Alimak Group AB (publ)

Thank you and welcome to the quarter two call of 24. And with me, as always, I have Sylva Dan. If we turn page and we do a short recap of the group. So yeah, a global industrial company, well diversified in our business, focusing on sustainable vertical access solutions and working at height. We have some fundamental drivers for our success that I would like to mention, and first of all, supported by some global trends like growing population, urbanization, more happening at height, the reshoring, moving back to localized production, good for our industrial business, the sustainability trend, focus on health and safety. These are all factors that are providing a fundamental growth into our business. We also have a leading market position in the niches that we operate in. We have a really global footprint and a large installed base around the world with machines that have a long life, which is then a great fundament for our aftermarket business with spares and services. And all in all, we also have a strong balance sheet, good cash conversion and a strong financial position. And we drive the business through five customer centric uh decentralized uh divisions done turning page uh i came to the group 2020 and then we kicked off a new strategy what we call the new heights program and this is what you see here we have talked about many times and we have been focusing on executing and delivering on this it's something that we have then done and followed So if we turn page, then we also have the financial targets and the dividend policy related. We updated this last year because at that stage, we already met the first targets we set out. So now we have a target of revenue growth of six to 10%. We have an EBITDA margin where we should be north of 18% within two to three years. We said one year ago. So that means within one to two years now. We have a leverage ratio that should be below two and a half times. And we are well within that. And we also say that we should have a dividend payout ratio of 40 to 60 percent of net profits. Turning page, of course, we have sustainability targets. So CO2 reduction within 2025 of 30 percent. But we have also applied and we are in the formal stage of science based targets. So that will come within a little bit more than a year. We have an employee net promoter score of beyond 40. We have a lost time injury frequency rate target of less than two, and we should have an ESG assessment of our suppliers of more than 80% of our suppliers. Turning page and into the quarter. Yeah, first of all, I would say, you know, very happy to see that we continue to strengthen and develop the group in a continued challenging market for some of our divisions. We continue to invest in growth. We move forward in fixing facade access, and we also keep making our cost base more variable. We reached for the first time an EBITDA adjusted margin of 17%, which is a very nice step up. This means an all-time high, both in value and margin, and of course, en route to our target of 18% that we have set out to reach. uh it's the transformation program instead of excess that of course contribute running according to plan and they reached a beta margin of 10 in the quarter we have construction profit rebounding as we said last quarter they would do and also overall order intake is in line with last year and and also revenue is actually slightly above which we think is good considering everything around us Turning page and a little bit more details of the quarter, order intake was 1,789 million sec flat organically. The industrial and wind divisions performed strongly. HSPS was stable and solid, I would say, in the quarter. Construction reports somewhat down order intake, but they are significantly up on revenue, which basically means that we are building a solid order book in the quarter, so in that sense also good order intake, while the façade excess division reported a somewhat lower intake in line also with quarter one. Revenue was 1,806 million SEK, up 1%, also 1% organically, where we have positive contribution from industrial construction and wind, while façade excess was flat and HSPS was slightly down, but basically driven by a high comparable. EBITDA adjusted at 307 million SEK up from 295, a margin of 17% versus the 16.5, which is again an all-time high in both reported earnings and margin. And as I said also, we are happy to see that we continue to improve the margin in facade excess and the construction, which was rebounding. Turning page. Service of the markets continues to be, of course, a very important part for the group. And we have a service, a global service structure in each of our divisions driving their own aftermarket. And this creates resilience. And since we have machinery with a long life, it also means that it is a significant business for us over time, which again also leads to refurbishment and also potential replacements. And I'm happy to see that we had positive order intake development in all divisions during the quarter. And we continue to drive this strategically, of course, and we see further nice potential in our aftermarket going forward. Going into division, turning page and facade access, order intake was 364 million SEK in the quarter, down 16% or 17% organically. We continue to face headwinds in North