Bulten AB (publ)

Hello and welcome to Bullton's presentation for the first quarter this year. My name is Ulrika Ulken and I'm the Senior Vice President for Corporate Communication and Investor Relations. Presenting the report today are Bullton's Acting President and CEO Kristina, or Tina, she usually is called, and our CFO Anna Åkerblad. As usual, you will be able to ask questions after the presentation, both on the web as well as in the telephone conference. So I will now hand over to Tina. Welcome, Tina.

Thank you, Ulrika. It is the first time you meet me here, so I take the chance to give you a short introduction. I am a long-timer within AB Volvo, with senior positions here in Gothenburg as well as in Asia. I have and have had several board assignments, whereof Bulten is one since 2020. and lately almost three years as a CEO in a mid-size industrial company. I left SEM in the autumn last year and I was available when Anders decided to leave Bulten. After a permanent CEO is recruited, I will return to the Bulten board. And for the clarity, I am not a candidate for the permanent solution. As you probably are aware, Bulten is a supplier of fastener solutions Our main customer group is light and commercial vehicle OEMs, but automotive suppliers and customers outside of the automotive industry are continuing to grow in their share of our business. We serve customers in three regions, Europe, Asia and North America. It is important to know that we don't supply just hardware. To some major customers, we are a partner for product development support, innovation, procurement and logistics. Bolton's three largest customers are still Jaguar Land Rover, Volvo Cars and Ford. They are and will remain important, but we have a number of new customers with strong growth in our base. And that's something we welcome. Our fifth largest customer is now a non automotive customer. The 2023 full year sales reached more than 5.7 billion SET, which is almost 30% year on year growth. Next slide please. We normally follow the market trends via global data, and this is what we share here. The vehicle production outlook shows basically flat development, both for light and heavy duty vehicles volumes for this year. Applying this forecast to the mix of Bullton customers indicates a market driven growth of just 1.1% in 2024. And this is following a previous year, 2023, with a very strong market growth in those categories. Next slide. So the highlights of this quarter in this year. The most positive thing is the EBIT margin. After three rough quarters with capacity issues, we can now see an improvement. The margin lands at 7.5% compared to 8.4% the same quarter previous years. But it's also worth mentioning that quarter one last year was an unusually strong quarter. The EBIT margin today shows that we are on the right track. The sales levels remain strong even this quarter, which is a positive. The capacity problems that we have had in our European factories have improved a lot the last couple of months. We are in much better situation even though we still have some work to do there are two things this quarter which delayed our capacity improvement work the main one is related to a failed furnace in poland in the beginning of the quarter it was seriously damaged and needs to be replaced and we are very happy that it was no injuries connected to that one a personal injury And we are confident that our insurance will cover us well. Also, we had some delays when installing new equipment in our Swedish manufacturing plant. Altogether, this further delayed recovery to normal production. That said, we are in a much better and more stable situation and assume back to normal situation. The positive thing is that we have learned a lot during this period. like creating flexibility by shifting production between our sites and outsourcing some production of more simple products to suppliers. This has come well in hand with the rollout of the new regional organization that I will tell more about in the next slide. We launched an organizational restructuring last quarter The implementation has continued in a fast pace and the outcome has been successful so far. A major cause for the new organization was to support faster decision-making and clearer responsibilities closer to where the business happened. This has two benefits. Firstly, we can better meet our customers' unique needs and requirements. Secondly, we can become much more effective internally, which will make us more competitive. We also launched the installment of the chief technical officer, and I'm actually amazed on how well this serves us in the interaction between technology, production and sales. I also want to take the opportunity to thank Anders Nyström, the former CEO, who initiated this reorganization before I joined and made my start as the acting CEO very smooth.

Some regional highlights then.

A lot of progress has taken place the last couple of months, and I will give you some examples. In Europe, the new management team has done a very good job in building a plan with prioritized activities to improve the operations. This has been made in close cooperation between manufacturing, sales and support functions. We have already seen some improvements, and I must say that I believe this will make us more agile and competitive going forward. In Asia, we are happy to have a new regional president in place, and I will introduce him a little bit more later. However, having him in place is a very important piece of the puzzle to further develop our business in this region. The Indian JV that we established with two partners in the end of last year is moving ahead according to plan. The construction of the plant is progressing day by day and the machines are on their way. In North America, the team is focusing on how to grow the business organically. especially in the automotive. And finally, Exim, the acquisition that we made last year, has made a good job in evaluating new interesting markets. And I must also say that the collaboration with the Exim team is working very well. And the legacy part of Bulten is learning a lot from the way Exim team as a distributor is running their business. So, next slide. So this is our new president in Asia. His name is Michael Richards, and he started April 1st and is ramping up in full speed. Michael is American, but has lived and worked in Asia, especially in China, for many years. Good understanding of this region. He also has extensive experience from working both in sales and manufacturing. and a broad experience from various businesses and companies like Husqvarna. And the experience of working in Asia for a Western company is invaluable for us. So far, it is very fun to see him onboarding the team here.

