Alleima AB (publ)

Hi, everyone, and welcome to the presentation of the first quarter 2025 interim report for Alema. My name is Emelie Ahlman. I am head of Investor Relations. And I'm joined today by Göran Björkman, president and CEO, and Olof Bengtsson, CFO. So 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 webcast. You can also download the presentation from aleima.com. And as always, safety is the top priority for us. And I trust that you are safe where you are located. So with that, I would like to hand over to you, Göran.

Thank you, Emily. Hi, everyone, and thank you for listening. So let me start with the highlights of the quarter. 41, I think, is another solid quarter, continued strength in financial performance. We had order intake growth for the rolling 12-month period of plus 1%. Continued organic revenue growth we are executing on our solid backlog. And we achieved broad-based revenue growth of plus 8% organically, and where actually most of our segments showed growth. Backlog remains solid with good product mix and visibility for near-term future. Our adjusted EBIT margin also grew year-on-year to 10.5%, with a solid operational leverage and margin development despite a slight FX headwind, and that is the bridge effect. We did not note any major effects from the ongoing turbulence stemming from trade barriers and the U.S., We view the main risk going forward as a potential negative impact on global demand and economic environment, not the tariffs themselves. We will comment more on this in detail in just a moment. A strong financial position enables us to stay with our strategy with several ongoing projects for profitable growth that we now are executing on. We are targeting more profitable and less cyclical markets. And we will continue to implement these growth initiatives to continue to strengthen the company in the long term and also strengthen local presence in important and attractive markets. This is an important part of the long-term strategy. I think in general, we are performing in line with our targets. To move to sustainability, we are generating positive impact both through our operations and our product offering. And I'll start with our own operations. And I start with safety. Safety is always a top priority. We are continuously and actively implementing measures to maintain safety as a top priority. Development is going sideways at the moment, long-term, heading in the right direction. I would say safety is an area where I'm not satisfied. We have to improve and have to do that at a higher pace. Our share of recycled steel remains high, over 80%, both on rolling 12-month basis and year-over-year. I think that's a good figure given our product mix. Our CO2 emissions are steadily decreasing, both on rolling 12-month basis and year-over-year, with a reduction of 3% and 8% respectively. During the quarter, we submitted our plan to SPTI, and we are now awaiting their approval. And the proportion of female managers increased to 24.8%. important and again recognizing this is only one aspect on a broader diversity inclusion initiatives when we talk about our offerings towards the hydrogen market we often talk about our unique production technique towards hydrogen fuel cells but we are supporting the whole lot more in the build out of the supporting infrastructure in the quarter we launched an on-site tubing solution to the canadian hydrogen market This container-based solution, which could be seen as a small mobile tube factory, can be installed directly on the construction sites and decreases the need for off-site processing, ensuring the exact specification wherever it's needed. And there are broad-based savings such as materials. Instead of having tubes at certain fixed lengths that you cut, you can get the exact length you need from the container. This improves yield and also reduces the number of couplings or welds. And also savings related to energy, space and time. I think this solution is already supporting more than 70 hydrogen refueling station projects in Europe. I think this is another good example on how Alema, with our expertise in our customer processes, acts as an enabler for solutions of tomorrow. Let's look at the market development. Overall, we continue to see a mixed market sentiment and the macro environment is continued uncertain. As said, no impact from the global trade barriers was visible in our order intake to date. But there is, of course, a risk that potential negative impact on global demand and the economic environment. However, this comment is, of course, very general. Walk you through the development in each segment, starting with oil and gas. The underlying demand is still on high levels, and the project list of upcoming tenders and potential future order is strong. In order intake, we still meet high comps from the backlog built up last year. Last quarter, we said that the backlog for umbilicals was getting shorter, but we have now booked more orders, and we have not consumed backlog. The book to build was about one in the quarter for umbilicals, and the OCDG backlog remains strong. Chemical and petrochemical year-over-year underlying flat. Europe is down. There's a solid demand in Asia on good levels, and the sentiment in North America was somewhat improving, but from low levels. Industrial segment, we noted an