Clemondo Group AB (publ)

Hi, and welcome to this report interview with Climondo. My name is Hugo Lishöv and I work as an analyst here at Carnegie. With us from the company for the third quarter of 2024 we have the CEO Jesper Svensson and CFO Jesper Friis Jesperkjell. Welcome Jesper and Jesper.

Thank you very much. I would like to thank you for that, Hugo. A little warning because the wind of the cooling has blown in Skåne, so we are a little rusty in the throat, both of us, so I hope you are with that.

Yes, but that shouldn't be a problem, I think. It is as if your shareholders have sent in questions to me, so we will start with you presenting the quarter. Then we will have a Q&A at the end, and then I have mixed both your shareholders' questions and my own, a little about everything else. So with that I hand over words and pictures to you for a presentation.

Thank you Hugo, and then we'll just throw it over to the agenda here. This presentation is about Clemondo and our strategy. We look at our market areas, important events and key figures during the quarter and the financial result before we conclude with a summary. Clemondo is usually a chemical company with three market areas. We sell cleaning products to the industry, vehicles and healthcare. About five years ago, we decided that people will still want to have cleanliness around them, but they don't need to pollute nature to clean their homes, industry or healthcare. This summarizes our strategy to be able to keep clean without polluting nature. In connection with that, we wrote our vision, which we call zeroing, which means 2030. ska man kunna hålla rent i sin industri eller sin biltvätt- utan att det blir utsläpp till luften- utan att man mår dåligt av att tvätta bilen. Det ska inte bli några som helst föroreningar av vatten- och det ska inte medföra några utsläpp till mark. Resan har varit något turbulent. Den börjar med en turnaround. Vi fick bolaget lönsamt efter ett år- Then came a pandemic that was very profitable for us, but that meant that we had to put a lot of other changes on pause. And then came hyperinflation in the chemical industry, where we for a while were at 44% inflation. We have been able to focus on these crises and not all the time on the changes, but from this year we have switched to growth. which can be said to be challenging when the connection is a little weak. But I think it's good to have that picture with us, where we come from. If we look at the connection, which is the diagram up here to the left, we have one quarter, the last nine where there was growth in the industry. This has initially taken a hard blow, the weak connection. We have had to find a way to find better profitable businesses. Partial segments that are not affected so much by the economy. In the diagram below, you can see the percentage drop we have had in the previous four quarters, where we were down and dropped as most 15% during quarter one. For me, quarter three is extremely important and extremely strong. We show that we are going towards the economy. Det är en liten tillväxt, men det är en tillväxt i en svag marknad. Det är en väsentlig förändring av det vi har stått för bara ett år sedan. Någonting vi är glada över, att vi klarar trotsarkonjunkturen, det tycker jag är ett högt betyg till Clemondo. Tittar vi in på våra tre marknadsområden, hur de har gått i kvartalet, så börjar vi med fordon. Vår huvudaffär inom fordon har varit att hjälpa till att göra rent bilar i samband med att bilar säljs eller byter ägare. Den har träffats oerhört hårt av konjunkturen. Bilhandlarna ligger näst högst i konkurrensstatistiken. Här har vi jobbat i ett intensivt förändringsarbete för att hitta andra segment inom fordon där konjunkturen inte slår lika hårt. What we can see here now under Q3 is that our change work is changing. We were the lowest in Q1 on a drop of 26% in the previous year. Now we are only on a drop of 3% under Q3. We are very happy about that. We hope we can continue the nice curve we have now entered on the vehicle. If we look at hygiene, it is a stable growth business for us. In five years, we are at an increase of over 200 percent. Even in Q3, we grew by 7 percent. The health care system has it tough, but we must still consider that the health care system is relatively conductive independent. Here we are with long, safe agreements that last up to four years, so it means that it is safe to have this business at the bottom. We are approaching 100 million years in this business. And then we have our industrial business, where we started a venture exactly one year ago, almost October 1st last year. We got good answers in the first half of the year and we expanded that venture with a start in Q2 this year. Here we see that our efforts are changing. We get nice contracts, we get big contracts. Men som alltid så tar det tid innan man ser den fulla effekten av dessa avtal. Men vi är nöjda med den utvecklingen vi har.