And I will hand over to Anna. Thank you, Tina. On page nine, you can see an overview of our quarterly sales the last years, including 12 months rolling sales. Sales volumes increased in the quarter with over 10% compared to the same period last year, and we saw strong sales in all sectors, but especially in the light vehicle sector. Next slide, please. The first quarter delivered an EBIT of 116 million SEK, equal to 7.5% EBIT margin. And the EBIT margin has improved positively compared to previous three quarters. Our strategic objective is still to reach 8% for the full year. Next slide, please. According to the waterfall, you can see the positive growth in rolling 12 months in all customer groups in absolute As a proportion of 12 months sales, other industries outside automotive amounts to 11.6%, which is a slight increase compared to previous period. Our main customer group OEM light vehicles has decreased somewhat percentage wise compared to previous period and automotive suppliers have increased. On this page you can see that our adjusted earnings per share for the first quarter amounted to 3.22 SEK compared to 3.56 SEK last year. The decrease compared to previous period last year is related to interest expenses due to financing of the acquisition. Next slide please. Cash flow from operating activities including changing working capital amounted to 123 million SEK in the first quarter. Cash flow from investing activities amounted to minus 39 million SEK in the quarter. Total cash flow for the quarter amounted to 89 million SEK with a cash position of 442 million SEK at the end of the quarter. Our net debt excluding lease liabilities amounted to minus 777 million SEK for the first quarter, including the acquisition of EXIM compared to first quarter last year. Next slide, please. Our adjusted key indicators for 12 months are impacted by the acquisition and the European capacity constraints during 2023. The adjusted return on capital employed excluding financial lease is at 9.4%. Our adjusted net debt adjusted EBITDA ratio for 12 months is at minus 2.2 and our equity asset ratio excluding financial lease is at 44.7%. Next slide please. This slide you can see some financial guidelines regarding relevant key figures for Bulten. Our guideline for average net working capital in relation to 12-month sales is about 20-25% depending on growth pace and at the end of the quarter we are at the level of 16.5% which is positive. The guideline for capital expenditures as percentage of 12-month sales are 2-3% for maintenance of equipment and additional up to 2% for capacity depending on the market development. And at the end of the first quarter, the rolling 12 months level is at 2.6%. The guideline for depreciation as percentage of 12 months sales without IFRS 16 is 2 to 3%. And at the end of the quarter, we are at 2.1. To summarize, we are well in line with our guidelines. Now back to you, Tina. Thank you, Anna, for the numbers.

Those of you who have followed Bulletin through the last few years are already familiar with our 2024 strategy and targets. The sales target of 5 billion SEK is already over-delivered and our operating margin and ROSE targets are still not met but are for sure reachable with the operational improvement actions that we were mentioning earlier in this presentation. The target stands and the Bulletin management are committed to meet them. You may wonder when we will define new targets since we now actually are in 2024. And we will during my time here do as much as we can of preparation as ever possible for the next strategic period. But to freeze the new targets will take place when there is a new permanent CEO and president in place. Next slide. And finally, a few words on our focus for the upcoming period. Obviously, there are many things going on, but the number one priority that I would like to emphasize is to improve our operating margin, especially within automotive sector in Europe. The automotive industry is still our key business and Europe is still our biggest market. Therefore, we need to work on becoming more profitable in this sector and region. There are a number of things that we actually can do to be more stable on a higher margin. With this, I would like to thank you for my first bulletin quarterly presentation and open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Matt Sliss from Kepler Tievro. Please go ahead.

Hi, thank you and congrats on the good numbers. First, I was thinking a bit about the production issues you mentioned at the beginning of the presentation and Polish hardening furnished that were sort of a problem. You also mentioned some delays there in the Swedish production setup. Could you give some indication how much that affected your quarterly cost?

I am actually not sure. If we talk about the oven in Poland first, we are actually right now trying to collect as much as we can on the costs that we have already taken and what we see ahead of us. So it's actually a bit premature to talk numbers on that one already now. We need to see better how it affected and what is connected to the oven compared to what is connected to the other old capacity issues also. Sorry, but I will actually keep that one without too much guessing on that one. When it comes to the installation of the machine in Hallstahammar, I think, in fact, it's not a huge financial impact. It's more that it has taken managerial capacity. That is the impact of that.

I understand. And going forward, I mean, seasonal impact and so on. I guess last year was a special year, but normally the second quarter is... seasonally strong for some reason I have got that on my mind anyway and should be expected to happen this year as well I mean you seem quite optimistic or confident that you are sort of moving in the right direction there could you give me some guiding or comments there

uh yes uh this is an interesting yes i am quite optimistic and i i i i do believe that we are having real activities that will give an impact so that's why i am optimistic but that said uh if the team here are always telling me that we have we are used to surprises So that's why I might be a bit... Okay. But if I see on the underlying and the performance, I actually am optimistic. And I hope that the number of surprises are smaller and less, simply.

And you also mentioned Exim there and that it sort of have... Well, give you new... new things or ideas how to approach the non-automotive segments. Could you give some... What is the outlook there? What opportunities do you see? How much do you expect to be able to grow business outside with the help of Exim, so to speak?

I guess you're not expecting me to give you a number, but we do see more markets and we do see an expansion also to Europe of the Exim business model. And how much that will be, we will need to come back on it. But it's clear that there are opportunities in growing the distribution on those type of products also that is not the fundamental of the bulletin group from stock.

Thank you. And yes, finally there, well, you have Book to build below one, I guess. But is it also the reason, is it also that you have been somewhat cautious in taking on or not reluctant, but your focus have been on productivity and delivering on the existing backlog and get your growing pains that affected last year in order?

It's clear that the first priority is to get the deliveries up, getting the margins up, and less on the growth or the taking in new.

Okay, great.

Yeah, I guess that was my questions. Thank you. Thank you.

there are no more questions at this time so I hand the conference back to the speakers for written questions from the webcast and closing comments yes thank you at this time we don't have any questions in line so I don't know if there's anyone else who want to ask a question and to Tina and Anna and we wait for a couple of seconds before we say thank you and leave the conference. But we can wait to see if there's anyone else who wants to ask or write a question. I guess not, so by this we say thank you for listening in to our Quarterly 1 presentation for 2024. and hope to see you soon. And if you have any questions, please feel free to reach out to us at any time. Thank you.