improving year-over-year demand, proving in North America from low levels, stable in Asia, slightly weaker in Europe. I think it's important then to know that due to capacity priorities, we are being selective in booking orders in the industrial segment. Industrial heating, flat demand year-over-year, and still some hesitance from customers in placing orders, which refers mainly to CapEx-related business. the solar segment especially we also have high comparables from last year for this quarter and to some extent also in the next quarter however demand was positive in some applications for ceramic elements for electronics including semiconductors and also glass industry but weaker in solar and metals consumer demand is now on a good level mainly driven by the white goods industry in the strip division medical continued to be a strong market several drivers momentum is strong across the product portfolio mining construction flat underlying demand year-over-year stronger related to mining than to construction and nuclear the high activity and growing demand continues and we're building a good backlog to execute for a long time transportation demand was flat year-over-year but with high activity for aerospace and marine titanium tubing And hydrogen and renewable energy is still a bit mixed. This is a wider segment where some businesses are doing better than others. But in total, no clear signs that this is taking off quite yet. Order intake rolling 12 months amounted to just below 20 billion, noting a broad-based organic growth and is now turning positive to plus 1%. The oil and gas segment is still contributing negatively, where we are to some extent still affected by high comps. Our view in the market is still positive. Nuclear medical segment noted the highest rolling 12-month year-over-year growth, but as I said, a broad-based positive contribution. Revenue grew organically by 8% year-over-year, with growth in tube and strip and declining cantal. Main contributors were oil and gas and nuclear, but all segments except industrial heating noted organic growth. We continued to deliver on our backlog and managed to grow revenue for the third consecutive quarter. Rolling 12 months booked a bill of 99%, and all the backlog remained solid with an overall positive mix. So let's move over to earnings. Just a debit amounted to 540 million SEC with a margin of 10.5%. This indicating solid operational leverage in the quarter, which makes this quarter, I think, a quarter I'm pleased with. Margin in Q1 last year was, however, damped by dilution from the ERP implementation and some under-absorption effects. We are seeing margin contribution for more segments now than in the past, medical being the prime example of this, but also oil and gas and nuclear, and also the way our ratio footprint is evolving. In Cantal, we noted quite a margin decline year-over-year, which I will come back to. The Cantal decline had a negative impact on the group. Free operating cash flow 46 million lower than last year, impacted by higher production volumes and higher capex. overall we are benefiting from from our diverse exposure and how we in the longer term have been driving a positive product mix shift while maintaining our order booking discipline in weaker market condition which brings me to the next slide a slide that we have shown a couple of times before looking at the longer perspective we have improved our resilience 2024 was It wasn't by any means a perfect year. I would say it was rather challenging in many aspects. But looking long term, we are at historically high levels. This does not mean that we are satisfied. We still acknowledge things we can do better, but it's still important that we have taken some great steps in improving our stability and profitability, a journey that we intend to continue on. Production volumes have slowly and steadily increased over the last few quarters, but we're still on low volumes compared to 2019. So let's look at the divisions, starting with Tube. Tube noted organic order growth of minus 3% for the rolling 12-month period. Again, coming from lower intake in oil and gas segment due to the backlog built up last year. Nuclear, mining, construction, transportation developed positively. Europe continued to be on the weaker side while Asia and North America grew year over year. Our order backlog in oil and gas is still solid. Booked a bill of 98% rolling 12 months with solid backlog in key segments. Organic revenue growth of 12%, mainly driven by nuclear oil and gas, but several segments are contributing. This means that we have a positive product mix. Margin increased to 11.1%. And we are utilizing our capacity in a good way by prioritizing more profitable orders. Note that we had some dilution effects in the comparative margin in quarter one 2024, meaning that the underlying performance was better last year than it looks. Anyhow, this was an overall good quarter for Tube. Cantal, order intake growth for the rolling 12-month period of plus 4% on low comparables. Still with a somewhat soft industrial heating market, however, demand was sequentially flat but on low level and positive in some applications for ceramic elements for electronics, including semiconductor and glass industry. Previously announced investments in both Sakura Japan and Perth Scotland are both related to