Bulten AB (publ)

Hello and welcome to Bulletin's presentation for the third quarter this year. My name is Elieke Ulgren and I am the FTP for Corporate Communications and Investor Relations here at Bulletin. Presenting the report are Bulletin's Acting President and CEO, Kristina Hallin, 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 Kristina or Tina. Thank

you Ulrika and welcome everyone. For you who possibly are new to Bulletin, I will give a short description of our business. We are a supplier of fastener solutions. Our main customer group is light and heavy vehicle OEMs. But the automotive suppliers and customers outside automotive industry are continuing to grow their share of our business. Examples of customers outside automotive are in consumer electronics segment. We serve customers in three regions, Europe, Asia and North America. We don't just supply hardware or fasteners. To many of our customers we are a partner for procurement, logistics, product development and innovation. Our aim is to join early in our customer development phases and be a valuable partner. Bulletin's three largest customers are Jaguar, Land Rover, Volvo Cars and Ford. But worth to notice is that our fifth large customer is now automotive. And all the numbers in the slides here are for the full year of 2023. Let's look at the market trends. We use global data as our source and following that over time. For the first time in many quarters we see a small drop in the vehicle production. The vehicle production outlook shows negative development for both light and heavy vehicles. Applying this forecast to the bulletin mix of customers indicates a forecasted market driven drop of minus one percent for the rest of 2024. However, we come from a couple of years with very strong market growth in the automotive sector. And at this stage we are not too concerned. We see slight settling in the market but not a dramatic drop. Then let me give you a short update on the third quarter. And as I just stated we can see a slight drop in the sales to the automotive OEMs. But of course this is the million dollar question right now in automotive business in Europe. And we are following this with interest. The good thing for our business is that we are less depending on whether it is an electric or a combustion engine vehicle that is sold. And that is of course impacting the trend setting here also. The positive news is that we have improved our operating result. Even if it isn't at the level that we want to be it is an improvement. And particularly as the third quarter often is a weak quarter due to the summer holiday. The biggest reason to the improvement is the work being done in our factories and regions with the aim to create a more flexible and more stable operation at the same time. And I'm very grateful for the hard work even though the work is far from over. This is a continuous improvement work that will continue to go on. That said we still keep a strict cost control especially to be prepared if production volumes goes down. This quarter we have introduced a reduction in working hours in a couple of our factories. And we have since last quarter a higher increase in terms of new roles especially within support functions. We have also started to review some of our non-profit businesses and are also ready to terminate accounts when necessary. We can no longer afford to have business with negative contribution as we need to improve our total EBIT mark. So finally a highlight from this quarter. This summer we announced the new president and CEO of Bullton. I'm very happy that Axel Bansson will take on this role at the latest in January 2025. He has a solid experience from working in a global environment with knowledge in both manufacturing and sales. Finally he also has experience from segments outside of automotive which is a key for Bullton in order to grow in new customer groups. Altogether I believe he has what it takes to develop Bullton into a great future. And I will take region by region and as you might remember we set a new regional organization in the early this year. And let's start with Europe then which is our biggest region in terms of business also. The work to find activities to improve operations has continued. We believe the operations are at the more stable level now coming from a quite intense year, year and a half before. And this is a never ending job to be balanced to balancing the delivery precision with inventory levels with the cost with flexibility. And obviously we are striving for excellence in this field. As I said the volumes have started to drop however this gives the region a chance to find new customers and develop new product groups that also can give higher margins. And another parameter for us to balance is what we make in-house versus what we trade. Finally a big focus area for Europe as for all regions has been and still is safety. Safety in our plans and all over is a priority and I will not be satisfied until our accident levels drops dramatically. Asia. We see a slight decline in sales also in Asia even though this level is still very strong. Sectors that are growing are consumer electronics and electric vehicles. Here we see big potential to increase sales and also to improve margins. The work with setting up the new micro screw plant in India is continuing. Hopefully we will see production there in the beginning of next year. I also want to mention the improved quality levels from our biggest plant in China is essential to gain trust by customers. And we see a really nice recovery trend during this year. A word about North America. Our aim is still to grow in this market. We have lately had difficulties with increasing our production due to our existing automotive customers there. This is mainly due to the fact that some of our automotive customers in the US are not calling off according to the production plans that we have received. And as a result of this the team is now investigating and approaching new businesses opportunities inside and outside of automotive. And then we have Exim. That is not the region but it's the standalone distributing business that we have. And there are some examples of activities in the slides here. But I would say that this year is a year of consolidation under the new management of Exim. While expanding the business into new markets and segments, internal processes are redefined for productivity and safeguard profit margins. And it is truly amazing to see the energy in this team. I also want to say something about the innovation work. Due to lower production volumes we have a great opportunity to speed up our innovation and technology work. On the product development side we have a few examples like self-locking fasteners with an integrated patch or a self-sealing fastener with an integrated o-ring. Or a low weight where we can save weight up to about 30 percent. And on the technology development side where we are in the early phases and we strive to increase competence in unexplored fields. We now start to test Allui which is based on the same methodology as the Bufui meaning we are skipping the heat treatment phase. And it's really exciting to start being able to start to test that. Our vision is to be in the forefront of sustainability and innovation. We are doing a good job but now we have the chance to do even more since we can try more things in our production facilities due to lower demand. That said I will hand