America, and this is market. So market for new equipment, and especially then BMU, building maintenance units, the complex units, it's very slow due to high interest rates and also the upcoming US election, which is cooling down investments. We are retaining our market share in this business. So it's not that we lose out. Projects are on hold or not being pushed forward. So this is something that we feel will come when the market rebounds. Absolutely. But it also means that we are focusing more on the infrastructure market. And I will come back to this. We see increased or we saw increased order intake for new equipment in Asia Pacific and services continuing to grow in all the regions. Revenue was 496 million SEK flat organically and supported by service revenue in all regions. EBITDA at 50 million SEK from 26 last year, margin of 10% versus the 5.3. And this is supported by this program that we are running. So the new projects are signed at better margins. We have built in contingencies and we are running projects the way they should be run with a solid project execution. Turning page and a little bit more what we are doing here. So we are continuing to drive the footprint optimization and the closing of the assembly site in Germany, Mamendorf, is continuing and is according to plan. We are now moving the spare parts from the Mantec brand out of Madrid already. We are, as I talked about, moving more into infrastructure projects. This facade access capability we have means that we can also do much more in infrastructure. We have a nice example from what we did in the Fermen project, but it also means that we are driving this globally and we see a nice potential and a place for us in taking facade access solutions and making that for infrastructure projects going forward. We focus on growing our design consultancy services. Instead of, you could say, just being a product supplier, we more look into the vertical and we see that with our knowledge, it's natural that we are also more into design consultancy. So it's also something we drive to increase our strength in this business. And we leverage, of course, our customer relationships. We have some recent very nice projects, one in China, thanks to our local presence there. But we're also actively managing our database with installed machines that we have out there to drive the aftermarket with refurbishment, retrofits, replacements, etc. So overall, a challenging market, but we continue to invest and we drive like the infrastructure, new opportunities. We continue to fix this business. And I feel very strongly that we are also ready for a potential rebound that we are sure will come Moving into construction, order intake was 454 million SEK in the quarter, down 5%, and also 5% down organically. Important to note is that this is still an order intake level, which is 7% up on revenue. So it means that we are building solidly on the order book in the quarter, and that this is a good order intake level. remained soft for new equipment while we saw strong equipment orders in the rest of the world we have nice contribution from our used equipment drive and also on the both rental and and the aftermarket in all regions revenue was 426 million sec up six percent five percent organically where the growth is mainly driven by new equipment and rental in asia pacific EBITDA at 71 million SEK, same level as last year, margin of 16.6 versus the 17.5. And happy to see, first of all, that the margin was rebounding from last quarter, as we said it should do, but we still have an impact here from the lower load in the Polish production facility, the Skam Climber Manufacturing. Turning page. Mass climbing work platforms was something that was not really in the focus in the old days, and this has also been part of the new height strategy to really revive mass climbing work platforms. We clearly believe that this is a fundamental driver and opportunity for the future, both to replace scaffoldings, but also because it's a safe and effective mean to work healthy and safe at work sites. We have from the old days, the Heck brand, which we are reviving, and we also have ScanClimber that we acquired. And these are areas that we strongly believe in going forward. And we have a couple of examples here where we see that we've won a very nice rental project in Switzerland during the quarter, where we have 16 units of mass climbing work platforms being used for a refurbishment project, where we see that from a sustainability perspective, The trend for taller buildings, it's not to demolish and build new, but it's to refurbish. And then you need to redo the facade. And then these machines are a very natural and good choice to do that. We also, as part of this strategy to revive it, we are actively using our used philosophy here. So in Australia, we repurchased, upgraded and redistributed, sold again then. 19 units of mass climbing work platforms from ScanClimber with a lot of mass sections. And this is, as I said, the part of our strategy to revive and develop this market. So our diversified model, global strength that we have, we continue to develop and it's working well for us. And we also feel that we are very well positioned for the improved market conditions that we are sure will come. Moving on to height safety and productivity