Bulten AB (publ)

Hello and welcome to today's presentation with Bolten. With us presenting today we have the president and CEO Axel Bernsson and CFO Hanna Åkeblad. If you're calling in and would like to ask a question please press star 9 to raise your hand and star 6 mute yourself when you get the word. You can also use the form located to the right. And with that said please go ahead with your presentation.

Thank you and welcome to this quite special quarter for Bultan. Let's move to the first page. All right, so we have a short agenda for you today. We will go through the key items in our Q3 report and then Anna will give you some financial updates and I will give you a few notes on what we look at going forward. If we summarize the Q3 report, we have had a quite big impact on Bulten from a cyber attack at one of our customers, which has had a really negative impact on our sales and consequently also on our profit as a group. That is a big one on the downside. On the upside, we have done quite a lot of work on a new organization, which we have launched. And obviously we haven't finalized it just as people are moving in and out of the group during this period. But the structure is finalized and we are now implementing it. It has been a strange quarter given all the volume losses that we have had with the big customer. But at the same time, we have actually won a lot of new business. And we highlight a few of them in the Q3 report, and I will come back to that in a while. But it's also nice to see that there is volume out there and we are winning new business for the future. We are also accelerating our shift, both in the verticals that we serve and in the products mix of what we sell. So I'm also quite happy with that. Strategically, we're moving forward in a good way, but obviously the result itself is not satisfactory. If we look at this report and talk about this quite large business wins that we have had. So we have won a new business in the automotive sector where we will get the opportunity to consolidate all the suppliers into a new car factory in Europe. And this means an annual volume between 200 and 300 million SEC per year once it is ramped up. We also see quite a lot of opportunities as new car models will be built in this plant to add volumes to this business. So we're quite excited about the opportunity here. And it's also a business with quite a lot of value add to it, meaning that we do a lot of services for this customer as part of this deal, which is then something that we like for the direction going forward of the business. We have one another nice business, which will have an annual sales of around 100 million SEC of nice profitable business. And this is to a new smartphone series to one of our customers. And this is done from micro screw applications. So basically, if you look at whatever cell phone you have that is held together, but really, really tiny little screws that are so small that you can hardly see them. And we are very good at manufacturing those in our Asian facilities. And we're quite proud to win this deal. We have also won a third business here, which is with a really huge global manufacturer of electrical components. And we will then supply as a consolidator of C-parts, three new factories for them. So we're quite happy for that. We're also discussing follow-up deals in other countries. And this is a type of business that we keep expanding and we look at strategically for the future as something important for Bullton. If we look at the type of businesses that we have, so basically we have three different businesses today. We have a contract manufacturing business where a big portion of the products go to automotive OEMs. And then we have a niche manufacturing business like this, the micro screw business I just talked about, and our C-parts distribution business. And when we analyze the future, it's quite clear to us that we will give a better return to our shareholders by investing in niche manufacturing and seed parts distribution. So we will focus more on that for the future and less on contract manufacturing business. And we are then also running a quite large project where we are analyzing how we could consolidate our factory footprint, where we are then running this contract manufacturing business. and that is also progressing well and we will come back to the market with more news on that once the project is concluded. So over to Anna.

Thank you, Axel. And here is an overview of our quarterly sales the last years, including 12 months rolling sales. And the sales volumes for the third quarter was down 22% versus the same quarter last year. And main effects are related to the cyber attack at one of the biggest customers and also to exchange rates. And when we look at as a proportion of rolling 12-month sales, our industry's outside automotive amounts to over 15%. And this is an increase with 5% over the last three years. Our main customer group, OEM Life Vehicles, amounts to 60% of total sales and has decreased over the last three years with 5%. The shift towards other industries is important for us and we aim to accelerate this journey. The third quarter delivered an adjusted EBIT of 16 million SEK, equal to 1.5% EBIT margin. The quarter was heavily affected by the cyber attack at one of our biggest customers. And we have worked with efficiency in our operations throughout this year. And to still show black numbers in this disruptive quarter is a proof that the efficiency measures are having effect. Our adjusted key indicators for rolling 12 months are affected by the customer cyber attack. And we judge this effect that to be more shorter and that we will be back in 2026. Adjusted net depth in relation to adjusted EBITDA is in line with last year at 2.3. And now back to you, Axel.