over to Anna. Thank you Tina. On page 11 you can see an overview of our quarterly sales the last years including 12 months rolling sales. Sales volumes for the third quarter decreased with 3.3 percent compared to same period last year and amounted to ,000,000 SEK. We saw lower demand in the automotive sector. Next slide please. At the third quarter the third quarter delivered an EBIT of ,000,000 SEK equal to 6.8 percent EBIT margin. The EBIT margin has improved compared to both quarter three last year as well as quarter two this year. The EBIT is however positively impacted by one time effects of approximately ,000,000 SEK. The effect is mainly related to insurance compensation for machine equipment in Poland. And this is a timing effect where we have received revenue in September but costs will be taken as depreciation over the lifetime of the machine which is approximately 30 years. So the underlying EBIT run rate is therefore 5.3 percent. Next slide please. According to the waterfall you can see that there is an increase in all customer groups except OEM light vehicles on a rolling 12 months period. The decrease in OEM light vehicles is however coming from high levels. Next slide please. As a proportion of 12 months sales other industries outside automotive amounts to 13 percent which is an increase compared to previous period. Automotive suppliers have also increased compared to previous period. Our main customer group is still OEM light vehicles but has decreased percentage wise compared to previous period. Next slide please. Here you can see that our adjusted earnings per share for the third quarter amounted to 1.56 SEK compared to minus 1.49 SEK last year. Rolling 12 months has increased compared to last year. Next slide please. The cash flow for the period is negative compared to same period last year as well as the cash position. Inventory levels are higher due to both customers not taking out their orders as well as bigger manufacturing batches in production to create stability and flexibility. However total networking capital in relation to sales is still at a good level of 18.4 percent. Next depth excluding lease liabilities is at about the same level this year compared to last year. Next slide please. Our adjusted key indicators for 12 months are in line with last year's numbers. The adjusted return on capital employed excluding financial lease is at close to 11 percent. Our adjusted net depth adjusted EBITDA ratio for 12 months is at minus 2.2 and our equity assets ratio excluding financial lease is at 44 percent. Next slide please. Our guideline for average networking capital in relation to 12 month sales is about 20 to 25 percent depending on growth pace. And at the end of the quarter our rolling 12 months are at a level of 18.4 percent which is a good level. Both capex and depreciation as percentage of sales are in line with our guidelines. And now back to you Tina. Thank

you Anna. And then the focus for the upcoming period and no surprises here. We have obviously a lot of things going on but the number one priority is still to improve our profitability. Especially the one from automotive industry in Europe. Since this is still our key customer group and still our biggest market. There are a number of things we actually can do to be stable on a higher margin not only when it comes to improve our own operation but also in commercial aspects. With a reduced demand we have advantages. We can spend more time on customers and customer groups that over time can be more attractive and give us better margins. We can also identify and exit contracts that aren't profitable. Also as I stated earlier it gives us an opportunity to focus more on innovation which is key for us as we want to be a strong partner to our customers in the future. Before I open up for questions I would also like to thank everyone for a good collaboration during my time as an interim president and CEO at Bulten. I will stay for some more time but that next quarter Axel Banthorn will take you through the presentations. With this I would like to thank you for listening and open up for questions.