those customer segments. Medical segment is maintaining its strong momentum, growing in order intake and maintaining good revenue levels. Backlog remains solid. And book-to-bill recovers a bit to 99%. The adjusted EBIT margin for Cantal was 16.6% in the quarter. I think it is a good performance given the lower volumes in industrial heating, especially in the solar end market, which is highly profitable. Margin includes an FX headwind of minus 17 million year-on-year on adjusted EBIT. And if we exclude FX, margin would have been on par with last year, which is a strong performance in a challenged market environment and low volumes in industrial heating. And Cantal's ability to adjust capacity and reduce cost, improving mix from the growing medical business, makes me stand firm with my previously made comments. And that is that Cantal has established a new margin level compared to the historical numbers. Strip, after a tough 2024 where Strip was heavily affected by the weak consumer-related demand, volumes have returned to better levels. Organic order intake grew 34% on a rolling 12-month basis with growth in all segments. Marketing conditions have improved, and we are building up a solid backlog in segments like consumer, where the main product is compressor valve steel for white goods. Revenue grew organically by 19% in the quarter, however, coming from a weak quarter one last year. We booked a bill now amongst 115%. Just the debit margin improved to 6.9% from last year's 3.1%. And adjusting for dilution from the offering to hydrogen fuel cells, which has been slow now for some time, the underlying STRIP business is steadily improving. On the other hand, year-on-year effects also a positive contribution of 12 million on STRIP. Let's have a look at our global footprint, and that is to describe our view on tariffs. As I've stated already, the main risk we see is the potential negative impact on global demand and economic environment, not the terrorists themselves. We have been through this before with Section 232 back in 2018, and which we handled in a good way. We have a clear local-for-local strategy, and recent investment decision also supports this. I will give you some color on our production flows looking at our U.S. production footprint. Starting with tube, we have several production units. I will not comment on all of them, but to give you an overview. Starting with Scranton in Pennsylvania, that's the largest site. That is mainly for industrial, but also for the chemical and petrochemical segments with products like high temp tubes, heat exchanger tubes, and also hydraulic and instrumentation tubes. Also in Pennsylvania, we have Scotdale and we have Kennewick and Washington State, both for stainless and titanium tubes for the transportation segment, mainly aerospace and marine. And in general, the melt shop in Sandvik can supply input material for these units, which are mainly bar and sometimes hollows, those being low refined products, and where the main part of the value add is taking place locally in the US factories. and competitors that do not have this capacity of extrusion in the US that we have. We also have sales in the US where the customer is the importer, as we have very specialized production units. To give you a couple of examples, umbilicals, which are produced in Chomotov in the Czech Republic, steam-generated tubes for nuclear that are produced in Sandviken, and here the competitors are mainly based in Europe and some in Asia, and none in the US. Cantal. In Cantal, we have Palm Coast in Florida and Tucson in Arizona for our medical wire business. And for the Cantal heating business, we have Bethel in Connecticut. That is a wire production unit that is serving external customers, mainly with industrial heating and the consumer segment. And Bethel is also an internal wire supplier to the more added value heating elements production, which we have in Concord in North Carolina. so it's a similar setup like tube with exception for the medical business input is a wire rod from sweden where the more value add production like wire production and manufacturing heating elements is taking place locally in the u.s again many competitors lack our capacity and capabilities in the u.s so how do we handle the tariffs we are passing on tariffs to customers like our competitors in the EU and Asia are doing. And remember that tariffs are paid on the low refined input material, like bar for extrusion in the tube case and wire rod in the control case. And we are active in very specialized niches, where many times there are limited domestic alternatives. If we see that tariffs will impact demand, we are ready to adjust capacity and cost base if needed. So what are our key takeaways from 2018 when Section 232 was introduced? We lost some volumes on low refined products like bars. This is an industrial segment and part of the long-term strategy is to be less dependent on the industrial segment. On the more high added value products, we had no major impact due to limited local competition. Also at that time, to reduce risk of having Chinese steel imports to Europe due to the tariffs into US, EU implemented import quotas, and those are still active. Again, we are not worried about the tariffs. The risk lies within the impact on the global economy. With that, over to you, Olof.

