Cavotec Group AB

Good morning and welcome to Kavatek's third quarter presentation. I am David Paulius, the CEO of Kavatek and together with me today I have, as usual, my CFO Joakim Wahlqvist. So to start a little bit with a short introduction to Cavitech. I know we have a lot of new, we might have newcomers on the call as well. So Cavitech has close to 50 years of experience and next year we will actually celebrate our 50 years anniversary, which is quite cool milestone. Over these 50 years, Cavitech has built a strong position as a leading clean tank company with a global presence. Our offering consists of design and delivery of solutions to connect, to automate and to electrify ports, vessels, other industrial applications like heavy duty vehicles that are used in, for instance, the mining industry. Our most important competitive advantage is that solutions and services contribute to the decarbonization of ports, mines and other industrial applications. This trend is strong all over the world and we are in it and we've been there since 50 years. A significant asset for us is our large installed base in over 80 countries. The install base gives us a well-established customer relations. It gives us a good reference, of course, going forward. And it also is a big potential for us looking after our equipment and then also continue to driving our service business. Let's turn to the next slide to see a little bit why our market is so interesting. What we have is we have a strong position in the market but it is driven then by mega trend and regulations. The mega trends that drive our market are the urgent need to reduce greenhouse gases and also noise in critical infrastructures such as ports, container terminals and on board on vessels. Our solutions are also supporting the reduction of emissions and noise in certain different industrial environments and, for instance, the charging of the heavy trucks, as I mentioned. These megatrends are supported by international and local regulations that enforces the operations of ports, terminals, vessels and other industrial applications to really reduce the emissions and also then to reduce the noise of their equipment. We know everyone wants to walk away from dependence on the fossil fuel, and that's where we play a critical role. We operate within market segments that are critical to society, where our solutions are needed to lower emissions and to create a better environment. Cavitech plays a significant role here with our solutions and our leading technologies that are proven, reliable, efficient and safe and therefore perfectly suited to meet our customer requirements. So let me talk a little bit about the various business segments. We have two business segments. Ports and Maritime has the world leading solutions for ports, ships, and other marine applications. We have unique systems, for example, automated mooring, shore power, crane electrification, and connection and charging system, significantly improving the environment in the ports worldwide. Customers include, for us include the ship owners, operators, ports and terminals, port equipment manufacturers, and of course also shipyards. Ports & Maritime is our largest segment and stands for the majority of the group sales and EBITDA. So, then moving over to the industry solutions. Our industry solutions drive productivity and contribute to the customer's operational efficiency, electrification, as well as occupational health and safety. The products include motorized cable reels, hose reels, radio remote controls, power connections, spring driven cables and hose wheels. Customers is a wide variety of industrial sectors such as cranes, energy, processing and transportation, surface and underground mining and tunneling of course. And service is of course an integral part of our business segments. So let's move over to some recent business updates progress here. I have talked to you about in the last quarterly presentation that I had the pleasure of cutting the ribbon in our new facility in Chennai in India in beginning of July. This new facility will serve the large and growing market in India and it will also improve our supply chain and sourcing capabilities and support our operations across the globe. Our integration took place in July, but even before that, we completed our first deliveries back in April, making an important milestone. Since then, we have received orders from both Portsmouth Maritime and English customers, and we now have the production going on in Chennai facility, and it's really pleased to see how it moves on. After the end of the quarter, We had two major shore power orders were signed with a total value of 6.5 million euros. The first order includes a power move mobile crane management system, you can say, designed to serve cruise and railroad vessels in Italy. These deliveries are expected to begin mid of 2025 and would be concluded by the end of the year. The second order there involves also supplying of two power moves, shore power systems, scheduled for delivery in the first quarter of 2026. This system will enable the cruise ships to come into the ports and connect to shore power in order to switch on the auxiliary power. And of course, this is critical when the cruising ships are coming in so that they can turn down the engine and you don't need to see any black smoke from the chimneys. These two orders are good examples of how we can contribute to the decommersation of ports and also how regulations imposed on ports will drive the demand for our products. And those two projects are now the first, but we see a lot of things in our pipeline for more opportunities around the Italian coast, but also to be spread along other coasts in Europe as well. Let's Before I hand over to Joakim, I'll take a little bit of the overall picture of what we have done in the last quarter here. In the quarter, we saw a good revenue growth of 5.1% and a strongly improved profitability. This has been the focus for me and Joakim since we joined, and it's really good now to see that we are progressing stable in that direction. We report for the seven consecutive quarter a positive EBIT that grew 76.3% over last year. This is a great improvement, mainly driven by margin improvement in the port and maritime segment. The EBIT margin improved to 6.8 and again a great improvement from the third quarter last year, which is a result of the change program and the strategic focus and priorities that we are carrying out. And also following the focus on the change programs, we report a net profit for the fifth consecutive quarter. So with this short introduction, I'll now hand over to Joakim and he will walk us through a little bit more of the details in the numbers.