solutions, order intake was 352 million SEK in the quarter, up 1% or flat organically. Our increased focus on lifting and handling distributors are paying off, and we saw stable development basically in all other segments. Revenue was 354 million SEK, down 5%, 6% organically, but here basically meeting a high comparable in Q2 last year. EBITDA was 69 million SEC down from 79, giving a margin of 19.5 versus a 21.2. And first of all, this is again driven or affected by the cost allocation change that we did. So this would be the last quarter where we have this negative effect from that. And then a somewhat lower sales effect was mitigated by a favorable margin mix in the quarter. Turning page. A little bit update also here. So what are we doing to drive growth? Yes, we are focusing on verticals to be more specific into different businesses and drive our offering more structurally. So verticals like underground networks, confined space, fire and rescue, load measurement industries. These are some of our key verticals and that we are driving our focus towards. And also, of course, to be more customer oriented, making more bespoke solutions, utilizing our product range and thereby meeting and exceeding customer expectations. So some examples here, we are making a black chain hoist for the entertainment industry in the UK. We are combining several projects to fit into a chimney refurbishment solution in India. We have a crane solution using both TIRAC and Dynafor in Spain, and we are framing our TIRAC for a refurbishment project in the Canary Gulf in London. So all together being more customer oriented. So still stable, good quarter and continue to invest in the growth. Turning page and into industrial, and again, I would say another great quarter by our industrial division. Order intake was 442 million SEK, up 19% or 18% organically. And this is also actually 22% up on revenues in the quarter, which means that we are building another significant order book level here. record high level strong equipment and refurbishment order intake across most regions and and segments and parts and service the aftermarket continue also to perform well in all all regions revenue was 362 million sec of seven percent or six percent organically where refurbishment and the aftermarket business were particularly strong in the quarter due to a lot of projects EBITDA at 82 million SEC up from 81, a margin of 22.7 versus 23.9. Somewhat lower margin diluted by a negative product mix effect, but nothing here that alludes to that we should run with lower margins going forward. We have high margin in our industrial business. It will be some natural swings over the months and quarters, but this will continue to develop in the way we have seen over time. Turning page. So what are we doing here? Yes, we are continuing our geographical expansion. We continue also here to invest in growth. So we invest in sales resources in markets where we have been weaker or not really present from the old days. And we do that slowly and steadily. We focus on key account approach, of course, starting to build this more up also. And that's paying off in our ship to shore business. We continue to drive our aftermarket presence, build on that organization to really ensure that we service our customers in the right way. And that's, of course, driving our growth here. And we also continue to focus on operational efficiency. And here we have in the quarter moving away from air freight and moving over to other transport means, sea freight, etc., rail. lowering CO2 emissions, saving costs and also improving customer satisfaction. So continue our profitable growth journey, investing and we see great potential long term. Turning over to wind, also here another strong quarter, order intake was 202 million sec, very nice level in the quarter of 8%, 8% organically. Increased orders in new equipment, but also, of course, then building a nice order book in Asia Pacific and America. Revenue was 194 million SEK, up 3%, 3% organically. And we had particularly strong sales of new equipment in China. It's personal protective equipment also that continues to perform well for us. EBITA, 39 million SEC up from 38, giving a margin of 19.8 versus 20.2. So stable, solid, good margin level supported by good factory utilization and a good favorable product mix. Turning page. So also here, remember that this is a very, very competitive market, few customers and very automotive-like. So we are winning because we are close to our customers and meeting customer needs, exceeding customer expectations. So that proves effective for us. We see the market is overall stable, some growth in Asia-Pacific, whilst we also see some decline in Europe and Americas. But combining our strength, you know, with our customer approach, product development, operational efficiency, we also see that we are taking market shares with these customers. And that's also, of course, then driving our growth. So good performance in service lift, good performance in personal protective equipment, and also the aftermarket, you know, with e-learning spare parts, it's all working well for us here at the time being. So strong development. although this is a very competitive and challenging market, as you can understand. So that takes us to profit and loss, and I leave for Sylvain.

