Alleima AB (publ)

Hi everyone and welcome to the presentation of the first quarter 2024 results for Alema. My name is Emilie Alm and I am Head of Investor Relations. I am joined by Göran Björkman, President and CEO, and Olof Bengtsson, CFO. Göran and Olof will take you through our results and then we will have a Q&A session. You can ask questions through the conference call and you can also write them in the field below the webcast. And you can download the presentation from aleima.com. As always, we have safety as a top priority. And I trust that you are safe where you are located and that you know the safety routines of where you are. So with that, I would like to hand over to you, Jaron.

Thank you, Emily. And hello, everyone. Thank you for listening. so okay let me start with the q1 highlights i will go deeper into numbers on coming slides and it has been a somewhat challenging quarter with negative organic order intake and revenue growth although of course compared to very strong quarter one last year market demand is still mixed and the chemical and petrochemical and industrial segments are still challenging especially in north america However, we are noticing some positive signals in segments where demand previously has been soft. For example, in the consumer segment of the strip division. Nuclear, medical, both showing continued strong demand. And all in all, our backlog is solid in most key segments. And as we said now for a number of quarters, we are consuming backlog in some segments while building in others. We've had some temporary delivery challenges in the quarter. I'll look back to that later on. But despite this headwind with temporary delivery challenges and under absorption effects on lower volumes, we are showing our resilience as a company, showcasing an adjusted EBIT margin of 9.6%, which I think is an okay performance given the circumstances. In these more challenging times, I believe it's even more important to stay true on our strategy. And even though there's room for improvement, we have been flexible in our production to accommodate lower volumes. We also maintain our price leadership strategy, which has in the shorter term had a negative impact due to under absorption, but will benefit us when higher volumes return. We've also seen how sustainability trend continue to benefit us, and we'll get back to that in more detail later. But let's start looking at sustainability in our operation. I think overall we continue to do good. We continue to prioritize our safety performance, actively implementing measures to maintain safety as a top priority, resulting in improved development during the quarter. Our utilization of recycled steel remains high, however, decreasing due to the product mix. I would say we have a higher share of special grades today versus normal stainless steel. Our CO2 emissions continue to stay below 100,000 tons for Scope 1 and 2, overall in a 12-month period, with a reduction of 6%. This is despite the fact that CO2 wasn't in the numbers in Q1 last year. increasing the proportion of female manager of course recognizing this is just one perspective of our broader diversity and inclusion initiatives i'd like to give a few comments on how we drive sustainability through our offers for more than 40 years we have been at the forefront developing modern duplex grades which are typically stronger than standard austenitic stainless steel and with superior corrosion resistance In February this year, we launched our next generation umbilical tube grade called SUF 3007. It builds on the success of the market-leading SUF 2507, which has become the industry standard for the umbilical application. This further advanced the duplex revolution that the Leymah has pioneered decades ago. This grade, SUF 3007, offers a plus 15% increase in yield strength, which will make tubes both thinner and lighter, something that this industry has been requesting for quite some time, as this is an important prerequisite for deeper wells. Thinner tubes leads to lower material consumption, meaning there's a win-win situation for Alema, for our customers, and not least for the environment. I think this is a good example on how Alema contributes to making traditional non-sustainable industries more sustainable. as we increase energy efficiency, reduce CO2 emissions with our highly durable components. Which brings me to another industry where our products can make a big difference. I can stress this enough, but 75% of industry furnaces used today are fossil-free driven. And as legislation on polluters tightens, we believe that the transition to fossil-free heating will ramp up even more going forward. therefore creating long-lasting growth opportunities for Alema. During the quarter, our Kantal division received an order for Fibrotal heating modules for downstream applications in the steel industry. The models will be used in a furnace in a new green steel plant in Europe, and the steel industry is a fast-growing and key niche for Kantal's industrial heating offering. And in addition to reduce CO2 emissions and improve energy efficiency, electrical heating also means more temperature-accurate heating. And this is only one of many examples on how Elema product offering is making a sustainable impact. Let's look at how we view the market development. Overall, as we have communicated now several quarters, continued mixed market sentiment. We did see some stabilization in the short cycle business, but on low levels. And the underlying demand in some customer segments remains strong. I will quickly walk you through our outlook for each segment. And I start with oil and gas. The underlying demand is still growing from already high levels. And I would say the project list of upcoming tenders and potential future orders is very strong, even stronger than before. industrial we see signs of a continued recovery of low refined products but still soft in the distributor characterized north american market but it looks like europe has troughed now chemical and petrochemical strong demand in asia as seen