Thank you very much, David, and good morning to everyone listening in. I can see that there's big interest in Cabo Tech today. We have many people on the call. i will walk you through a bit more of the details in the finances like david said here so let's start with the revenue as you can see here the revenue grow grew with 5.1 percent in the quarter mainly as a result of a very strong quarter for the industry segment with good sales of radio remotes and services the currency effect played only a small or had only a small impact this quarter with 0.3%. And we have seen a more stable increase in sales the last quarters, but we sell to a large extent projects, which means that revenues can fluctuate quite a bit between the quarters, depending on which projects have been completed and what milestones that have been achieved. And as David described earlier, we continue to see a very strong interest in our solutions driven by both international and local regulations, as well as the megatrends to reduce emissions, which David had talked about earlier. If we move on to the order intake, order intake has decreased in the quarter with 6%. But as you can see from the graph, the order backlog has decreased a bit over the last year, which is a consequence of our active choice to increase the profitability in the order backlog. I just want to stress what David already has said that a large portion of the Cavitech business is project driven and order intake can therefore fluctuate quite a bit depending on the timing of signing the orders and quite a lot between the quarters. And although we have a declining order intake here slightly in the quarter, the underlying market demand for our climate friendly solution remains really good. And this is driven by the customer's need to increase both efficiency, but also to decarbonize and adapt to the new environmental regulations. If we move over to the EBIT improvement, and I can add to what David had said earlier, that we're happy, but not yet satisfied with the profitability development. We have seen a stable improvement quarter of a quarter, and it's really a result of our employees commitment to implement our change programs. Since last year, we have also increased our focus on our supply chain. and improved our purchasing procedures, which we're now starting to slowly see adding to our performance. And in addition to this, which is something that I'm also very excited about, is the cost reduction efforts that are being brought in across our product portfolio, which we expect to further support our journey towards our profitability goals. However, I want to underline that we are not in any way finished with the transformation of CavoTech, and we have a lot of initiatives and improvement activities on our to-do list, which will contribute further to the value creation. After our positive impact of these change programs that we have implemented in Port and Maritime, I'm also very comfortable to see good results going forward in the industry segment. And David will come back to that a bit more in his part later on in the presentation. Over to net profit. These stable improvements in the operating result is now also starting to show some results on the bottom line. And it's good to see that we are reporting a net profit now for the fifth consecutive quarter. And earnings per share also improved significantly. And this is really a proof of our ability to transform Cavitech and strengthen the financial health of this company. We move over to cash flow and cash flow decreased a bit here in between the quarters. It was negative. It was negatively affected temporarily by increasing working capital related to some lower prepayments from customer and timing of receivables and collection of them. Compared to the third quarter last year, the leverage ratios continued to move in the right direction and improved to 0.85 versus last year's 2.68. So very stable also compared to the second quarter this year. I can underline, though, that we have a very stable, still very stable cash position and plenty of headroom. So I feel comfortable about our about our cash flow situation. What I can say is that we continue also to have a very big focus on the working capital. So that will remain a focus throughout 2024 and also in 2025. Let's now move over to ports and maritime. Ports and maritime, like David said, offerings have decarbonization solutions for ports and vessels and automatic mooring systems and also shore power solutions. These offerings are sold as projects, which means, as I earlier explained, that revenue can fluctuate quite a bit between the quarters, depending on which projects have been completed and what milestones have been achieved, which is something that you can also quite clearly see in the top graph in this slide. So Portia Maritime shows a very robust profitability development with an EBITDA margin of 13.2% in the quarter. And as David has mentioned earlier, Cavitec also have signed two major shore power orders in October with a value of 6.5 million, which is very exciting for us. Let me now move over to David's baby, the industry, the industry division. So the industry division showed a strong revenue growth with an increase of 11.6% driven partly by a good demand for regular remote controls and services in this segment. However, we are not satisfied with the profitability development in the segment yet, and the EBITDA margin decreased in the quarter. But what I can say is that I feel very confident that the work that is now being done to implement our change programs also in this division will have a positive impact going forward. And as you know, David is still the interim head of the industry division, and a lot of activities have been initiated across all the functions. And by this, I will head back or lead the presentation back to you, David.

