Cavotec Group AB

Good morning and welcome everyone to Cavitech's first quarter presentation. I am Joakim Wahlqvist, CFO of Cavitech. Our CEO, David Pejos, that's normally presenting together with me is unfortunately stuck on a delayed flight and will not be able to attend today. But I will do my best here to run this presentation without him and answer your questions in the Q&A session also at the end. First, I would like to say a few words on the reason for postponing the publication of the report with a couple of weeks. We had a temporary interruption in our IT environment caused by a cyber incident that is now closed and under control. However, the event affected some of our servers and delayed the financial consolidation, and therefore we took the decision to postpone this investor call with a couple of weeks. Even though the incident caused a short-term interruption here in April, we actually have now strengthened our IT and IT security quite significantly, quicker than we were planning. And as many of the improvements that we had planned for the year has now been introduced in Cabot Tech. So with that short introduction, I want to recap a bit about Cabot Tech before I comment on the first quarter performance. So, Cavitech has close to 50 years of experience and we have built a very strong position as a leading cleantech company with a global presence. Our offering consists of design and delivery of solutions to electrify ports, vessels and other industrial applications like heavy-duty vehicles that are used for example in the mining industry. Our main products are shore power systems, motorized reels, crane electrification and automatic mooring systems. Our main attraction is that our solutions and services contribute to the reduced emissions in the ports and terminals and from ships and heavy-duty vehicles. Over the years we have created a large installed base worldwide and our current footprint reach over 80 countries and continues to grow. This large installed base provides us with an untapped potential of service business that we're now focusing even more on. But let me now give you a quick overview of the main drivers of our markets. First of all, we have leading technology and a very strong market position with long term customer relationships. All markets in which we are active are driven by megatrends of electrification and the global need to reduce greenhouse gases. Our solutions are crucial for reducing emissions in ports, terminals, and from vessels and heavy duty vehicles. Our solutions also contribute to reducing noise pollution in ports and terminals, which is a growing problem, not at least in the cruise terminals and cities. We also see that demand is increasingly driven by regulation, both from international and local authorities that want to reduce emissions of greenhouse gases as well as noise pollution. Our solutions and leading technologies that are proven reliable and efficient and secure and are therefore a perfect fit for our customers requirements. Few words about recent business progress. As we have informed earlier in our sessions is that we have established a facility in India to better serve the important Indian market and also explore attractive supplier base. David Pagelsen, our chairman, just came back from a visit in India and met with to look at the facility but also meet with several of our potential clients in these booming markets. And we are now even more confident that this was the correct strategic move to make. The facility that has been recently is now operational and the official inauguration is planned for July this summer. And we are already now meeting a lot of interest from potential customers in the market. And very exciting also is that we have signed the first orders with Indian customers. However, having said that, the ramp up to larger volumes from this facility will only happen over time. About a month ago also we announced in a press release that we want an order for shore power with a global shipping company. The order is valued about 5 million US dollars and includes a substantial number of PowerFit shore power units, establishing vessels to connect to shore power while at dock. PowerFit is a complete containerized solution and includes all equipment for high voltage shore connection. The deliveries of those units are scheduled for later this year. Earlier this week, we also announced a two-year service agreement with Port of Salalah in Oman for our 32 installed more master vacuum mooring units. Port of Salalah was established about 25 years ago and has really grown into one of the leading and most prominent multi-ports in the region. In 2021, Porto Salada was ranked as the second most efficient container port in the world. And with this new service agreement, Cavitech will contribute to the continued efficiency in this port by minimizing the downtime and make sure that the units are running properly. The other three orders here that we have on this presentation slide is was signed in the quarter, but we talked about them already in the previous presentation. But I would once again just like to stress the importance of the service agreement signed in the major port in North America. Unfortunately, I cannot tell you the port's name, but the deal is very important for us because we are taking care of the plug in and plug out of our power units for the first time. And this provides us with a lot of valuable insights and data on how we can further improve our product while also ensuring that it's operated in the most efficient way. We have in earlier presentations given you some information about our change programs and we will continue to work with them and inform you about what we are doing. As you know, we are driving six strategic priorities with related change programs in order to lay a strong and very stable foundation for profitable growth and value creation. And as we execute on the changes, we continuously develop new prioritized areas for further improvement as value creation is really a never-ending work. We can at this point in time conclude that the ports and maritime division has been most successful in implementing these changes. As a result, we see a very steady improvement in profitability, mainly driven by better profitability in the order backlog. But it's also satisfying to notice the increased number of service orders coming from in the ports and maritime segment. However, in the port and maritime segment, we also still have a lot of things to be done. So we're not done there yet. As you saw in the report, David has now taken up as acting president of the industry division while we are searching for a permanent solution. And we have identified many opportunities in the industry segment and see a good potential for increased profitability. By accelerating the implementation of the change programs, as we have done in the port and maritime segment, we believe that we can achieve significant improvement in the industry segment too. Near term, we are also focusing on a number of group-wide actions in the global supply chain, not the least, as well as in the product development area, both areas that are really important for us for continued profitable growth. We believe that we must increase our focus and speed in the product development in order to remain a strong leader in the electrification industry. And for both divisions, we have important potential, like we said earlier, in the service area, and we still have a lot to explore. So over to some of the financials of the quarter. I must say that I'm happy to see that