for a long time now underlying demand is really there demand is somewhat lower in europe and are still some uncertainties and slow order booking but here we have a nice backlog north america also down year on year but we see some early signs that market might have truffed with end of the quarter better than the beginning industrial heating is slightly weaker demand year over year and some hesitance in placing orders for some customers at the moment total order intake remain high consumer this is still a soft market but clear signs of recovery from low levels and this is mainly driven by the white goods industry Mining construction trend continues to improve year over year, especially mining is strong, but we also see construction picking up. Medical continues strong positive underlying development from high levels. Demand in medical segment continues to show strong momentum with growth driven by remote patient monitoring and catheter lab instrumentation application. Really good news is that insurance coverage is expanded to cover both type 1 and type 2 diabetes in the US. Nuclear underlying trend is continuously growing. It's long lead times but high and growing activity among customers. Transportation remained on a stable level with high activity in the aerospace and space industries. And here we have really long backlogs. Hydrogen renewable energy segment noted the continued momentum and certifications regarding key products was obtained during the quarter. And these are related to different aspects of material approvals for heat exchanging tubes that we produce for hydrogen refueling stations. This allows us to certify to certain standard, which is required by some customers in order to place orders. So that's an important progress. Business for coated strip steel for the hydrogen fuel cells is still experiencing headwinds as customers, not only but mainly automotive OEMs, have delays in their ramping up of their production. Let's look into the order intake and revenue. As you might have noticed, we have changed our disclosures and we are now only disclosing order intake on a rolling 12-month basis. As we said many times, order intake in isolated quarters can be volatile due to timing of orders and the nature of our business with a lot of project business. And order intake in a single quarter does not really correlate with near-term revenues, and it gives an indication that it's not valid or applicable for our performance. Order intake rolling 12 months, on the other hand, it gives a better understanding of our future performance. And yes, you can still calculate the quarterly order intake, but shifting to rolling 12 months is a way for us to shift focus in our communication or what we perceive as important, which is valid both up and down cycles. When looking at the rolling 12-month order intake, it's not really necessary to adjust for major orders, which is why we have removed that measure. So to the numbers, organic order intake growth was minus 8% for the rolling 12-month period. This is mainly driven by a weaker order intake from the chemical and petrochemical and the industrial segment in North America. Also oil and gas saw a lower order intake, but from high comparables and we still view, as I said before, market as very strong with a, I would say, impressive project list from customers. Absolute level in order intake is high and is above 20 billion. Total revenues, 4.7 billion. This is an organic growth of minus 2%. I think we believe that we have reached the trough in the short cycle business in industrial consumer, but they're still showing negative growth compared to a year ago due to a thin backlog. We've also been highly affected by implementation challenges of a new ERP system, which hit revenues by low to mid single digits. Big part, and we will not lift that up and comment in a quarter report unless it had some significant impact, and big part of the tube and all of Strip and Sandvik did go live with the new European environment during quarter one. And there has been issues, and that has affected both revenue and EBIT margin. And I will not go through too much in details, but it has been issues like, for instance, DC inventory visibility and with problems with our online ordering system. Normally we have automatic generation of certificates, but for migrated orders, meaning orders that were started in the old system, moved to the new system, had issues and we need to handle them manually, which is creating delays in our invoicing. And several more, and people are working hard to solve this. But however, production is running and has been running all the time. However, with the rolling 12-month book-to-bill on 102% in the quarter, solid backlog with good mix, we still see opportunities for revenue growth in the upcoming year. Let's look at earnings. Adjusted EBIT margin decreased by 20% to 453 million with a margin of 9.6%. Of course, I'm not pleased with the decline, but I would say given the circumstances, it's not too bad. We have dilution for underabsorption from lower volumes and we have dilution from the lower revenues from implementation issues of the new ERP system and tube and strip. We anticipate lower impact from these temporary challenges and underabsorption going forward. We still had a positive product mix and we have been successful in our price increases. Looking at the margin on a rolling 12-month basis, we're at 10.1 compared to 9.5 a year ago, and still on historical high levels. Pre-operating cash flow, 159 million. I would say a bit on the low side, mainly due to accounts receivable. I'd like to share this graph with you, where we show revenue and adjusted EBIT margin over time. In a way, it speaks for itself. We take a closer look at our adjusted EBIT margin. We say this is a weak quarter, but if you zoom out a bit, we're still on high historical levels. Even what we said about difficulties in the quarter with underabsorption effects and other temporary challenges, we're now at a higher adjusted EBIT margin role in 12 months than in 2019, which we considered