The next question comes from Mats Liss from Kepler Chuvriaks. Please go ahead.

Hi, thank you for taking my question. I just had some, well, I was interested in hearing somewhat more about how you see the finish of the year. I guess the third quarter is normally a seasonally slow quarter and now you're up and running in September, October and it seems that, well, you mentioned that markets are pretty stable. Should we expect, I mean the question is probably should we expect the normal seasonal pattern that, I mean Q4 is maybe not the strongest quarter of the year but it's sequentially normally somewhat patterned.

I think that sales wise we probably foresee somewhat lower also in Q4. I'm not saying it's huge, it's low single digit lower I would guess or we are anticipating. Then it's all a question of how much we are able to get out and really get sold during the quarter. You

mean lower sales compared to Q4, 23, yeah. Okay. Are you still sort of suffering somewhat from too high demand? I mean you mentioned try to get out as much as possible. Do you have sort of a backlog that's still not, are you a bit behind?

No, the backlog is really shrinking. We have some backlog but you always have some backlog so it's not really the question. I think it's more a making sure that our customers actually are taking what they are asking us to produce.

Regarding sort of the productivity and efficiency in your operation, are you still sort of, are there any low hanging fruits to pick there to improve things or are you sort of as efficient as? No,

no, I still think we have, maybe not as low as they were before but they are still in the mid heights of things to pick there. So yes, we still have things to do there. Or in reach if I put it like that. So it's maybe not the lowest anymore but it's in reach.

Yeah. And then again you mentioned in the report or somewhere that the 8% margin target that was sort of announced several years ago is probably not within reach for this year. But it still sounds as if it's not too far out to be reached.

No, and I think it is. It's a reasonable target and I will obviously leave for the Axel and the new team and the new set up to actually propose and have a decision in the board on new strategic targets as it moves along into the next year. But I think the 8% is not too far off as a target.

Okay, great. Thank you and congrats on a good set of numbers.

Thank you.

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

We have two questions on the web here. I will read them and Anna and Tina you can answer. 29 million SEC in other operating income in Q2 and now 49 million SEC in this quarter. Could you explain this as well as to give us an idea on how we should think about it going forward? Will it be somewhat recurring? Does it drive cost of sales? I

can answer on that one. The other operating income is mainly related to insurance and the positive net effect is showing there in the quarter of course as we already mentioned with the 20 million SEC.

So

we will have further insurance claims coming in as revenue and then we have the gross accounting. So the costs are in other lines in the P&L. So the net effect is evening out going forward. So I would say that the big effect that we have this quarter is a bit unlikely.

Okay and we have another question here. I will try to read it. How are you seeing the development in between in-house and outsourcing production that you mentioned and how much is this possibly affected margin development going forward? Are we talking about 1 to 1.5 percentage points or is this more about fine tuning?

I think it's a tricky question. There are quite a few elements connected to this in and outsourcing because we have customers and the approval of where we produce etc. So it's more to it than just to calculate in and outsourcing a bit margins on that or impact on that. So I will actually not give a number of that as we sit here but there is at least an opportunity for us to revisit and to see which are the products that we can make in-house or if we have more capacity and take back home rather than in-house. Rather than to let it be outsourced. But I will avoid making an assumption or sitting here today.

And no more questions on the web. I don't know if there are any other questions in the call. It doesn't seem like it so I will hand over to Tina for some

closing comments.

Thank

you and thank you for listening. It's been an exciting period of being part of this side of the bulletin business. I hope to see you somewhere else in another context somewhere. Thank you. Have a good day. Thank you. Bye bye.