Bulten AB (publ)

Hello and welcome to today's webcast with Bulten, where CEO Axel Berntson and CEO Anna Åkerblad will present the year-end report for 2024. After the presentation there will be a Q&A, so if you're calling in and want to ask a question please press star 9 on your phone to raise your hand and then star 6 to unmute your microphone. You can also send in questions via the form to the right. And with that said, I hand over the word to you, Axel.

Alright, hello everybody. Thank you all for joining the call today. I will assume that most of you do not know me from a Bulten agenda. I joined the Bulten here on the 22nd of January, so just short of two weeks ago. I'll give you a short introduction of myself before we move over and talk about Bulten and our Q4 and full year results. So before joining Bulten, I ran another listed company called Absalent Aircare Group, listed on First North. And before that I worked for a company called Isap that do welding products, so a lot of consumables for welding and also machinery for that. Way back I went to Chalmers and studied industrial engineering and management, after which I went into consulting and worked a lot with cost down projects, such. As you can see, I decided to invest a little bit in the business, from the start here and have bought a few stock options. And I hope that we together will continue to build a good share price development of the Bulten share over the next few years. If we move over and talk about Bulten then. So I would assume that most of you listening to the call know Bulten much better than I do, but for those of you who do not, I'll give a short introduction to the business. So basically what we do, most of our business is fasteners for the automotive business, but we also provide quite a lot of logistics services. So it's not only parts that we produce ourselves, but we also trade in quite a bit of products. And we also have a couple of other business segments where micro screws is a fairly big one and also seed parts management from companies that we have acquired through as part of Exim and PSM in the past. If you look at the total business, we have a turnover of around 5.8 billion SEC, and grew just a little bit over last year, but just short of a percent. And we have operating margins of around 5.2%, which is also a good improvement over last year, even though it's not in line with the targets that we have as a business. And we'll come back to that later on in the presentation. The largest customers that we have is automotive OEMs. So as a Ford, Jaguar, Land Rover, and Volvo cars. The fourth largest customer that we have is in electronics manufacturing, for example, but still automotive is a very big piece of what we do. Given that the automotive business is still the biggest portion of our business, we tend to look at that as some kind of future outlook for the business. And this is data that we get from a company called Global Data. And what we can see is that 2024 is projected to have been a fairly slow year for the automotive industry, where the passenger vehicles or light vehicles shrunk by 0.4%, while heavy commercial vehicles shrunk by about 5% over the prior year. And I think our development is fairly much in line with this. We follow the market more or less on the big picture. And it's good to know then that we are quite heavily geared towards light vehicles within the bulletin. If we take a look at the full year summary, as mentioned, we did about 5.8 billion, so a slight growth over the year before. And I think overall, given that the market is really fluctuating, I think to have some kind of growth this year when you're a primarily European supplier, I think that's a pretty decent outcome as such. And we were also facing quite a lot of issues around an explosion of a furnace down in Poland. I think the team here did a really good job to manage that and make sure we were able to keep the volumes flowing out of the factories. And obviously, we are also very happy that nobody got injured in this accident, and we're happy with that. We could see that our margins improved from about 4% to a bit north of 5%, also stepping in the right direction, but clearly not good enough from where we want to be as a business. We have expanded our new ventures, so Exum, for example, and gone into new markets with them. And we are opening up the old PSM business going further out into the world with that, and have set up a JV in Vietnam. And we are also expanding a JV in India with that business. Worth mentioning is that the tension can business, which is kind of an early stage investment that we did for a new technology a couple of years ago, now has its first orders. We're happy for that, even though it's not something that has a significant impact on our full year numbers. We're also quite proud of the sustainability work that we do as a business. I think this is an area where we've been trying to lead for quite a few years. And I think this year we got a very nice award from Ecovaudis for the Platinum Award, which is given to the top 1% of businesses when it comes to sustainability. So very well done from the team in this regard. So to sum up Q4, I think the most exciting part is that we established these micro screw and businesses in Vietnam and in India, or expanded India, I should say. And that the results were below what we expected or what was expected on us, mainly due to extra costs that we have of about 55 million. Mainly this is related to a closure of a logistics center in Poland and starts up of these new businesses in Asia, so in India and Vietnam, and major maintenance work that we had to do here in Sweden. With that, I pass the baton over to Anna, our CFO, to give you some more details.