Då ska jag förklara lite med de KPI som vi har i resan mot vårt nollbarhetsmål. Vi har en, vi mäter inom La Hega, där vi mäter våra gröna produkter, där vi har andelen Greenium. Alla våra miljövänliga produkter inom We label the vehicle segment under the brand Greenium. We have an accumulated share of 42%, which we are very pleased with. Do we see our goal of reducing electricity consumption by 5% per year? Yes, we are on a figure where we have actually managed to exceed that, so we are so far that we have reduced our electricity consumption by almost 7%. The goal is to have zero emissions to the water, and we do that by reusing our process water in the factory. We have actually managed to win again during this quarter, and we have a figure of 100% recovered process water. So it's a very nice figure for us there too. If we look at the goal regarding zero emissions to the land, we see how much production waste we take on to destruction. Yes, that there should be zero emissions there, we are on a figure of 0.3% in this, so it is also a figure that goes against the goal. If we look at important events during the quarter, The positive development within the market-oriented hygiene that Jesper has been talking about continues, where we have a stable growth figure. And the investment that we have initiated in the industry that we decided to make under QE, yes, it has also given results in the form of new customers and contracts. We have also expanded our range and widened it. I think we will also benefit from that in other the market area that we work in. This picture shows our result calculation and some different key figures in relation to the result balance calculation and also the cash flow analysis. If we look at our net turnover, just as Jesper has been talking about, hygiene is growing by 7%. Vi har vår industridel som har växt med tre procent och fordon, ja, tappade endast tre procent i detta. Och tack vare de siffrorna, ja, men då når vi en ackumulerad tillväxt på en procent. Och det är en siffra som vi är väldigt glada för och stolta över, sett till hur konjunkturen ser ut för oss, som Jesper också var inne på. Det är en tuff marknad för oss och den tuffa marknaden It is reflected primarily in the passenger car side for us, where we know that we are a passenger car reseller and have it hard. It can also be read about in media articles in Dagens Industri, how in Germany they are thinking about reducing production in some car factories etc. So it is reflected in our customers. If we look at the gross margin, it is in line with what we had expected and it is about 1% better than last year, so it is where it should be according to the expectations. If we look at our moving costs, we have increased the number of employees by 12% compared to the previous quarter. This moving cost is a very noticeable change in the form of increased costs. The reason why we have such a sluggish increased costs is due to to the mix in the number of employees, and then it is transferred to different reservations, where they are distributed between the quarters. If we look at the key figures, where we measure our operating costs through the brunt of the result, then they are at 73% in the quarter, just 76%. We have a target that we will be below or around, it should not be above 80% in our internal target, so you can say that we can achieve that target here. Then, of course, the higher the gross margin in money, the better the number will be here. Our EBITDA target, there we will reach 10%. We land into the financial target here, reach 10.4%. and that we have accumulated, is at 8.9%. This is due, above all, to the volume drop we have had within the vehicle, and that is due to a handful of customers in this. have hit hard on the volume figures that we have already done for earlier. Our solidity is by far 63% and our debt rate, I would say, has reached an all-time low of 0.6 this time. The cash flow is not really with us this time. It is mainly caused by changes in the moving capital. where we have partly had supplier debts that have decreased considerably. We have also had the financial net debt handled under IFRS 16 that has decreased We have had some customer orders. It is a pair of single large high payments. They fell on the first of October instead of landing on the last of September this time. So there is nothing alarming in such a way that our customer orders have increased. This picture shows earlier listeners, the blue stacks show sales and the green curve shows EBITDA margins for us. And the higher the volume we get, if we succeed, it usually reflects in the margin, that we get better development for our fixed costs. Versus our financial goals. Yes, we turn to 1% growth in a tough market for us. We have been aware of EBITDA and we can also handle the solidity with ROGE this year. I'll pass it on to you, Jasper.

Thank you very much. I will try to summarize the presentation. Hygiene continues to deliver according to the plan. It is a stable growth trade. We are now focusing on geographical expansion. Industry, the investment we have initiated, delivers according to the plan. It is a relatively stable growth. We are beginning to see growth in industry. Vår huvudaffär där, bilhandeln, det är riktigt, riktigt tufft där ute. Vi driver ett intensivt förändringsarbete. Vi ser under kvartalet de första tecknen förhoppningsvis på att det håller på att vända. I samband med att affärerna börjar bli bättre och mer i ordning, då ute kan vi också lägga mer energi på vårt strukturerade förvärvsarbete. Där jobbar vi relativt intensivt nu. Här har vi brett ägarstöd för våra tankar framåt.

Ja, tack för den bra presentationen. Jag tänker att vi börjar fokusera lite extra på fordonsegmentet eftersom att det fortfarande är det största segmentet. Och det är precis som ni säger, man läser varje vecka nu faktiskt om att det är motigt att folk sägs upp nere i Tyskland på löpande band. Men vad är era känslor här kring fordonsmarknaden i Sverige? Känns det som att vi är på botten, att det inte kan bli så mycket värre, eller ser man till och med att det finns en liten ljusning, eller kan det bli ännu tuffare?