All right. So to summarize, I mean, we mentioned quite a few times today already in this short call that we have had a cyber attack at one of our customers. And as we write in the report, we're talking about in the magnitude of about 200 million lost sales. And obviously, we are a fairly volume sensitive business, even though we have worked on our flexibility and we can withstand quite a lot. Overall, we will be impacted when this kind of massive disruption happens at a big customer like this. So, of course, that is probably the key topic of the quarter, even though we have a lot of interesting things going on in the business today. Mentioned in the beginning, the highlight of a new organizational structure. And we have, as part of this, reduced the workforce with about 10% globally. So a bit more than 200 people in here. And obviously not all the employees here and colleagues have left the business. Some of them are still in the business, but will be phased out over time as we implement the new organization. But we are happy that this important step in decentralizing our business, in moving more focus to driving profitability and driving an entrepreneurial type of culture where we chase new business and new verticals with a higher intensity than before, that that work is progressing. So we're happy with that. And we can see that already. I think we are winning more business now than we have done in a long time. And it's all business basically, or a lot of it has to do with business, either where we have more value-added services or where there are new verticals in a built-in context and with the micro screws and different types of business in electronics manufacturing and medical devices and so on. So quite happy for that. And we will continue to invest in this business, even though overall we are challenged at the moment, short term, as Anna said, in Q3 and Q4 until we are back to more normal volumes here. I think it also, we have been talking for a while at Bulletin that we will make this shift to other segments and I think it's nice to see that now we actually walk the talk and we will continue to drive this shift and we will drive it with intensity going forward. Also worth to note is that our footprint evaluation is progressing really well and there are good opportunities for Bulletin to improve our overall business. by reducing the factory footprint either by consolidation or divestiture. And the solution is basically to be seen and we will come back once that is concluded. But happy with the progress. The team is doing a great work and we are moving along the plan. And with that, we conclude and leave over to questions.

Thank you very much for the presentation. And yes, let's open up the Q&A section here. If you're calling in, please press star nine to raise your hand and star six on mute yourself when you get the word. And we have the first caller, Mats Lis from Kepler Chevro. Please go ahead. You have the word.

Yeah, hi. Thank you for taking my questions. First, looking at the... Well... the customer affected by this attack and you mentioned that they are sort of gradually ramping up now and I just wondered how you see that ramp up going you expect them to be up and running mid quarter and then again I guess you won't need to supply them with so much of your products, do they have already inventories to cover the ramp up, I mean?

So, I mean, this is in, hi Mats, by the way, nice talking to you. Hi. We, if you look at this attack, I'm quite impressed by the customer, I would say. They are doing a really good job with all this, getting things together, getting volumes up, get a production map up in their factory footprint. So I think they're doing a really good job with that so far. There is inventory in the chains, but in this type of industry, the inventory is fairly small that they're sitting on, meaning that the sequencing of production will move on very quickly and they will run out of their stock fairly fast. But obviously, there's also inventory on our side, sitting in our factories and so on. It will take a little bit of time until we have the right absorption in the factories. So there will still be a hit to our cost even in the beginning when the volumes are more normal. So what we foresee, kind of like what we wrote in the report, is that the impact will be similar in Q4 from this attack. And from 2026 onwards, it should actually be an upside as they keep catching up on their backlog. So obviously, they have a lot of unhappy customers that are not getting their products at the moment, and they will want to supply that as fast as possible.

Okay, thank you.

I mean, if they ramp up quicker, we can deliver more. But it could also be disruption and things happening along the way that we don't know. There are a lot of suppliers involved in this. And obviously, it's enough with one big supplier not being able to deliver. And then there would be a halt in the production. So it's a sensitive system, even though I'm super impressed by how they handle it and what they're doing at the moment. Okay, great.

And what about other customers as such? Could you give some sort of flavor about performance in general for the light vehicles and also maybe heavy vehicles?

I would say that the light and heavy vehicles, I think the trend before this is quite similar to what it's been earlier in the year. The general market is down a little bit on that. And if you look at the bigger customers that we have, I mean, it's public that we have Scania and Volvo trucks and Volvo cars and so on and JLR in this. Some of them are seeing challenges on volumes, and that is kind of what we've seen early in the year. And I think that remains the same, more or less, for that. If you look at other verticals, we're doing really well. Anything else but automotive, we have a good volume development. We're winning a lot of business, and that is progressing better, so to say.

In these new verticals, do you have sort of extra costs or sort of SG&A costs and so on to sort of, well, increase the exposure and then create a new network of selling to new customers, I mean? Or is it sort of up and running and then you don't need, well, any extra costs to...

I mean, that would be phased. If you look at the demand that we have right now for cost for capturing that business, I think I'm happy with the organization that we have in the overall kind of shift of staff that we have seen. So we have made some reduction, but we also added additions in the places where it makes a lot of sense for us to go and hunt more business. And that is already taken and those costs are in the business. But obviously, as we scale up, we need to add some costs along the way. But I do not expect that to be extraordinary. And I do not expect it to be kind of outside the normal ratio here of SG&A to sales or something like that.

Great. Well, looking at the working capital, it was quite helpful in the quarter. You released a lot. Could you give some more indications of how you managed to do that?

But most of this is actually timing issue, I would say. So I would say that the underlying cash flow gets impacted in the same way as the rest of the business. So I think we were lucky with the timing here at the end of the quarter, more than anything, to be honest.

It's not because you have sort of reduced reduction and so on. It's more.

Not really. I mean, we don't publish the details behind it, so I don't want to go into that, but it's more of a timing issue, honestly, Mats. Okay.