Thank you, Axel. Here you can see an overview of our quarterly sales the last years, including 12 months rolling sales. And the sales volumes for Q4 was down 6% versus same quarter last year. We had overall stable sales volumes for the full year in a more volatile market, and we are still in line with previous year's sales. According to the waterfall on the left side, you can see sales rolling 12 months, and there is a positive growth in other industries and a slight decrease in the customer groups. On the right side, you can see that as a proportion of -to-date sales as of December, sales to other industries outside automotive amounts to 13%, which is an increase compared to last year. Our main customer group, OEM Light Vehicles, amounts to 62% of total sales and is in line with last year. The fourth quarter delivered an EBIT of 20 million SEK equal to .4% EBIT margin. This is not a satisfactory level, as Axel already mentioned, and we had the extra cost, for example, related to startup in India and Vietnam, as well as closing down a warehouse facility in Poland. However, the full year EBIT improved over last year and ended at 5.4%. And our target remains at 8%. Earnings per share for the quarter was at around zero following the unsatisfactory result, but looking at the full year, our earnings per share improved versus last year. We reached 6.45 SEK compared to 4.89 last year. Cash flow for the fourth quarter is positive compared to same period last year, and cash position is in line with same period last year. Cash flow for the full year improved at minus 8 million SEK versus minus 103 last year. Net depth, excluding lease liabilities, is almost about the same level this year compared to last year. Our key indicators for 12 months have all improved versus last year. Return on capital employed, including financial lease, is at 9.2%. Our adjusted net depth and adjusted EBIT-DEA ratio is at minus 2.1 at the end of the year, and our equity assets ratio, excluding financial lease, is at 44.9%. Our guideline for average net working capital in relation to 12-month sales is about -25% depending on the growth pace. At the end of the quarter, our rolling 12 months are at a level of 17.1%, which is a good level, and in line with last year. CAPEX as percentage of sales is slightly above the guidelines, and this is related to catch-up of previous years where CAPEX were at a low level. Depreciation as percentage of sales is in line with our guidelines. And now back to you Axel.

All right, so talking about strategy, I mean we have had strategic targets and direction for the business that ran up to 2024, and obviously one of the first things that I will do here together with the team is to figure out where we go for the next five-year period. So we'll ask for some time and some patience for us to work that through and come back with new targets and a new direction for the business, or if any. If we take a follow-up and look at how we execute it on the strategy that we have had, the first part of that was to get a stronger position, and with that we meant that we wanted to expand our FSP concept, we wanted to get closer to customers, and take a step forward in innovation and sustainability. And I think we have succeeded fairly well in that. We have established businesses in India and Vietnam, as we spoke about. We have acquired a presence in Taiwan, and we have come in much stronger to the United States as well. So we are getting closer to the customers where they are, and I think that's a very important step for us. We have improved in our sustainability and moved forward quite a bit on those metrics. That's a good step forward during this period. If we look at growth, we had set the target to reach five billion by the end of 2024, and we are closer to six. So I would say that we have overachieved on that target. If you look at the third and fourth targets here, they are fairly connected. So we targeted to get to an operating margin of about above 8%, which then should lead to a rose above 15%. And we have failed on the operating margin targets. We landed at 5.2, as we have mentioned previously, which is way below where we expected it to be. And going forward, it's needed to say that that would be a key part of the next five years period to figure out how do we get substantially more profitable than what we are today. But we will come back to the plan behind that and how we move that forward. If we look at our 2025, obviously profit, as you can see at the end of this list, is the big focus. We need to make more money. It's as simple as that. And I think every shareholder will agree with that. That is a very important area of this business. That is the heart of what we do. And then obviously it is to get a plan for how to do that and expand on some of the really attractive opportunities that then should lead to part of this profit, which is the micro screw business in India, Vietnam, as an example, we have a few other things that we're working on as well. And there are good opportunities to improve here, but we need to make it happen and deliver a better profit overall. So now we will open up for questions. I know there have been a few sent in in writing and probably a few in by phone as well. So let's open up for questions.

Thank you so much for the presentation here. And as you mentioned, you can call in and ask your questions. If you're calling in and want to ask questions, please press star nine on your phone to raise your hand and then star six to unmute your microphone when you're handed the word. And we have a first questionnaire here and it's Mats Liz from Kevle Chevereya. You have the word.

Yeah. Okay. Hey, can you hear me? Yes. Yeah, good. Yeah. Coming back to the quarter and the one of the best you have on 55, one regarding the police warehouse and the others regarding Asia and startup costs, I guess. Could you say something about the mixture and maybe if we expect to see a further one of there in the 2025 regarding these issues?

Well, we have not made public any details or breakdown of that. And we that means we will not do that here either. Obviously, they can be continued with some smaller startup costs if we expand businesses in new countries. It's nothing that we are willing to disclose today, however. So I will give that boring answer here. Sorry.

Yeah. And do you expect to see any payback, I guess, or cost decreases due to these measures or is it also something that you don't want to?

We will not quantify anything that is not in the report. But obviously, the exiting the warehouse will give a saving. It is a custom measure that we do because we have been able to use our footprint in a more efficient way. And therefore, we do not need that premises anymore. So there will be some saving related to that. And when it comes to opening up new businesses, the businesses that we are opening up, we project them to have a reasonably high profit level if we are successful in expanding those customer accounts that we are following into those countries. So obviously, we have an ambition there to improve profit, but yet to be seen.