Vi ser ingen ljusning i marknaden än, utan den ljusning vi kan visa i våra siffror kommer från andra delar av marknaden, inte från bilhandeln.

Jag förstår. You mentioned that you have made some changes. Could you give a concrete example of any changes you have made?

The trains, for example, run as many kilometers as they did before the conjecture became weak. Logistics, apart from a little bit of e-commerce, the trucks run as many kilometers as they did before the conjecture. There is still the same washing and cleaning needs of the vehicle, so we are trying to weight down our business to have a larger share of that type of customers. That's one thing. And then we have widened our offer. If we only sold a car shampoo before, we now also sell the paper, the detergent, the absorption agents and the pallet where the customer places the chemo, which is a special pallet. So we offer the customer a little more service. He will be happy that he does not have to shop in two places. The customer can often get a cheaper solution when he shops more in one place. So we get a little higher sales for each customer. We become a little more important for each customer.

I understand. I also like the broadening of customer segments. And we go over to hygiene. This is a segment that works really well. It goes very steadily upwards. And when I interpret the development here during the third quarter, since it is a seasonally difficult quarter and you still grow, then I interpret it as that you have taken some market shares. What is your opinion on this question?

I think that Vården has not received less money, but they have not received compensation for inflation. So Vården has a little less money to deal with. Then I have a hard time saying that they have taken all the money they have and put it on just our products. So probably the total market is a little smaller. And in this business we managed to grow. Under those conditions we managed to grow. It's well done, so we take market share. And we take them pretty quickly when it comes down to it.

And how big of a market share would you appreciate that you have in the current situation here in Sweden? And how much more is there in that case to grow on, do you know?

With that product flora, I think if I may add, I think that we are around, almost 50% of the market share.

That's really good. And if you think about the future, what are you going to do to be able to drive growth in this segment?

That's a good question. I don't think you should strive for 100% market share, but there is a limit when it gets harder and harder to take additional market share. So we have one or two more years ahead of us here where we can keep our growth based on the Swedish market. And then we have to expand geographically and maybe also add one or another product. You can say that our revenue today comes from a handful of products. If you could add one more product with the same volume, it would be able to generate 20% growth on its own. So it's those plans when we go home and sweep that we don't want to be completely transparent with.

That's right. Then it's the R&D department that will have to work on here in the future. If we look at industry, you have here during the spring and spring summer, you have announced that you have won large contracts with fine customers. It doesn't really seem like this is visible in the turnover yet here in the third quarter. When should we expect to see results from these contracts?

Nu har vi ju en policy som säger att vi inte lämnar prognoser som jag ska försöka hålla mig till. Men du kan säga om du skriver ett avtal med en större industriell spelare som har fem sajter. Så ska du, när du väl har skrivit avtalet med huvudkontoret, så ska det avtalet sedan rullas ut på de fem sajterna. Och där ligger en naturlig fördröjningsmekanism. Det är ingenting som pekar på att det inte sker, utan det är ett arbete som sker och vi har inga farhågor att det inte kommer att fullföljas.

Industri har lite nya produkter här. Ni pratade om att ni hade breddat produktsortimentet även inom fordon. Hur kommer det här att påverka lagret och lagervärdet framöver?

We still have a little too wide an offer in the number of CHEM products to the vehicle. The big problem is the idea that we should be able to pull down the CHEM layer as much as we pull up the layer with absorbents and tracers and so on.

Så det ska vara ganska flat och så växer det såklart om ni växer också. Ja. Och sen rent kostnadsmässigt, ni har ju ökat antalet anställda till 57 personer från 51 för ett år sedan. Varför återspeglas inte det här i kostnaderna och hur ska vi tänka kostnadsutveckling framöver?

Jag tror, Hugo, som jag var inne på, att vi har... The primary reason that the costs have not increased more than they have done is the mix of the employees in this, that it has had an importance. And then we have some reservations, how they divide between the quarters. If we look at the progress, there have also been employees during the year, so I think we can expect that when we get to the other side of the year shift and so on, we will see successively that our turnover costs will also increase in some degree afterwards. So it's rather positive for the owners that they haven't stunk more than they have done. Of course, we should be happy and grateful for that. But they will stand up in line with us to attract more people. And that's how it is.

And what type of resources have you added?