Thank you, Ole, and good morning, everybody. On this slide, indeed, we now present a summary profit and loss statement. I will not come back to order intake and revenue developments, which have already been commented. But I would like to highlight the EBITDA. We are glad to see an adjusted EBITDA growing more than revenue in the quarter. It's a 4% growth for EBITDA versus 1% growth for revenue. And this indicates that we have overcompensated some cost inflation by an improved operational efficiency. Items affecting comparability relate to the closure of the Mammondorf assembly facility. Below EBITDA, quarterly amortization is at its normal level, around 50 million SEC. Finance net is slightly down, mostly due to the reduced debt. Taxation rate in the quarter is down to 23.1%, thanks to a favorable country mix. Our typical tax rate is closer to 25%. And overall, that means we grow the bottom line, i.e. the net results by 11%. So turning page, let's now look at the two main EBITDA drivers, gross margin and operating expenses. Gross margin has been steadily increasing to 40.9% in the quarter. It's almost 200 basis points above Q2 2023 and 80 basis points above Q1 2024. The biggest contributor to the improvement is the Facile Access Division. As already mentioned by Ulleh, the transformation program is bearing fruit in that division. In the quarter, construction and industrial divisions perform below their usual standard due to a negative product mix for industrial and an insufficient utilization of the Polish factory for construction. As a percentage of revenue, operating expenses are slightly up versus Q2 2023, And this results from various factors. We have taken on some specific additional expenses, such as expenses for the industrial division or product development in construction and HSPS divisions. But we see those expenses as an investment for the future. We have had some cost inflation, typically labor. And on the other hand, we have made some savings further to the tractor integration. As already mentioned, we are delivering the 40 million sec cost synergies which we announced for 2024. Beyond that, we have taken some other cost initiatives which have not had any effect yet, and I'm referring in particular to the closure of the Facade Access Assembly Facility in Germany. Turning to reason for the period, this was 143 million SEC in the quarter versus 130 million in Q2 2023. So that's an 11% growth. Excluding items affecting comparability, reason for the period was 154 million SEC against 136 in Q2 2023. That's a 30% growth. EPS was 1.35 SEC versus 1.21. And adjusted for ISE and acquisition-related amortization, EPS was 1.78 SEC versus 1.61 in Q2 2023. Let's move now to the operating cash flows, which were soft in the quarter due to some temporary working capital increase in the construction and facet access divisions. This is in particular related to the phasing of the invoicing, and we expect most of it to be reversed by year-end. In construction, the repurchase of the used mass clambers in Sydney contributed as well to the temporary increase as the cash inflows resulting from the resale will mostly come in the third quarter. In the first semester, cash flows are still going by 20% despite the soft Q2 and the cash focus will definitely continue in the future. Let's move now to debt and ROSI. Net debt is stable in the quarters. It is mostly a factor of the operating cash flows on the one hand and the dividend payments on the other hand. It's important to note that we secured an additional revolving credit facility in the quarter for an amount of 50 million euros and a tenor of three plus one plus one years. This comes on top of the 2 billion SEC RCF, which we executed in December last year. So in total, we have a bit more than 2.5 billion SEC of available RCF. Leverage at the end of the quarter is 2.29, in line with our target of being below 2.5. And as I already said, we will continue to focus on operating cash flows, which will contribute to future deleveraging. Our priorities for capital allocation remain unchanged. We will invest in organic growth, and I mentioned some examples earlier. We continue to actively work on acquisition opportunities, allowed by the decreasing leverage. And we will apply the dividend policy, although ultimately this is a board proposal and an AGM decision. And I will finish with one word on ROSI, which is an important metric for us. It's slightly growing in the quarter, thanks to an increasing bid, and we will continue our work to uplift Rossi in the future. And on this, I'm handing over to Ole.