Thank you, Göran. And let's go through some numbers then on the financial summary slide and looking at the bridge table to the right in the slide. Starting with order intake amounts to close to 20 billions on a rolling 12-month basis. And organically, we are now turned positive and are growing by 1% this rolling basis, which is a change from previous quarters. We see growth, for example, in nuclear and medical segments on this basis. Quarterly revenues just below 5.2 billion, with a strong organic 8% growth. And we have not shown revenue growth for three consecutive quarters. And the growth is fairly broad-based, with all segments except industrial heating growing. Alloys, we still see some negative alloy effects on orders, with a minus 2% on a rolling 12-month basis. Neutral on quarterly revenues though, and if we look at the common quarter, alloy effects are expected to be neutral on both the rolling 12-month order intake and on the revenues. Structure, that's zero on both order intake and on revenues. We actually have a small acquisition there, Endox in Kantal, closed in January, but we only see minor effects from this in the quarter. Then turning to the table on the left, and I'll get back to the adjusted EBIT in a minute, starting with the reported EBIT coming to 10% then from 2.7, same quarter last year. And this is the improvement here comes from the increased revenues, of course. the better performance but also from the fact that the metal price effects are much lower this quarter compared to the same quarter last year we go from a negative 328 to a negative 27 this year so that of course has a strong impact on that line net financial items a positive 13 in the quarter compared to a negative 42 last year And the change comes mainly then from revaluation of financial instruments that we use to hedge our various exposures. And some of these hedges do not fully qualify for hedge accounting, thereby impacting the finance net when they are revalued. However, we have a positive underlying interest net coming from our strong cash position, and that is currently yielding about 2.2%. Tax rate, we have a reported tax rate of 25.1 in the quarter. And if we normalize that, it comes out at 23.1. So that is well in line with what we're guiding for. Pre-operating cash flow of 46 million, lower than last year. I'll get back to that in a minute as well. And finally, adjusted earnings for the quarter at 165 per share. impacted positively from the higher adjusted EBIT number and also the improved finance net. That is the finances shortly. And then looking into the bridge or the change in adjusted EBIT from quarter one last year to quarter one this year, we are growing EBIT by 19% in total, going from 453 million to 540 million. with a sound operating leverage of 28% in the quarter. We note a solid organic development in tube and strip from improving volumes and good mix, somewhat mitigated by a negative development in Cantal. Slight currency headwind in tube and Cantal year-over-year, while strip was positive, and total currency effects in the quarter was negative 21 million in this breach. On structure, we have a positive underlying contribution from the ENDOX acquisition in Kantal, but some temporary M&A transaction costs, including a real estate transfer tax, has impacted the numbers, so they come out at a negative four. However, the acquisition is performing as planned. Then going to the balance sheet, network and capital then to the left. more or less on par with last year in absolute terms however lower as a percentage of revenues and the sequential increase you see from the preceding quarter is mainly driven by higher volumes resulting in higher accounts receivable and inventory as well as a lower accounts payable change and as you can see on the bars to the left and looking back two years we normally have a build-up of inventory to two first quarters of the year for the annual summer stop, when we also do maintenance of our mills. This also goes for this year, and in addition to this, this summer we will have a prolonged stop for reinvestments related to one of our extrusion presses in Sandviken. But with this in mind, we expect the working capital change coming from this to be neutral on the cash flow for the full year. Year over year, capital employed, look to the right, Capital employed excluding cash increased to 16.3 billion from 15.5 last year. This increase comes mainly from higher fixed assets as we're investing in our growth. And with the increased capex levels we have seen for the last quarters. And if you look at sequential, the increase also, of course, comes from the increased net working capital position that I just mentioned. Rows, return on capital employed excluding cash, which is then based on the operating profit, including the metal effect, was 11.9% in the quarter, based on the rolling 12 months. And the increase from last year, 7.1, is attributable to the improved performance in the reported EBIT and the lower metal price effects. Looking at the cash flow, free operating cash flow amounted to 46 millions in the quarter. That's lower than last year, despite the higher EBITDA, as capex levels are higher. And also, of course, coming from the aforementioned changes in working capital. Capex increase relates to higher growth capex, and our maintenance capex levels are still approximately 400 millions per year, as we have previously communicated. We see a slight increase in our lease liabilities, and normally we improve cash flows in the second half of the year as we release working capital from the seasonal inventory build-up in the first half. Looking at the financial position then, the position remains strong. We are well below our financial targets. net debt to equity ratio below 0.3 times. At the quarter end, we were at the negative 0.0 times. And if you prefer the net debt to adjusted EBITDA measurement, this came in at the negative 0.14 times. Looking at the different components then, net pension liabilities increased to 839 millions from last year's 722. And that is mainly a result of lower discount rates year over year, obviously affecting the pension liability. Leasing liabilities more or less on par with last year at 481 millions. Cash position continued strong with a financial cash position of 1.7 billions. And then a net debt position of a negative 414. That is a net cash position there. And subject to an AGM decision next week, we're getting ready for paying our dividend of a total of 577 million that will be paid in May. That corresponds to 230 Swedish kronor per share. And again, we also have contributing to our strong financial position is that we have a new utilised revolving credit facility of 3 billion at the end of the quarter. So if we look at the guidance that we gave you ahead of the quarter that just passed, we had capex of 213 million. We are guiding for a full year capex of 1.2. So I would say we are well in that range, considering that we normally have more capex in the third and fourth quarters. Currency transaction and translation effects at 64 millions in the quarter. We guided for 85 based on what we knew then and the lower outcome has to do with the significant strengthening on the Swedish krona that we saw in March versus our main currencies. Total currency effect including hedges and revaluations came out at the negative 21 in our year-over-year bridge. Metal price effects, we guided for neutral effects and we came out at a negative 27. So I think we were fairly well in line there. Tax rate 23.1 and we guide for 23 to 25. So at the lower end of that range, still in the range. And if we look into the second quarter then, CapEx, we remain with our guidance of 1.2 billion for the full year CapEx, mainly coming from already decided and announced investments. And as I just mentioned, 400 million of that is maintenance or investment CapEx. And then we have some IT and safety investments. But the rest of the CapEx is actually for improvements and growth. Currency effects. Transaction and translation, approximately 130 millions negative for Q2. And this obviously comes down from the Swedish krona versus our main currencies. And this is based, I should say, on FX rates at the end of March. And currencies, quite difficult at the moment, I think. And with the recent quite considerable currency movements, it's difficult to give any longer guidance on the currency effects. But to get a better understanding of currency effects for the full year, what I recommend is a deep dive into our recently published annual report for 2024. There's a note there to be specific, note 26, where we have a sensitivity analysis on our transaction and translation exposure and the possible impact on EBIT. You can see the different currency exposures that Coming to metals then, with the metal prices at the end of March, specifically the nickel price, we expect negative metal price effects of 150 millions in the second quarter. And for tax, we keep our guidance of the range of 23 to 25% for the full year.