a really good year. And remember that our contribution business, the low refined industrial segment, has been declining now for seven quarters. And capacity utilization in the steel plant are at low levels. And I would say volumes in the steel mill are more than 20% lower now than they were in 2019. Our key focus is to keep price leadership also in a weaker market environment, not filling backlog with orders with low prices. also done footprint optimization improve flexibility in the cost base but i say most importantly we are focusing on growing attractive niches improving mix and today we have a much wider span of products contributing to our earnings and we believe we're only in the beginning of this journey and mixed changes happens over time and we continue to execute on a strategy to pursue growth within these segments with higher profitability and less cyclicality which in time will make Elema as a group just that, less volatile and more profitable. So let's go into and look into the division, starting with Tube. Tube noted an order growth of minus 7% for the rolling 12-month period. That was influenced by a weaker intake in oil and gas, also in chemical and petrochemical and the industrial segment in North America. This was partially offset by a nuclear segment and a continuous strong development in chemical and petrochemical in Asia. Even the order intake in oil and gas declined, there's a strong underlying momentum in the sector, and we will be able to capitalize on that going forward. We are booking orders for 2025 now, and the organic order intake decline is rather a consequence of a strong backlog and high comparables from last year when we were building the backlog. And the customer project list, as I said, is really positive. For the contribution of the industrial segment, we could have booked more orders if we wanted to, but to choose not to because we rather have some spare capacity for more profitable orders. Booked a bill of 106% for a rolling 12 months and still a solid backlog. Organic revenue growth of minus 1%, mainly due to lower volumes in the low refined business in the industrial segment. And several of the other segments are showing nice organic growth, for example, oil and gas, chamelepetric amination, hydrogen renewables actually growing over 100%, but of course, still from low levels. We have experienced some headwind during the quarter, mainly due to the underabsorption effects from running lower volumes, and also some challenges regarding the implementation of the new RFE system. We expect these challenges to be gradually fade out after quarter one. But the under shops and effects from lower volume in industrial as well as chemical and petrochemical North America and North America overall could also impact going forward. Which is why we have adjusted capacity to adapt. We had a positive product mix and price increases are coming through nicely. Positive effects of 36 million year-over-year. And I would say, even though I think we can do a lot better, the fact that we still came out with an adjusted EBITDA of 9.2% shows that we have made some improvements. Moving over to Cantal. Cantal also had a mixed quarter, at least on top line, where we saw an organic order intake growth of minus 9% for the rolling 12-month period. Industrial heating started to decline already in Q4 and this has continued, however not getting worse sequentially. Decline was also noted in the industrial segment, both from high levels. Order intake in the medical segment was strong and with the earlier mentioned expanded insurance coverage as well as successful new product introductions to the market are to continue to support the segment growth both mid and long term. Revenues grew flat organically year on year with decreases in industrial and increases in industrial heating and medical. Uptill bill declined to 91%. We are consuming a bit of the backlog at the moment, but Kantal has taken swift mitigating actions to adjust capacity and reduce costs where needed. All of this, of course, to safeguard margins going forward. And talking about margins, I think the margin improvement continues in Kantal. with a margin of strong 18.5% in the quarter compared to 16.4 a year ago. This is mainly driven by a strong medical segment and an overall good product mix, as the industrial heating segment is also growing in the quarter. FX had a negative impact of 10 million. I think Cantal have improved cost position and productivity, and the product mix is steadily improving. Cantal has established a new margin level, and they are doing a really good job. So let's look at STRIP. STRIP has been heavily affected by the weak consumer-related market, but we now see some indications of a slight market recovery, especially, as I said before, in the white goods industry, where one of our more important products is the compressive amp steam. Order intake declined organically by 30% on a rolling 12-month basis due to the lower intake from the consumer, but also from the hydrogen and renewable energy segment. The offering in hydrogen and renewable energy segment is our coated strip steel for hydrogen fuel cells. And as said before, our customers have delays in ramping up their production. And therefore, we expect this business to be subdued near term. And it will have a negative impact on both revenues and earnings. In the quarter, revenue declined organically by 19%, which is, of course, a result of the weak backlog and the overall weak market that we've seen for some time now. This had, of course, an effect on earnings, where adjusted EBIT came in at 3.1%. But the weaker margin can also be partly attributed to the earlier mentioned under-absorption effects on lower production volumes across the business, and especially in consumer and also in hydrogen and renewable energy. And the hydrogen part is the growth opportunity in the future. But I would say growth will not be linear, and the challenges with the new European system also hit margins for the Strip divisions. And with that, I would like to hand over to you, Olof.