Thank you very much, Joakim. So let me go through, round off the presentation here before we move into the Q&A session. So talking a little bit about the key strategic projects that we have here. Although the Ports of Matter segment will continue the execution of their change programs in order to further improve the efficiency, to become more competitive, etc. We also see that a lot more to do in the industry segment, as Joachim just mentioned, when it comes to implementation of the change program. As Joakim said, we have clearly plans and projects underway, also within industry, to improve the possibility. We started these exercises on the ports and maritime, and now we see clearly the results coming through there. Compared to 2022 and 2023, we are now on a robust, positive, upcoming trend for ports. We are now applying the same kind of methods and the same kind of plans and improvements on the industry side. And so therefore, I'm very, very optimistic that we're going to see the same things there. We work across the group to improve in sourcing and the supply chain. This has been a little bit of an untapped potential within Cavotech. The new facility in India is a part of our strategy to improve our supply chain and sourcing capabilities. We expect to see continuous effect from these enhanced supply and sourcing processes. Of course, some of that will further strengthen our profitability, but it also then gives us a more possibility to shopper offer and strengthen our competitiveness in the market. We also increased our focus on innovation and product development. This has led to us identifying product areas where we see exciting potential. One example there is within our radio remote controls, where we have a strong position with among other world leading companies that manufacture heavy duty vehicles, et cetera. Within all these areas we have identified, we see a good opportunity to grow with both new and existing customers. Another important priority that we have already touched upon in the presentation is focused on untapping the service potential on the installed base. Ports American has over the past quarter has been successful in reaching out with this improved service offering and we will see the potential in this area. And our installed base is growing quarter by quarter. also now going to see the same thing on the industry where we have not been but service is as we all know it's it's a perfect opportunity to stand by our products uh to to support the customer if anything goes wrong we are there to support them and therefore we tie up the customer in a very good relationship so they know that covertech products is something they can rely upon and So as Joachim said earlier, the whole group will continue to focus on developing our working capital and further strengthen our financial position group. And finally, as we said in the second quarter's presentation, the board is giving capital management team the assignment to assess the possibility of moving the registered offers from Switzerland to Sweden. These assessment has now started, although we have no schedule or more details to communicate today. But it makes sense to have the registered offers, certain benefits to have the registered offers where we are also listed. So to summarize up, let me quickly summarize the key points that we have in this presentation before we open up for the questions here. We have had good revenue growth and we see a positive business activity. It's a lot of things happening in the market, which of course gives us a good opportunity to capture more business. I feel that we have a very strong momentum in the organization. with all the employees worldwide, which is a conclusion that I can draw by my visits when I'm out meeting the organization and with colleagues and also meeting customers. We have now for soon two years demonstrating our ability to steadily improve Cavitech to where it should be. Our performance also shows that our clear strategic priorities and change programs are effective and they will contribute to building a stronger Cavitech going forward. So to conclude, Cavitec has a strong position. It's a key player in the growing market, driven by the need to create more sustainable solutions in emission-free world. So by that, I will end this presentation and now ready to take question. You can either call in or ask questions or write your questions in the webcast. Let us first start with some questions over the phone. Do we have any questions over the phone?