Then again, you also have the savings efficiency measures to make your company more decentralized and so on. It's quite a substantial amount of money that you expect to save. When will the sort of

hitting you or benefit you the 100 million I mean and that's been gradual I mean the first people left the business back in Q2 here or maybe even end of Q1 and it's been gradually happening I think it will be ending at the mid there's a third quarter 2026 the last person that's on the list will leave so it will be gradually during this period some is already in the boat some will come

And you expect to be able to keep up the current business and your target of growing into the new verticals with existing manpower?

Yeah, from what we can see right now, we have the right organization in place to do that. Yes.

Okay, great. And then finally, just about the... Well, you say you meet the covenants there, but... Is there a sufficient headroom now when things are continuing to be quite slow here in the fourth quarter? I mean, is that the covenants that you are exposed to or is it more other covenants that you are exposed to?

But that is the key one, and we are managing that tightly. I mean, obviously, depending on where the next quarter ends, that will affect this covenant up and down, depending on how well the ramp-up works and how much cash we get into the business and so on. But we are monitoring day by day to make sure we stay on the right side here.

Okay. Okay, great. Thanks a lot.

Thank you much. Let's move on to the other questions here. Is it correct to say that the cyber attack on your customer resulted in a sales loss of approximately 200 million SEC, meaning that a weaker market environment account for around 100 million SEC of the sales decline?

It depends on how you look at it and what quarters we are comparing and so on. But I would say in general, yes, there is an impact of a weaker market. And like we've seen in the earlier quarter and then on top of that, we have the hit here.

And we also had the currency effect on the sales.

Yeah, which is about 4%. Yes, correct.

Thank you for that answer. EBIT fell from 91 million SEC to 60 million SEC. How much of this decline would you attribute to the impacted customer versus weaker margins or other external factors?

We don't make that public, so I will not comment. I think you need to run the numbers kind of on GP loss and so on and compare that with rough estimation yourself, actually. I think when you compare to last year, though, it's good to know. I think we commented that on the call last year if I wasn't here. There's about 20 million in one-time effect in the Q3 last year. from some kind of insurance payment that we had because of a big fire. So you should probably adjust that from the comparables. But yes, other than that, I don't want to comment the details as we don't make it public. And it's also difficult to estimate exactly the impact Given that we estimate the sales loss here to be in the magnitude of 200 million, but we don't know exactly what it is. And therefore, it's also difficult to calculate all the way through with accurate enough numbers. That's why we choose not to go out. But the impact is obviously heavy.

Thank you for clarifying that. Orders fell by 38%. How should this be interpreted, primarily as an effect of the cyber attack or of the market in general?

No, I think the order book this year is very, very difficult to look at. And the reason is when there's a cyber attack and all the kind of schedules get wiped, it's quite difficult because there's nothing moving in there. That means that that moves these order intake numbers up and down quite a bit. it's very difficult to draw any conclusion from that. But yes, there is a big impact from the cyber attack and the general order intake is a little bit slower than last year, but I would say from what we can tell, it's not material in a way.

And when will the new strategy and business plan be presented, including an updated financial and operational targets, as well as a new vision for Bulten?

And nobody's more eager to do that than me. But I think it's important for us that we do it at the right time when we are ready to talk about that. And we will talk about that. I mean, we know from the calls that we have had and what we're writing, I think you kind of know the general direction where we're going. We're going after niche manufacturing. We're going after C-parts. And we will build an opportunity to do that by M&A once we have the financial strength to do so. And we will then do that in favor of contract manufacturing towards OEMs basically. uh but the more details than that we will wait until the timing is right and i don't think the timing is right right now when we have all these uh issues with the cyber attack and we want to get through that we want to manage in the right way we want to take care of our customer in the right way make sure that they are up to speed as quickly as possible and they do what we can and then when we are ready we will talk about the new strategy and going forward

Thank you, Axel, for that answer. And we'll take one final question here before wrapping up. Can the existing production capacity support this strategic shift or will acquisition be part of your toolbox going forward, so to speak?

Yeah, so I mean, it's a two-fold question. Will the existing factory network support it? No, because if you look at the strategic shifts that we want to do, we have one factory base that's not geared for that. That is not really fit for purpose for that type of expansion that we're talking about. And to get there, we will grow some of that organically. We have interesting developments in India with manufacturing in Vietnam, where we are building manufacturing capabilities. We're also investing parts of China for this. So we are moving in a good direction organically, but we want to be a company that has a fairly aggressive M&A agenda. But to do that, we need a lot more financial headroom. So we need to get there first. Step A is to create that headroom, and then step two is to go and acquire it.

Thank you. And we actually have one final question before wrapping up. Is there any insurance reclaim possibilities on back of the cyber attack?

No, we have from what we have, we have obviously explored this opportunity and we have no insurance that will cover this, unfortunately.

Okay, that concludes today's presentation and also Q&A. Thank you everyone who participated in this webcast and a wishful great rest of the day. Thank you and goodbye. Thank you. Take care.