Thank you, Göran. And let's go to the financial summary then, and looking at some numbers. If we start with the bridge to the right, we see a rolling 12-month oil intake of close to 20.4 billions. Organically and on a rolling basis we are down 8% meeting high comparables from last year's first quarter. We get some help from currencies and then we have a negative change in the alloys 4% coming from the lower metal prices in the quarter. If you look at the revenues to the right, they come out at 4.7 billions in the quarter, also impacted by lower metal prices and consequently a negative change in the surcharge of minus 9%. Organically, we're down 2% against the strong quarter last year and adjusted for the delayed invoicing that was mentioned before. In some of our operations in the quarter, we would have been in a positive organic growth territory. Looking at 12-month rolling numbers on revenues, we come out just above 20 billions, which gives a 102% book-to-bill ratio. Going then down to the adjusted EBIT, it decreases to 453 millions affected by the lower revenues and also the underabsorption effects mentioned. The adjusted EBIT margin for the quarter stood at 9.6% compared to to last year's 10.5. Metal price fluctuations impacted the reported EBIT during the quarter and reported EBIT margin declined to 2.7 percent compared to 19.4 last year coming from the swings in the metal prices then year over year. And please remember here that the metal price effect that we calculate is a calculation of how changes in metal prices affect our performance. This is because sales that has an alloy surcharge clause entails a time lag between fixing the raw material cost in the product and setting the price to the customer. And even if we see that over time, the effects normally balance out. But a single quarter can of course be very much affected by the metal prices. and going further down in the income statement we come out with minus 42 millions in finance net in the quarter and the negative impact here comes mainly from revaluation of financial instruments that we use for hedging of various exposures like metals electricity and fx and we have since 2022 gradually introduced hedge accounting to these instruments to avoid these swings in our books. So swings are a lot lower now, but not all contracts are in the hedge accounting scheme. And this also means then that we get some revaluation effects in the quarter. But I should also mention that we, of course, have a positive interest net coming from large cash balances that currently yield around 3.9%. Looking at the tax rate, the normalized tax rate comes out at 24.6% in the quarter. That is well in line with the guidance that we have given. If you look at the reported rate, however, it comes out very high. It comes out at 38%. And the effect here comes mainly from the fact that the metal price changes affect the tax calculation when you just look at the plain reported rate. So I prefer to look at the normalized rate and also it can be difficult to look at a single quarter when it comes to the tax because single items might have a big effect on the tax rate. The operating cash flow comes out at 159 millions in the quarter and I will come back to that in my later slides. Going to the bridge then, adjusted EBIT decreased by a total of 140 million compared to the first quarter last year. This is mainly driven by 137 million organic decline from the volume decreases and underabsorption effects. We estimate approximately 100 basis points dilution from the underabsorption and 100 basis points from the temporary ERP issues that we experienced in the quarter. And if we are to look a little bit ahead, we still think we will have some underabsorptions effect from the volumes in the next quarter. However, we do not expect any significant effect from the ERP problems in the second quarter. We get some tailwind from currencies, 24 millions, and that coming from a Swedish krona during the quarter. And if we look a little bit at the parts, the tube impacted by the lower volumes in the upstream production that's causing this underabsorption that I just mentioned, but also the lower volumes in North America and the temporary ERP problems. However, helped by positive currency effects. Cantal defends its volume well with a good product mix despite the lower volumes and negative currency effects. In SRIP, besides the ERP challenges, the lower volume of course has an impact on the consumption. No contribution from Structure, and Structure in this case is the acquisition we made in May last year of Söderfors Steel. That's not a positive contribution on EBIT, as their external market demand has been low. But you should remember that the main reason for this acquisition was access to their fine production capabilities in small sized bars. to serve our medical and aerospace customers. So the impact of Seriforce going forward will be seen elsewhere in this description. Looking at the balance sheet then. Networking capital is lower than last year and slightly up sequentially. Year over year, it's