And that takes me back to you, Jara. Thank you, Olof. The outlook for the second quarter. I mean, the economic environment remained somewhat cautious during the quarter. And considering the change in global trade policy situation, the general uncertainty concerning future development has increased. We take a positive view of the development in several of our customer segments, but the underlying megatrends are expected to continue to support performance, while there are challenges in others. Our backlog is solid in several of our key segments, and we have a good visibility in our near-term deliveries. Europe is on the weak side, North America picking up on low levels, and Asia is doing fine. And please note that we are meeting high comps in second quarter. Product mix is expected to be similar to the one in the first quarter. And on the basis of the exchange rates of the end of March 2025, currency headwind is expected in the second quarter, as Olof just described. Cash flow is normally lower in the first half of the year compared with the second half. So that brings me to summarize. Overall, we had a solid financial performance in quarter one, companies in good shape, and we deliver on our financial and strategic targets. Quarter one, we noted continued mixed market sentiment. The future is difficult to foresee as with turbulence in the market related to trade barriers and geopolitics. Revenue continued to grow organically in the quarter with a broad-based contribution. Our diversified exposure to customer segments at different stages of the business cycle, as well as our strategy to grow within more profitable and less cyclical niches, have proven to be successful. EBIT margin grew year-over-year, and the long-term development is solid. This shows how we long-term have driven positive product mix and maintained our order booking discipline in weaker market conditions, and thus able to maintain profitability. We have several ongoing growth initiatives, which will strengthen our company in the long term. Our strategy has always been to have a global footprint, the production close to customers, and our announced investments are strengthening this further. Our financial position remains strong, which will enable us to continue to execute on our strategic agenda. And with that, I'd like to hand over back to you, Emily.