Thank you, Sylvain, and we turn the page into the summary. So, yeah, good quarter, and we are on track to deliver on our financial and sustainability targets. We have reached a new margin level in the quarter, despite that we still face a challenging market condition for several of our divisions. And the new heights strategy continues to serve as well. And these are having these three key elements. So first of all, these strategic drivers, customer obsession, technology, leadership, operational efficiency and people. This is the drivers that we all focus on every day. But then I would also like to highlight the importance of the effective and the decentralized organizational structure that we're having, combined with the right strong culture. This is giving an effective and well-performing machine that continues to take the group to new heights. And we also have a solid financial position that allows us to continue to invest both in organic growth, M&A, and et cetera, like Sylvain was mentioning. And we also feel very ready now that we are in a strong position to capitalize on improved market conditions when they start to emerge. So with that, I would like to thank all employees and customers and partners for this first half year and we move to Q&A and turn page.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.

The next question comes from Jenna Shu from Burenburg.

Please go ahead.

Hi. Thank you for the presentation. Just a couple of questions for me, mainly on the margin. So from HSPS, how should we think about that margin going forward following the end of the central cost allocation? Because I understand that Q3 is historically a weaker quarter in terms of revenues. But does that also impact the margins for Q3? Or was last year's margins just in effect from that cost allocation?

I think you should look a little bit upon where we are now year to date over the last four quarters. I think that would be more the signal of... If you look at the last four quarters and take the average, I think that would be the most... or best indicator for what to expect going forward.

Okay, thank you.

And on sort of facade access and construction, I know right now kind of the big question is the timing, but personally, when do you see sort of this market for facade access coming back, especially in the U.S.? ?

Yeah, it's a good question, Jenna. And, you know, I don't really have it's just speculation, of course, you know, but we all start to see now that the inflationary pressure is starting to come down. Interest rates have not really started to come down yet. So then it's also this question, what will start to drive increased investment? Is it just now that everyone realized that it most likely is to come down or is it that we need to see it's coming down first? And if it is to see it's coming down, then most likely globally, it's more closer to year end or beginning next year that we can start to see some fundamentals there. And then considering that also our products are investment products, Most likely, they will not be first out. Most likely, I would think that you need to start to see projects being put back on the table. Short term, I don't think you will have effects in the next one to two quarters of any magnitude. But 25, hopefully, we need to start to see effects from this, I would believe.

Okay, and just a quick clarification, is this for both facade access and construction? Yes. Or is it more on facade access? Okay.

No, this is both, you know. Both are affected by this high inflationary pressure. US also, as I mentioned, you know, are influenced by the US election. And also still in the US, which you see a little bit more than I think in Europe, you are also having a little bit of effects in some cities that people have not come back to office to the same degree as pre-pandemic. So there is also some effect there in some of the cities in the US, but that we also believe will change going forward.

Thank you very much. Thank you, Yana.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Yeah, thank you. We have a question online here, so I will do that first then. So it is a question. Can you speak some more about Alimax digitalization and smart solutions and how rolled out is it through the current unit base? Yeah, you know, we have since I came to the group, you know, we have been investing quite heavily into making our machines connected. And we have a team out of Borås, which is led by Charlotte, our CTO, driving this development. And this is a center which are working for all our divisions, supporting all of them with this type of knowledge. And we leverage in that sense, you know, the knowledge and can also help every division moving fast on this. Basically, what we have done is to put... uh this type of control systems in our machines and sensors etc so so today most of our machines have this ability that that we can see load we can see run data so so you get you know the the usage of the machines that we can see and also customers can see so so that's available uh today and then there's a question of course going forward how much will it be adopted and so forth. And this will vary a little bit from industry to industry and segment, segment, division, division. But we are providing these things and we start to see more and more interest from our customers in this respect. Maybe one area to highlight is on the construction side. You know, you have both the element of productivity because at a construction site, The question is, of course, to move effectively people and material at the construction site. And most of, you know, if you build something at height, most material and people are moving through our machines. So to be able to work on the productivity, to make sure that people and material should move more effectively, you need to have data around it. And the only way to have data is to have run data from our machines. So then you can see, you know, where they are starting and stopping, where they are moving, what type of load they carry, and all these things. And from there, you can start to work on taking out the data and working on productivity and plan better the logistics at construction sites. So that's one element on the productivity side. Then you also have the safety side, of course, which is basically the same thing. You need to have digital machines. You need to have machines that are controllable. uh and that's also what we are having today so that since you have a smart panel in the machine we can build in and we have this type of features available you know if customers or you know want to use them that the machines cannot be operated by anyone besides those that have a certified training and a certificate and a tag from us you know so that's the only way to to run the machine that you can use this type of things during the installation of a machine. to ensure that it's digitally approved by people that are certified to install, maybe two installers, so to ensure that it's all done correctly, et cetera, et cetera. So these are many ways that we can utilize and where we see strong trends, and we are sure that we will benefit strongly from our digital initiatives going forward. So, yeah. Trying to be a little bit short, but giving a couple of examples. That was the only question I had on the written side, so I don't know if there are any more on the phone side.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, so with that, again, thank you to all. Thank you to all our employees driving the company forward, partners, customers, and I wish you all a great summer. So until next time, thank you.