AQ Group AB (publ)

Okay, somebody turned off my microphone. Sorry for that. I start again. So, net sales decreased in the first quarter with 1% to 2.2 billion. Operating profit increased by 15% to 223 million and the profit after financial items increased by 20% to 221 million. Profit module before tax EBT was 9.9%, which is a record for EQ and profit after tax was 185 million. And then the cash flow was really good at 244 million and profit per share for the first time was about 10 sec per share. And the board for the AGM that will be held later today has proposed a dividend of 6.66 krona per share and a share split of five to one. So it's a double dividend that is proposed. So it's really good, I think.

And

Hopefully you heard it. But the earnings per share growth for AQ has over the last 10 years been 15%. But if we take this rolling 12 month after Q1, it will actually lower to 14% CAGR. uh it's still really solid uh and if we look at the onion special growth versus first quarter 2023 it was 17 and um compared to the quarter four in 2023 it was 37 so it's um i would say really good improvement and uh In quarter one, we had a net sales of 2.2 billion, as I said, and it is a slight decrease compared to the same quarter last year. We see and there also we had the positive effect of 1% of currency as well. So really a volume decline of 2%, which is not that much, but it's still a decline compared to the increases that we've had previously. We see that capacity and demand are more balanced. We are starting to catch up on our deliveries and also our productivity then becomes higher affecting the margin. And we have a little bit of a decreased order backlog now compared to the same period last year. If you look at organic growth, as I said, it was minus 2%, which is below our target of 10% growth. and we have lost some business in our battery systems factory in bulgaria as i communicated already in quarter four and then we have some lower sales in in certain market segments we can see some decreases in inductors for frequency drives also mechanics for that and components for construction equipment vehicles then the increases are mainly in because we are increasing in several market segments as well and we see increases still in electrification, defense, industry and railway and marine, which is positive. Acquired growth, we have zero still. The acquisition of JITMEC that was announced in quarter one will be within the aq family from quarter two and we expect that it will add about one percent growth in 2024 and we get more to that later on in the presentation we have a lot of prospects in the pipeline as always but we are very picky with what we buy but i hope that we can close some more deals during the year it's our target at least And margin-wise it is our best margin that we have ever had in AQ, earnings before tax. We are happy with that. It is due to we have lower cost for late deliveries and quality non-conformities in the quarter. We have implemented several process improvements to improve our delivery performance and our productivity and also our quality. see big improvements in Finland and China in the quarter and it has been also hard work from our purchasing departments which have a great impact in the quarter where we still have some sites that we can still improve but as I have said previously with AQ you can expect a stable But margin between 6 and 10 percent. And it is very clear that if you look on these quarters that are in the picture, you see that the margin is really in between there. We have now been several quarters, five, where we have been above our target of 8 percent. But in the picture, it's actually more quarters that are below. So we are still fighting for our margins, you can say. even though the margin in this quarter was really good. Inventory value and turnover development, I think it's very steady. And we are seeing a little bit increased inventory in the quarter. We have several projects that are supposed to be delivered out in quarter two. uh yeah i think it looks good even though our target is of the inventory turnover is 3.5 we are 3.1 and i think we will see improvements during the quarter we have a very delicate team that is working on this and we see that we have made improvements before so we will continue with our improvement work and it's really important to for our cash flow but also for the risk of the companies a lot of the balance sheet is in the inventory so we we should work hard with this it's really super important for us And net cash from operating activity is very solid. We usually say that we should be around EBIT and it is really close to EBIT here in the quarter or net cash from operating activities. So we see also that our net debt is actually not a debt anymore. It's that we have more money in the bank than we have debt. So it's really stable and good. but you should know that in quarter two now we plan to pay a dividend of about 122 million SEK and also do the payment for JITMEC of 40 million SEK so then we will be about zero. But this is a really strong balance sheet and I see that we have a lot of dry powder to invest in growth with our current customers but also to buy other companies I mean to acquire them. So that's really good situation to be in, I believe. Quality and delivery precision. We've been looking at the delivery precision and we see that it is getting better and better. It is still very far from our target, but we are happy with the