Thank you, Jaron. So now it's time to start the Q&A session. Again, please write your questions in the webcast or you can ask them on the conference call. So operator, please go ahead.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question comes from Giuliani Adrian, ABG. Please go ahead.

Yes, hello. A couple of questions from my end. First of all, it sounds like you're not really seeing any notable negative impacts from lower demand yet. But given that the whole trade war situation started in April, are you able to talk about how the order intake has looked so far in April? Can you give anything quantitative on that, whether there has been a drop-off or not?

It's only been a couple of weeks and we have an Easter, and when I look at the numbers, I see nothing. That doesn't mean that we will not see anything going forward, but we need to describe what we see, and so far we do not see anything. But of course, uncertainty is not good for us either.

Okay, understood. And I guess on a similar note, and I appreciate it's a bit hard to tell, but Do you think there's a risk that Q1 was perhaps boosted by pre-buying as well, sort of building inventories ahead of the tariffs?

I don't think so. That is a question we also have raised internally and try to see if that is the case. And that is not what we see.

Okay. And do you base that off of sort of conversations with your customers or what's the reasoning behind that?

The reasoning behind that is how the divisions and the business units are viewing their order intake, and we don't see anything like that.

Okay, thanks. And perhaps a final one from me on the margin in Cantal. It was down almost two percentage points year on year, and I get that FX is part of that, but is there anything else unusual in the Q1 numbers, or Should we assume that unless industrial heating improves, then this is perhaps the level Cantal will be at for the coming quarters as well?

I think Cantal could improve from the levels they are at right now. You're right, industrial heating is low, and if that continued to be flat, we still have the positive mix effect of more medical as share of Cantal, and that is bringing up the level. I think, and then I should not speculate on the FX level, but my belief is that they can improve from this level, even though industrial heating will not start to grow a lot.

Okay, understood. In that case, that's all from me, so thank you.

Thank you. The next question comes from Akerblom Anders from Nordea. Please go ahead.

Hi all, thank you for taking my questions. Getting back a bit maybe to the, and sorry to repeat this, but the tariff, potentially tariff-induced, you know, component of purchases in the quarter. I mean, for me, just looking at Tube and North America, I mean, you reported 63% organic revenue growth year over year. For me, that kind of pops out. And sorry, not to grill, you know, on kind of how you make the assessment that there's not, you know, such a component to purchases in the quarter. But at least maybe if you could explain the North America figures, that would be very appreciated.

But we start with the numbers. Yes, the growth is high, but from very low levels. So the sales in America, in the regional tube, is still low, even though it's improving. We were there, or I was there, two weeks ago and also met with the organization. Because they worry about the uncertainties, and they... for what would they say, haven't seen anything like sort of speculating or chasing from customers. And on the margin, you never know exactly what all customers are doing, but we have not seen that as a big thing. No.

Okay. Okay. Thank you. Just thinking about the kind of metal prices currently, I mean, you know, during the quarter, at the current spot at least, nickel prices came down by some low single digits year over year. But if, you know, the current spot is maintained, and I mean, obviously you guide for this in terms of the impact on EBIT, but I mean... This will have a quite significant impact, something around 20% year-over-year in Q2 at the current spot. And you say that the underlying profitability and the mix maybe is the same, which I interpret as the potentially underlying profitability. Should one view this as... the profitability of projects getting worse in the quarter to come, given that you get such a significant margin support from metal prices coming down? Or how should one think about that?

I mean, the metal prices, the adjusted EBIT is excluding the metal price effect. Or is that your question?

No, not really. I mean, looking just at reported EBIT, if one thinks about when you say that you expect a fairly similar mix in the coming quarter, I interpret that maybe as saying something about what the margin level should be assumed to be at. But we have metal prices coming down very significantly, which will, of course, support the margin level for reported EBIT. So, how should one think about the profitability in the backlog for the coming quarter with that in mind?

I don't see any big impacts on that. I mean, it takes some time for the metal price changes to work through. We normally say it's about four months. So the figures we give is based on that assumption, and of course also the fact that we're hedging part of our metal exposures. So is that okay as an answer? But that's, I mean, and we of course look at the adjusted EBIT as well, reported EBIT that you have the impact of the metal prices. But it takes time for them to come through. So the spot price is maybe not the best indicator of exactly how the meta prices will work out in our income statement.

I think that's the best answer I can give you. Yeah, fair enough. Fair enough. Okay, thank you. And finally, just on CapEx, I mean, previously you guided full year around 1.2 billion SEK. In the quarter, it was just above some like 200 million. So, of course, below the run rate level. How should one think about the timing of the investments going forward? I mean, will it be more back and loaded for 25 or what's the case there?

Yeah, Q3 is normally when we have our summer stops, when we do quite a lot of capex.

Yeah, and end of the year also have high capex. It seems like suppliers try to be paid before end of the year. So it's normally higher end of the year.

Yeah, Q4 almost. Go back to Q4 in 2024, you'll see that we're at a very high capex level.

All right, perfect. Thank you.

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

Yes, thank you, operator, and hello, Göran, Olof, and Emily. Perhaps first on getting back to the Cantal margin, and you mentioned, Olof, some temporary effects from acquisitions and the NDOX acquisition. Could you remind us what sort of... profitability, is it basically that we're looking at in Andox? Is it, you know, I think you said slightly below Cantalas as an average or perhaps in line. I guess what I'm after here is that, you know, you reported minus 4 million sex impact on EBIT, but obviously you added 2% to sales. So, you know, the dilution on on the margin seems to be fairly substantial. That's one percentage point, something like that. But if you can help us with the Endox margin. And then secondly, on that question also, will those temporary effects linger into Q2 as well? I'll start there, please.