mainly the lower metal prices impacting the numbers. The sequential development is impacted by a few different factors. One is currencies, as the weaker Swedish krona in the quarter increases the value of the net foreign working capital. Another factor is slightly higher physical inventories from seasonal build-ups, but also from the delay in invoicing caused by the ERP change. This effect is compensated by lower metal prices. Overall, no big changes in inventory values. However, in addition to this, our accounts receivables have increased, and I will come back to that when I talk about the cash flow. As percentage of revenues, net working capital came out at 36.3%, which is higher than a year ago when it was at 32. And this is partly due to the combination of lower revenues already explained and the weaker SIC having a direct impact on the net working capital numbers. Year-over-year capital employed in the right graph then decreased to approximately 15.5 billions from 16 billions last year and the change comes mainly from the lower net working capital year-over-year. Rows excluding cash based on the operating profit then including the metal effect was 7.1 in the quarter based on a row in 12 month basis. And the decrease is attributable to the change in metal prices, which is practically reported significantly in the quarter. Cash flow then, on the next slide, came out at 159 millions in a quarter, lower than last year, coming mainly from higher accounts receivable, as we see the Easter holiday coming right at the end of the quarter, impacting the receivables collections. And this is confirmed at the beginning of April when we saw good cash flows coming in from our customers. So a bit unfortunate, but it has improved. CapEx is higher than last year, coming from several ongoing growth investments. And last year was, if you look at the working capital changes, it's quite a change. And that comes mainly from the higher net worth prices during the first half of 2023. Our financial position then. In summary, we have a continued strong net cash position. We continue to be well below our financial targets on the capital structure. Net debt to equity to be below 0.3 times and we're currently at a negative 0.03 times at the end of the quarter. So we are in a cash position. And if you were to look at the net debt to adjusted EBITDA, we stand at minus 0.17 times. And looking at the components then, the net pension liabilities, they increased to 722 millions from 461 million a year ago. And this is mainly then coming from lower discount rates applied to the pension debt. However, sequentially, the net pension liability decreased from higher asset values and slightly higher long-term discount rates on the Swedish pension liability. Leasing liabilities stood at 480 millions. That's an increase from acquisitions and from renewed leasing contracts in some units. And then our net cash position was 1.7 billion. That's improved by close to 600 millions year over year and 119 millions in the quarter. So the total net debt position actually a net cash position is 507 millions compared to 256 millions one year ago in 242 at the end of 2023. So all in all we are financially strong with a net cash position and a unutilized credit facility of 3 billions. Subject to approval on our AGM next week, we will pay out our annual dividend of SEK 202 per share for a total of SEK 502 million. Looking at our guidance, how well did we manage to guide you for this quarter? Well, capex was at 141 millions. We don't specifically guide on the quarters, but we are guiding for 950 millions for the full year. And remember that the second half of the year is normally stronger when it comes to capex, so it takes higher capex expenses. Currency and translation effects came out at minus 11 and we guided for 60 millions negative and the total bridge effect including the hedges and revals were 24 million positive and the Swedish krona it was the weakening of the Swedish krona during the quarter that caused the deviation from our guidance here. The Swedish krona was very strong around the year as you remember. Metal prices negative 328 millions versus a guidance of 300 million so we're fairly close there i think tax rate normalized at 24.6 and the guidance is range 24 to 26. and if we look into following this quarter that we're in now q2 capex we still keep our guidance for the full year of 950 millions including Investments like our announced investments in China and silicon carbide. And also remember that around 400 millions is maintenance. We also have some IT investments this year on the ERP side. Currency effects in translation and transaction. We got for approximately 25 millions back to the same quarter last year. Metal prices, negative 100 millions for Q2. And this is based on the prices, the metal prices at the end of quarter one. And if metal prices increase, the effect will be lower. Same goes, for instance, if the US dollar strengthens further. Tax rate, we keep our guidance for 24 to 26% on a normalized basis. All from me, I hand back to Göran.

