Sales related to project deliveries towards sawmill industry remained at good levels, while demand for new projects continued to be on hold. Another important leg within Industrial Solutions is special vehicles, where we saw a softening during the quarter, especially towards construction machines. Which is a sub-segment that we expect to remain soft throughout the year. But other niche segments such as waste management sub-C showed strength and together with companies acquired lately we expect to balance up and support future sales growth and profitability. Last but not least, for process technology, the business situation remained good. Solid sales growth more or less across the line. We saw flat demand within energy and forest and process segments, but a positive trend within medical and marine. And also within this business area, special vehicles softened during the quarter. If we summarize the period, I would say that Q1 was good with a fairly positive sentiment and momentum. Q2, still a good development. But again, the uptick that many were expecting has been kind of delayed. So still quite of a how to say, partly challenging market and more on a stable level, I would say. Also important to underline that the general order intake in the second quarter was good. So it's still on a good level. And to summarize, energy segments, stronger development during the period while special vehicle was weaker. Those, I would say, are the most Significant changes. But again, this is where the strength of running a large and diversified portfolio come in. We have seen this year by year ever since Adtech started. So we are good at putting our efforts in where we can see good developments. All in all, in the period, solid EBITDA growth, up 12%, with a margin of 15.1 compared to 14.3, the same period last year. We should be happy about that. And cash conversion remained strong, and we strengthened our earnings per share in a good way, year on year. So with that said, over to you, Malin.

Thank you. And as Niklas commented, our profit margin in the quarter is unchanged compared to the same quarter last year. And as you can see from the graph, we come from a long strike of quarters with improved margin. The improvement over time is broad based and it's in general thanks to active work to increase the value add in our value proposition and make sure to charge for it. Strategically improve our product mix and not least good leverage from acquired companies. We continue to keep a firm grip on the costs and take actions where needed if we see a long-term weakness in the market conditions. Important to remember what we always say, the margin can be higher or lower in single quarters. We have to keep our eyes on the long-term trend, the rolling 12 margin and a continuous increase, steady and stable. Cash flow was stable on a high level during the quarter as well as during the period. Both the profit and margin were in line with last year's second quarter and a continued focus on working capital development made cash flow remain at a good level. I'm very satisfied with the long trend regarding the working capital development, even though inventories always tend to increase during summer period due to bunkering ahead of vacations in the supply chain. And our long-term target, profitable working capital, reached 72% in the quarter. Our financial position remains strong and as expected, our gearing increased as the second quarter is often strained due to the payout of dividends. As you know, the key figures do vary over the year, but are still at very reassuring levels, which gives us plenty of headroom to support our ambitions going forward. So with those short comments, I hand back to you, Niklas.

Thank you. So a few words on acquisitions, as you know, an important part. And as Malin said, acquisitions are contributing in a good way for us. And the high pace continued in the quarter. We strengthened our operations with three acquisitions and signed agreements to acquire two more. And in total, that means nine high performing companies that adds a total turnover of approximately 1.2 billion with good profitability. The two most recently announced acquisitions are Unilite in Denmark and PGS in Germany. Unilite is not yet completed. We're waiting for approval for competition authority. But Unilite is a supplier of fire safety and ventilation solutions for commercial and public buildings. The main driver here is on rebuilds based on regulatory demands. PGS Tech is a German company specialized in customized water and gas supply systems to primarily pharma and laboratory customers. So that would complement the business we already have in process technology in a very good way. In general, as I always say, our view of the acquisition market remains positive. We have a well-filled pipeline that we continue to fill with new prospects. As Malin indicated, we have continued firepower and plenty of possibilities. So both in the Nordics, we still see good potential in Nordics, but also in an increased way, especially in northern parts of Europe. So a high pace so far, and I would like to underline that we have not changed our general growth profile or strategy. So focusing on adding a minimum of 7.5% earnings growth from acquisitions on own cash flow. That is still our objective. So to summarize, overarching and satisfying second quarter. Activity level still high. We continue to grow our business both organically and through a good pace of acquisitions. And for the group as a whole, market situation remained stable and overall order intake was good. Looking ahead, as we write in the report, of course, the economy situation and where we are in the cycle will, of course, set the tone. But given our well-filled order book, still good order intake and the strong positions in attractive niches. and the diversified situation we have. The outlook looks good. We're always having one foot on the brake and one on the gas. This is one of our main competence. And also, as we usually say, to capture potential and going into actions where needed, where we can see some challenges. All in all, I feel satisfied and I'm sure we will continue to create conditions for long term profitable growth. With that said, let's open up for questions.