No, I mean, we closed the Endox acquisition. It's part of the medical part of Cantal. We closed that in January. And we also then... accounted for the transaction related costs and in those costs you will find of course all the legal costs and the due diligence costs and so on but also there is also a transfer of a real estate asset transfer tax on a real estate asset in, I think it was in Germany, that has affected the numbers. So that is a one-off thing, you're seeing that. And we lost profitability on the acquisitions, but I think that it's performing according to plan, I would say, the acquisition.

And what we said is that the margin in MDOX is slightly accretive to Cantal. Yeah.

Slightly creative, okay. Okay, yeah, fair enough. But then I guess that, you know, the impact from acquisition or the delta is in the eight million sec, basically. So, I mean, the minus four will not, you know, linger into Q2. And then I guess, as you pointed out, it's not loss making. So it's basically eight million coming in Q2 versus Q1 then.

I don't want to forecast that.

I don't want to forecast that, but you will not see any one-off.

uh costs related to the acquisition in q2 i would say you will see the the plane yeah yeah yeah fair enough fair enough and just from my side you know it would be okay if you put this as one of from my perspective so we get you know the underlying profitability in in control because then it's oh it's actually you know call it much better than the 16.6 uh let's say that it's seven oh 17.3 underlying if we take away those effects but fair enough and then um i guess the question to To Göran and, you know, on the executive management turnover that we have seen, I guess a majority of management is now changed since listing. And, you know, that could, of course, be natural as Alima, you know, is venturing into a new phase. But are you too tough, Göran? Or could you give any comment on this? And also whether, you know, this impacts the pace that you can... You can run the company as a lot of new people are coming in.

I don't think I'm too tough. These are three individual cases that have nothing to do with each other. I'll start with the one on the other side of the table. Olof has decided to retire. Of course, we know how old Olof is, so we have prepared for that for some while without knowing when he would take the decision. So that is one thing that Johanna is leaving. Good for her, bad for us. She's a very competent legal counsel and an appreciated member of the team, but she's moving to another position. Then I made a change in Strip. end of the year claus had been there for about five years uh we were reviewing the strategy and and i just wanted to have sort of a new leadership so so three individual cases that has nothing to do with each other and things like this happens and i'm not worried about the team the team is strong

Good to hear. And then finally, and I guess to you also, Göran, and I know we've been over this before, but on slide nine, as you point out, the margin resilience, I do agree it's actually quite remarkable how the margin has capped up on low volumes. But I guess the question is to you, as the title suggests, you know, how much must the margin resilience improve before you feel, you know, comfortable to use, you know, the balance sheet and the net cash position in another way than letting it yield, you know, 2%? Just to hear your thoughts, you know, how much must Alema, you know, change from history before you feel comfortable?

Well, I understand your question. I am comfortable right now. And I think we are utilizing our strong balance sheet. We have more CapEx than we used to have. And it has to be good cases before we do anything. Then, as we all know, fast swings in the metal price could have an impact. And we need some margin on that. But I think... Overall, the strong balance sheet means that we are prepared to drive growth initiatives even in sort of a weaker market that we have been into. So there's no target where we will start to act differently. This is a strategy and we will continue to drive it as we're doing right now.

Okay, fair enough. Thank you very much.

Thank you. The next question comes from Igor Tubic from Carnegie. Please go ahead.

Thank you, operator, and thank you, the team. I have two questions. First one is, Göran, if you can comment anything around the lead times of OCTG and the umbilicals. If I remember it correctly, it was like six months or umbilicals and 12 months post last report. And the second question is around the project that you have and how they are developing and what should we expect in terms of ramp up in China and Japan this year? Will you reach like 50% of capacity by the year end or how should we think about that? Thank you.