Thank you, Olof. So let's look at the outlook for the second quarter. Well, despite mixed demand in our markets during the quarter, underlying megatrends are expected to continue to mitigate the impact of uncertainties in the macroeconomic environment in the coming year. We have a solid backlog in key segments and we have good visibility on our near-term deliveries. We are, as always, of course, continuously taking measures to mitigate potential impact from cost inflation and other absorptions. For instance, if we have lower production volumes in certain segments. One example is Cantal, who has reduced capacity and cost through flexible solutions already in quarter four when they saw a weaker order intake. And if needed, they can do more, and they are prepared to do so. Product mix is expected to be similar to the one of the first quarter. And cash flow is normally lower in the first half of the year compared to the second half of the year. If I should summarize, I think we can conclude the first quarter with mixed sentiment, having successfully navigated headwinds, yet acknowledging areas for continued improvements. We've encountered challenges in implementing our ERP system, resulting in reduced invoicing, and it has also impacted margins negatively. Also, the low production volumes has led to underabsorption effects. But as a result of this, I believe one of the most important takeaways moving forward is the building of track record of stronger margins credited to a diverse exposure and also consistent execution strategies targeting highly profitable and less cyclical segments. And even though we are consuming backlog in some areas in total, our backlog remains solid. with a good product mix looking ahead. And we remain committed. This is really important, the execution strategy. And I want to emphasize our price leadership and that our aim is to stick to that. This will be a clear advantage when broad market demand and volumes returns. And by that, thank you, and over to you, Emelie.