improvement that we are doing. We still have a number of companies that we focus very a lot on that they should get back on track. I am i really believe that we we will have maybe two companies left after q2 that still are struggling but we are working hard to improve all our companies to reach our target of 98 and it is i think super important also for our customer list that we are improving and it is happy to see that it's going in the right direction uh some examples on future growth then uh i want to show you a little bit about uh our uh newly acquired company we we as announced only this week we were approved by the authorities as well so so now we can go ahead and acquire gitmec as planned and then gitmec is is a supplier of big welded and machined components for demanding industrial customers. And when I say big, it's quite big components that they are doing and it is new for EQ. We don't have really a workshop that do these type of big products. It's low volume, high mix. Customers are in electrification, defense industry and agriculture automation. And the customers are in the north of Sweden. JITMEC has very high technical competence and they work extremely closely with the customers R&D to develop this product that they produce. I would say that they have good and well-maintained equipment machines with factories in Robertfors and Örnsköldsvik where Robertfors makes medium-sized parts and Örnsköldsvik makes really big parts. and about 75 employees had a net sales of 130 million with profitability in line with the group and it is a cash out for 40 million at closing for aq and as i said they will be included in our group after q2 and it you can say when when going to this factory this is the type of products you will see that you see on this photo and it is really You really fall in love with the people and the products that they produce, because they are super difficult to make these type of parts. And the people are dedicated and really passionate about what they are doing. You can see also on the customers that there are a lot of customers here that are similar to what the EQ Group have today. Here we add something more and I think together we can come with some financial firepower and invest more in these people up here in the north of Sweden and then we will grow this company a lot. So this is really exciting opportunity for us and we're very happy with this acquisition and they're doing crazy things. You see this yellow part here on the bottom. it is a contact for connecting underwater sea cable and you can imagine how difficult that is that six meter long connection welded part which is for one of the customers and yeah it is really cool cool products that they do and and super nice and and smart people up there dedicated oh it's fun so very happy with this acquisition so our acquisition team have done a lot of good things so Now, I tried to today also to speak a little bit about the electrification. Electrification can be so many things, but some of these things we have shown before. But we on the on the on the top left, we call it Project Korvkiosk or hot dog stand. If you are in the UK because it looks like a hot dog stand. But it is it is a big cabinet for for for inverter for solar. solar power and wind power and it is a new product that we will start to deliver in Q2 and from our factory in Pernik and it's a lot of welding, painting. It is a really cool product and it will go to Germany. In the end the customer is there. On the top right we have a nice battery system or a battery module I would say. that we are now working with several customers to sell. We bought the IP really cheaply for like one million SEK from a Gothenburg based company that went bankrupt and we see a good potential in selling this product to several of our existing customers. So this is really nice and we have met several and it's a big interest in fact so we think that it is really fun. In the middle is also batteries and that is enclosures and batteries for data centers where we have the first order now for those red enclosures there. But we are also offering wire harnesses and copper bus bars to these customers. It's also in Germany. And on the bottom left is also a kind of a battery, it's a rack for a super capacity that we are doing for one of our customers here in Sweden. But they have won their first projects now and we believe that we will start to deliver those racks by the end of the year but it will be a lot of this type of racks so it's really fun and then on the bottom we have a battery for an electrical bike and it is the Bosch electric bike and we are doing the complex parts the end parts there you can see both ends and we have one now three more projects from them from our factory in Hungary and it's plastic injection molding in this case A lot of battery storage in this picture here, but in different forms, so to speak, what we do. If we go to the next slide, we have, and this is an accident actually, but almost all the trains here are red and white. It is funny, but these are projects that are ongoing at the moment where we have a lot of content, both electrical cabinets, drive controls and inductive components. So it's a SGR 250 on the top left. It's a Trax locomotive on the bottom left. It's an Italian train on the bottom right for Hitachi Rail and then it's on the top it is Deutsche Bahn German train where we deliver a lot of sheet metal boxes, electrical cabinets and hopefully also the driver desk.