Thanks, Igor. I'll start with the oil and gas business. Last quarter, we said that the backlog in umbilical was roughly two months. I think I said that that is good from one perspective. It means that we are flexible in booking orders, but I don't want it to be much shorter. We have a slightly positive book to build in quarter one, and that is on high revenue pace. We have built backlog a little bit, and there's still a lot of interesting projects coming up. So situation is a little bit improved, but mostly rather stable in umbilicals. OCDG is still a long backlog. We're booking into 2026 as we speak. And regarding the projects, I think the team around me needs to help. I mean, first of all, the tube China will just start ramp up end of the year. Mid-year, we're going to start ramp up the silicon carbide in Perth. The nuclear steam generator tube is at its next fall. uh japan when are when are we starting ramping up that i don't know that by heart actually end of the year so we start ramp up uh uh can't all asia uh japan end of the year so they're coming uh some during the year and some next year

Okay, sorry, I didn't get you on the China and the chemical and petrochemical. Was that ramp up this year?

End of the year, we're going to ramp it up. I'm going to be there, I think, in November for the inauguration. So we'll start ramping up that end of the year.

Okay, great. That's all from me. Thank you. And good luck, Olof, with your retirement. Thank you.

As a reminder, if you wish to ask a question, please press star and one. The next question comes from Hannah Grimberg, Handelsbanken. Please go ahead.

Yeah, hi, Hannah here. So I have two questions, and both of them are a bit regarding markets. So first of all, in oil and gas, I mean, the oil price has come down a bit this year. With the oil prices at this level, do you think that that could have a negative effect on demand? Or do you think that oil prices would need to come down much more and would need to be at these levels for much longer for the outlook in oil and gas to change for you? So that was the first one. And then also in... In industrial heating, last quarter you said that you thought that you might see a recovery at the end of the year. Has anything changed during the quarter for you? Do you think you still see a chance that industrial heating could recover at the end of 2025? Thank you, Hanna.

I'll start with the oil price. I think the The drop we've seen is quite significant. And of course, that creates some kind of uncertainty. But I think I looked at Brent today, it was 65 or 68. From what we know, that is the levels where also the offshore investments are a bit above break-even, I think. Last time we saw really downturn, that was when oil price came down to around 30. So I think the level is still good enough. But of course, it could create some uncertainty. But we have not seen any of our customers act differently due to the last weeks of lower oil price. When it comes to industrial heating, we said for some while that we expect to see a recovery. We haven't seen it. It's quite flattish. uh in some of the sub segments we see some lights as we said now in the call here uh semi-con and glass starts to improve while for instance solar and metal industry is still on pretty weak uh i mean i would say industrial heating is the segment where where we would have expected a recovery faster than we have seen

All right, great. That's great info. Thank you.

We have a follow-up question from Giuliani Adrian, ABG. Please go ahead.

Yes, hi again. I just wanted to do a quick follow-up on the margin resilience profile that I think Victor talked about before. I agree that slide 9 is a great illustration, but it also sort of I would say highlights the limited value of the current margin target of 9%. So you've been clearly above that for quite some time, and it doesn't look likely that you're going back down to those levels. So I guess, I mean, the question becomes how long do you have to outperform that before evaluating whether you should raise it?

Yeah, that's a question I've had before. We have no plans right now to change it. And I can agree with you. We hope to perform better. I think that's all we can say at this moment. We have not changed our financial targets. You should see it through a business cycle. And what is the business cycle? I think we have business cycles. and still i mean we've been around for a little bit more than two and a half years so still uh it's still pretty fresh uh targets uh at some point i guess it will be adjusted but it's not so planned at the moment okay understood uh thank you again we have a follow-up question from acker blom anders please go ahead

Yeah, thank you. Hi again. So I just wanted to follow up on my second question, which a bit poorly phrased perhaps of me. So apologies if that created some confusion. But what I was referring to specifically was if you could give any kind of indication of the magnitude of the support for metal prices coming down to adjusted EBIT, given that it lowers the revenue base. That was kind of the question. So should one interpret it as given that that creates a margin support, then you go for a fairly similar mix in Q2, that the underlying profitability of that mix is worse if one interprets the mix as being somewhat akin to the profitability level. Do you get my question if I phrase it that way?

You mean if the top line, the metal price impact on the top line

helps supports the margin precisely given that i assume that you kind of you you pass on the the potential uh you know um metal price effects to to top line uh give just just give it give like some type of indication of the the magnitude of the the margin potential margin support you know in q2 if metal prices remains you know close to the level that they are currently

I understand the math you're doing right now, but I would say it's more neutral. Okay.

Fair enough. Thank you.

Thank you. Super. With that, thank you, Olof and Göran. And thank you all for listening to the call. We will be roadshowing from tomorrow. Hope to see many of you there. So thank you very much and goodbye.