Thank you, Göran, and thank you, Olof. So now it's time to start the Q&A session. So operator, please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Adrian Ghilani with ABG. Please go ahead.

Yes, hello. A couple of questions from my end. I'd like to start regarding the delivery issues for the new ERP system. You mentioned 100 basis point margin dilution from it. And am I correct to assume that these sales are just delayed and will come in Q2 instead? So effectively, we should get a 200 basis point positive effect quarter over quarter in Q2.

Most of it is delayed. I explained two examples. One was with the certificates that we had to handle manually that has created delays that uh should come back in quarter two uh the problem with visibility in the dc's and the online ordering system i mean you really don't know if a customer will come back when it works or if we we lost them so i think i would say two-thirds of this is uh we could we know we'll come back and maybe one third uh could be lost

Okay, I understand. And then a more broader question on industrial heating, given its exposure to many different end markets. Is there any specific area there that is driving the weakness right now, or would you call it a broader weakness across the board?

I would say it's the broader weakness. We've looked into this more carefully. We studied, for instance, glass. We studied electronics and Semicon, and also solar. And when we talk with customers and also read reports, it's fair to believe that quarter one is a slow quarter, and at least customers expect a stronger second half of the year in those sub-segments. So from that point of view, normally careful, but I'm pretty optimistic that that will turn back again.

Okay, I understand. And then on the contribution business, you said that it has likely troughed, but will still be down year over year in coming quarters. Can you give some rough indication on these underabsorption effects on the margins? We had 100 basis points this quarter. Is it going to be roughly half next quarter? Is that reasonable?

It's always difficult calculation. If I should do the calculation, I mean it takes time to fill the backlog again. I think it's fair to believe that the under absorption effect in quarter two will be similar to the one in quarter one.

Okay, I understand. One final one from me as well regarding Cantal cutting costs, is this an ongoing thing that will continue into coming quarters as well, or have the measures mostly been taken, would you say?

That really depends. I mean, we have, and we have that in the other divisions as well, flexible solutions, and that means that they can act fast, and which they have done. They've also sort of summarize what more could be done if needed and that will mean they they're going to follow the order intake closely and if needed there is more to that can be done that could be done pretty fast so it really depends but but but they have more ammunition if needed okay perfect in that case that was all for me so thank you for taking my questions thank you

The next question is from Victor Trollsten with Danske Bank. Please go ahead.

Thank you, operator, and hi, Göran, Olof, and Emily. Firstly, perhaps on the nuclear decision, we discussed it in last quarter, I think, and you said that it could be something for the first half. Could you just update us on where you stand, given the still strong momentum in that area?

Yes, I mean the project is ongoing because we run this as a project. We have not come to any conclusions yet and the first half year hasn't gone yet. We are looking for a decision early autumn and it has to do of course How much needs to be invested? How do we view the market? What are potential competitors doing? And I think one of the more delicate questions would be how would we scale it up? And we're not done yet, but we're working with it a lot.

But still something for the first half, potentially.

Internally, we will come to a decision just after the summer.

Okay, that's super. And then also on a strategic note, just on your M&A agenda, you now have net cash of let's say 500 million. Could you update us where you stand there?

Yes, we are looking at... couple of acquisitions in one of the key segments and I'm pretty positive on those but you never know it has to be finalized and it's a lot of work to do that we do that but we are actively working with a couple of targets

Okay, and the M&A pipeline, has that sort of changed in any view or in any way?

I think the main way it has changed is the one I refer to as come further in the process. I think that is the biggest change.

Okay, that's super. And then on margins again, I just try to sort of understand how that can play out. You said in Q4 that under-absorption was 100 bps impact. It's now 100 bps. How did it look in Q3, if you can remind us? Did you have a headwind also there, i.e. for the second half this year, that headwind could fade? Or how should we sort of think around that?

Honestly, I don't have that number in front of me, Victor.

Yeah, we can get back to that later on. But I guess that, as you pointed out, that Q2, you know, sort of similar impact as in Q1. But it feels like in Q3, you know, sort of comps will look better from that perspective.