our strategic initiatives and our change programs are starting to yield results. We report for the fifth consecutive quarter a positive EBIT in the quarter, and it amounted to 2 million euro, a significant improvement from the last year's EBIT of 0.3 million. The EBIT margin also increased to a 4.5 percent compared to the 0.7 percent last year. After financial costs and taxes we also reported for the third consecutive quarter a positive net profit. This quarter of 0.5 million euro which is an improvement from the loss in the first quarter 2023. The improved profitability and our initiatives to improve working capital had a positive impact on cash flow also which increased in the quarter from minus 2.9 last year to a slightly positive this year. The performance in this quarter in Q1 continues to show that we are on the right track and our change programs are working and we're very happy about that. Let's talk a bit about revenue. Year on year, the growth in revenue was 8.5%, where currency effects had a negative impact of 1.2%. And this growth is primarily driven by a strong demand of services, but also an increased delivery of shore power solution for container vessels. We are happy to see that we continue to see a very high activity among our important customers. Now to the order backlog. And as you know, we have informed you that for some time that we have focused a lot on the profitability in our order intake and not only the volumes. we have decreased the order backlog slowly but surely while we have normalized the margin levels in the backlog. And the decrease of the order backlog now was a moderate 2.4% from year-end 2023, meaning that we are now seeing this normalization of the order backlog and at the same time we are ready to increase the focus on volume And we continue to see a strong interest of our electrification solutions and service offerings. So to our EBIT, we reported a positive EBIT in the quarter, thanks to our strategic initiatives and focus on profitability. This is very much related to the successful execution of the programs in our ports and maritime division. colleagues in the ports and maritime have focused a lot on a number of change activities to improve profitability such as product production optimization. However we still have a lot to do and we focus near term on our supply chain as well as the implementation of our change programs in the industry division. I mentioned the cyber incident earlier in the second which happened early on in the second quarter and that incident is now closed and under control. The incident incurred some costs and delayed certain deliveries and will have an impact on the second quarter on the operating result with approximately 1 to 2 million. But I want to mention that Cavitech is well covered by cyber insurance. We continue also to implement Strategy and change programs for improved profitability And I'm very pleased to see that we're experienced improved contribution margins in the underlying orders and a positive development of the business Now to our net profits I'm very satisfied to see that we are Continue to show a positive net profit profit for the third quarter in a row. We had a net profit of 0.5 million compared to the minus 1.3 last Q1 and also a small but important positive earnings per share then. So it's a positive net profit and also positive earnings per share is a good signal that we are on the right track with the transformation of Capotec and that we have an ability to grow profitable Few words on cash flow. We reported a small but positive operating cash flow in the quarter. And this is thanks to higher profitability in the business, driven by the operational efficiency, but also our strict financial management. The leverage ratios also continue to improve from 1.29 in the previous quarter to 1.09 in this quarter. And this needs to be compared with the first quarter 2023 that was 4.54. So a great improvement year on year. This good development is positive for us since it means that our strengthened financial position has also lowered our financing costs, something that David has stressed in the previous quarterly report. I want to say, though, that cash flow and especially the working capital development will continue to be one of our key priorities also in 2024. Let me now briefly say a few words about the ports and maritime division. Ports and Maritime, which delivers solutions to decarbonize ports and vessels, they grew with twelve point eight percent in the quarter. The increase was driven by improved volumes in services, as I already said, and deliveries of shore power solutions for container vessels. The currency effects had a negative impact of minus 1.2%. Fortune Maritime has really steadily improved its operational results and margins over the past quarters due to really successful work with with a focus on a profitable growth in the order backlog and higher service volumes. So let me now move over to our second division, the industry division. So revenue continued to increase in the quarter, mainly driven by demand for services. Volumes are up 3.6% and currency had an effect of minus 1.3. We are now searching for a new president for industry that will have a very clear agenda to accelerate the change programs in the division. We have planned actions and activities that we want to implement, and we now need a strong execution and leadership to reach those targets. But we are already now taking really active action to accelerate the change programs under the leadership of David in the position as acting industry president. Okay, so let me now quickly summarize a bit before we open up for some Q&A. We continue to feel to have a high business activity with important customer wins that gives us a very good foundations for continued profitable growth in 2024. We have a good growth and a strong financial performance. I'm happy with the development of Cabotek, even if we still have more work to be done. We really feel here that we are on the right track. I think what can be felt across the whole organization is a very strong momentum and engagement. And we can see that across all the departments and all the divisions. and that we want to continue to deliver on our commitments to our customers. We now have clear strategic priorities and change programs in place to build a stronger Cavitech. That also takes a while to get in place and it's now starting to be well known in the organization. And I and David are very confident that Carbotech will continue to be a key player in transition to a more sustainable and emission-free world going forward. So by this, we have ended the first quarter presentation and are now ready to take some questions. You can either call in to ask questions or write your questions in the webcast. With me also to support me with the questions here is Niklas Ribbing who is working in investor relations and he will help us to read up some of the questions here. So I have an extra hand. But let us then first start with the questions over the phones. Do we have any questions over the phone?

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 six on your telephone keypad. The next question comes from Lara Motadi from ABG Sundal Collier. Please go ahead.

Hi, Lara here from ABG. Good morning. Hi. It's great to see that the group's profitability has increased this quarter, but the industry segment was actually down a bit year on year. Could you please give some detail on the strategic initiatives that are aimed at increasing the profitability in this segment and how that work is progressing?