Looking at the fourth quarter numbers again, cash flow is pretty good. And it seems that you have been able to reduce inventory or working capital. Does that mean that you have some ground production at the lower level or tempo and thereby having had some under absorption of fixed costs?

No, we have not seen any effects related to that. This is not a volume driven change. Even though when you speak about working capital, there are some of the things that naturally move up and down. I mean, you got your receivables and payables and there's always a timing issue related to those. It's a natural variation. But there's nothing here that is related to a volume change in practice.

Okay, thank you. And well, one question here regarding the trade war or tariffs coming up. Could you say something about how you prepare for that or if you expect to see any impact or is it more a white and sea game currently?

If you look at our direct exposure, obviously when there's something like this comes up, it's something that we speak about fairly immediately. And our direct exposure is fairly limited to this. I think it's the indirect effects that are more difficult to quantify and see. So for example, then how are our largest customers affected by this in the end? Meaning how much volume will they pull through which factory and so on? And that we have not seen and we have not had any indication of any changes from our customers yet to my knowledge.

Okay, great. Thank you.

Thank you so much for the questions. We will continue now with some questions that have been sent to us. The first one is why didn't you communicate the additional costs in advance?

Anna here. Yeah, we normally only communicate when it's a big structural change like this. So we don't communicate these kind of things.

Thank you. Your peers, Bozard and Bufab are valued at P-Ratios between 25 and 40. What do you think is needed for Bulten to reach such valuations? Just diversification?

I think there are two parts of that question or the answer to that question. I think the first one is the risk profile. In general, automotive oriented suppliers or tiers are valued lower, especially in Europe. I think that's something you see if you go and value them all across. So I think we need the diversification for that to change or a major change to European car manufacturing, which is less likely. So diversification will be one part and the other one, we need to make a lot more money. Simply, we need a much higher profit profile of this business to justify those type of valuations, which is why we have focus on profit as one of the absolute main priorities going forward.

Thank you. Could you please elaborate on the additional cost of 55 million or those costs one of and not recurring in 2025?

Yeah, these are not recurring as such in 2025. They are related to the fourth quarter.

Thank you. Is the joint venture in India in production yet or is it still in the upstart phase?

Well, it's about definition. I'm not sure if we have produced the first part yet, but it's just about to start the production of the first pieces, but it will take some time until we have proper volume in that factory.

Thank you. How big is the first Tenision cam order? What do you think about the rest and what do you think about the rest of 2025?

It's a small one in relation to numbers, but we see, yeah, we are. Let's see what comes more, but we think that there is a good speed in this business.

I think this is one of the things that is quite similar to many other when it comes to new technology to market. You can speak to some customers and the industry is huge. They want to buy hundreds of systems of this, but then it takes years to implement it. So it's really difficult to judge the pace of growth that we will get from this type of technology. I think the only thing we can really see is that there's a proper interest in the market for it. I think that's where we can have to leave that one,

I believe. Thank you. What target would your percentage of non-automotive business be, say from 13 to 25 percent over a period of next few years?

We don't have a target of that and I think this is something that our strategy process will have to show. So we need to come back, but if we connect it to the question that we had before about valuation, if we want to have a valuation move for the business because we have a lower risk profile, I think the shift needs to be much larger than 13 to 25.

Thank you. Are you still looking for acquisitions in the US? You previously communicated that current scale is not sufficient to achieve good profitability.

I think in general we are open to acquisitions. I think we need to understand also that we have a financial profile that gives a certain space for acquisitions. If you look at the debt levels that we have and how much cash we have, so I think it is more we need to find the right opportunity to buy so that we can afford it without taking on too much risk for the business. So let's see what it is. Obviously, the US is one of the top priorities. We want the bigger market in the US, but there are also other areas that are quite interesting when it comes to them diversifying the business. So we need to prioritize where we spend our money.

Thank you. Moving on to the last question here, can you also give some information about major maintenance and startup costs in Asia?

Okay, so if you speak about the startup cost in Asia, so when you set up a new company, let's say what we do in India, there's a new factory being built and you put new equipment in, so there are startup costs related to that and it pulls quite a lot of cost to get that going. And that's what we see in this quarter as well, that we have realized some of that cost. When it comes to the maintenance, I don't have any more details to give you at this point in time. It's more as a larger maintenance work that has been done that we don't normally do and it hit this quarter.

Thank you so much for answering all our questions here. And that was all the questions we had. So I will now hand over the word to you, Axel, for some closing remarks.

I think a couple of things. It's really nice to be here. I've been looking forward to this day for quite some time and I'm super excited to get going with the team working on the built-in 2.0 strategy. So let's continue this discussion and come back next quarter with hopefully some nice points to show where we're going.