I think we have... We have reported from a market point of view roughly the same thing now, a number of quarters. Some segments strong, some segments weak. I would say it was during the second half of last year where the weakest segments from an order point of view started to impact revenue, but I'm not sure exactly how it was in quarter three. We have to come back on that.

Yeah, that's fair. And then final one on my side, just book to bill and your new disclosures. You have 102% book to bill on a rolling basis and a better indication for growth ahead. And you mentioned during the call here that still revenue growth in the cards for this year. But how should we think around Cantal at 90%? book to bill, how does that sort of set that division up for organic sales growth for the coming quarters?

First of all, if you look at Cantal, medical continues strong. So that has a nice impact on Cantal. And then I think the comment I made to a previous question, when we look into sort of the sub-segments of industrial heating, We believe, I'm normally, as I said, I'm not really careful of saying too much on this, but I am, and that's actually overall for Leymah, more positive on the market now than I maybe was a quarter ago. I think the weaker ones has looked as they have stabilized. Some of the weaker ones have improved. And with the insight we have in Cantal, we believe that for instance, second half of the year will be stronger than the first half of the year.

Okay. And follow up on that, sorry, but on the margins, because I guess slide 10 was, you know, very good to see with, you know, our industrial volumes that were 20% below 2019 levels, still a strong margin. But I guess, you know, it's fair to say that despite a bit weaker industrial heating, this is, you know, sort of

a trough margin from that context if you know short cycle you know recovers i will not state that this was the trough margin we don't we don't make commitments to trough margin but if i put it this way then uh this was a weaker margin than i expected and i expected to be better going forward

OK, that's that's up here. Thanks a lot. Thank you. I'll step back.

Operator, do we have another question?

Yes, the next question is from Frederick Agart with SEB. Please go ahead.

Yeah, thank you. Hello. I was just also following up and can't also Partly the question has been asked. But, I mean, there's been a magnificent recovery in margins or increase in margins in the past couple of years. And we say that they have readiness to mitigate what weakness there is. Should we use 2023 margins as a base for that? Is that sort of where you think you will be even in a weak scenario and with the actions they can take? Or is that heading lower if we see continued weakness and no refill of the backloads?

Oh, that's a good question, Fredrik. I don't foresee any larger margin declines. So maybe your estimation is a fair estimation.

Okay, thank you very much. I think that's it. Just one more question, if I can. alloy surcharge impact top line would you expect that to be in uh in q2 i guess that's just mechanical from what you see in contract so it doesn't doesn't affect earnings but it does have an have a margin impact so it could be that's the mid senior mid single negative mid singer digits okay thanks well that's all for me thank you

As a reminder, if you wish to register for a question, please press star 1 on your telephone. The next question is from Igor Tubic with Carnegie. Please go ahead.

Thank you, operator, and thank you, Jaron, Olof, and Emily. I just have two broader questions also. I remember that you mentioned once that in terms of M&A that you might start to look at larger acquisitions compared to what you have made before. Is that still fair to assume or how should we think about that?

I don't recognize that comment. I think what I've said at some point is that they don't necessarily need to be at the size they've been. It's more the nature of the business where we look like. And I think I've said at some point, mentioning one example, if that would have been twice as big, we still would have looked for them. So it's not necessarily that we're looking for larger It's more the kind of companies we're looking for far normally in the size where we have done acquisitions.

Okay, thank you. And just a broader question, the next one as well, in terms of industrial segment. If I remember it correctly, you mentioned in Q4 that the demand among some larger customers has started to improve. Is that still the case or has the demand widened, so to say, among other customers as well?

It's the same comment. I think all the larger customers are a little bit more positive now than before.

Once again to ask a question please press the other one on your telephone. There are no more questions at this time.

All right, should we give it another few seconds, maybe? Let's see. No, it doesn't seem like it. So with that, I would like to say thank you for listening and hope to see you all again soon. So thank you and goodbye.

Thank you, everyone.