It's mainly sales-oriented resources to increase self-confidence outside of our customers. Plus that we are on the hygiene side, then we have strengthened according to a project that we are doing there, connected to our quality management system etc.

And earlier we have discussed the gross margin a lot. We haven't really had to do that in the last quarter because it has been quite calm. But if we look a little forward, how does it feel on the currency market? How does it feel on the real estate market? Is it somewhat stable so that we can count on such a gross margin of around 38-40% even forward?

Or how does it feel? I would say that you should divide it up so that you take the real estate market. Because the raw material market, how it is developed, it reflects in our calculation, since the raw material is such a large part of our calculation. So there we have the joy and stability in this. And you can also say, according to the Riksbank's prognosis and other what is happening, then no inflation is expected, what is it called, on that part. If we look at the euro rate, yes, it has not helped us, not either in this quarter and not either totally during the year, but we have to say that Hoppiness etc. in this is also more stable. So I hope for increased stability in both areas. And we see it mainly in the material side, which is the big, heavy post for us. That's also why you have to say that when we talk a lot about when we talk about growth, we talk about growth in kronor. If we were to talk about growth in liters, as some others do, because some have both had inflation and then they get deflation. Yes, it is also applicable to our business. since the raw material part is so large in the calculation that we have. And that is something that will follow us on this journey we are on.

When you talk about broadening product assortment within both vehicle and industry, will this be able to have any impact on the gross margin?

Yes, first of all, it can certainly have, because it is a a traded assortment. Then you have to remember with a brutto margin, which is important, you don't live on percent, you live on kronor and even in this here. So the main thing is to function our supply assortment. We can expand it, we can do what I call cross-selling from industry to the other areas. It generates sales kronor, it generates Then I'm not so worried about having the margin now, because it would show that we get a slightly lower margin on this supply range. You probably get that initially, but the more the volumes grow from this supply range, the more you enter a win-win, just like when you manufacture in a factory. Because then the purchase can go out and trade for higher volumes. Then they get a better price. So you may start to trade in long-term, then you trade home containers, etc. And so on. So just follow the sales development on this. Then the brutto margin will probably drop a little, but come into play.

Yes. And as you were talking about, the cash flow was not very strong. And that is partly due to the fact that you had upbindings of customer feedings. And when we talk about it being a bit tough on the vehicle market, should you be worried about customer feedings? Is there a risk that there are feedings that you will not get paid for? Or how do you feel about this question?

I have to say, with great joy, we do not see any such risk. It could otherwise have been the case, according to what we read and see on the vehicle side. But we don't see any such trends, and the credit test model, the risk model that we have put up to our businesses with our customers, it also shows to have worked very well throughout the years. During my time, I have been here in this industry. It's five and a half years now. Historically, we have had very, very low customer losses. So we don't see anything like that now in this.

And then there are several who wonder about this share collection. What does that mean for the shareholders and how will the shareholders be affected?

Jasper, or should I?

Yes. It means that ten shares become one. So in principle, there is no effect on the shareholders. They get fewer shares, but the shares are worth as much money.

But if you have 57 shares that are not shareable on ten, what happens then?

Then our main shareholders go in and finance three shares. So you get six new shares. So you can earn nine shares. All eight kronor. It will cost the main owner a little bit, but it will not be a lot of money.

So for the shareholders in general, there is no difference? No.

It is an action, Hugo, that is done so that we will be better equipped, also connected to when we talked about acquisitions earlier. In such an acquisition, you can use the stock as a means of payment, then there can be an expansion, and we climb up a number of steps at such an eventual expansion, so it is a purely shareholding action that we do in this.

And finally, we have previously talked about that you will come up with a new strategy. And then there are many who wonder, this comment about the vehicle sector, was it the whole strategy or will there be something more?

It's a pretty big change when you go from being a chemical supplier to going to someone who will help customers with all their chemical handling. There is a big difference in that. I understand that you are not in the industry and work with this every day, but that means adding a thousand products, maybe traded. It means new skills, new knowledge. Another thing is that the CLK needs to be trained and changed. It may sound like a small change, but it is a huge change. Och den lägger på dessutom att cellkåren, och vi har typiskt gått i bilhanden, och plötsligt ska vi gå till tungasidan också, så gör du den förändringen ännu större. Så ja, det var det hela, men jag tycker inte det är lite.

Nej. Härligt. Tack så jättemycket för att ni har presenterat. Tack så jättemycket till alla som har tittat. Har ni några ytterligare frågor, då är ni varmt välkomna att höra av er till mig på hugo.lijo.kanegi.se. Tack så jättemycket.

Tack Hugo. Tack Hugo.