Elanders AB (publ)

Good day and welcome to today's eLanders ABE conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. You may submit your question by pressing star 1 on your telephone keypad at any time during the call. At this time, I'd like to hand the call over to Ms. Magnus Nilsson, CEO. Please go ahead, sir.

Welcome, everyone, to Alambo's conference call. This is Magnus Nilsson speaking. Together with me, I also have our acting CFO, Elsa Wilson, as well. I will now start with our presentation, and I will go directly to slide number five and talk about our first quarter. As expected, continuing the market to be very challenging in the first quarter, and several of our customers showed lower demand compared to the previous year, which resulted in a negative organic growth of 9% in the quarter. Of this 9% of negative organic growth, the normalized shipping prices within air and sea was roughly 2%. It was mainly customers exposed to end consumers that showed a downtrend compared to last year. But our continued focus on lowering our working capital and improving our cash flow resulted in a very strong operating cash flow, and we had a cash conversion of 137% in the quarter, and a cash conversion in the last 12 months of 114%. And if we adjust for dividend payment, currency effects, and acquisitions, our net debt excluding IF-16 effects actually decreased by 200 million crowns in the first quarter, and we managed to lower our working capital with 241 million crowns. As expected, our two recent acquisitions increased our debt. And our financial costs are negatively affected by both the higher debt, but also the higher interest rates, which of course put some pressure on our net profit. But despite this soft result in the first quarter, could we show a rolling 12-month net debt EBITDA, excluding IFRS 16, and also including performance results from our two acquisitions of 3.2%. If we then go to slide number six and we look at the supply chain solutions, we had a negative organic growth of 9%, and this was mainly due to weaker demand from our customers, especially exposed to consumable goods and durable goods like automotive and fashion. But also our newly acquired company, CAMAC, was affected by this downtrend. This combined with an almost very soft amount resulted in a low margin compared to previous year. But on the other hand, continuous actions to improve cash flow and to lower working capital have a very positive effect, and supply chain solutions could show a cash conversion of 133% compared to 79% the year before. If we then go to slide number seven, To look at print and packaging solutions, could we see a similar effect when it comes to negative organic growth, which was 7% for print? They were also affected by a lot of soft market. But despite this, could the business area show a significant improved EBITDA margin of 7.5% compared to 4.1% previous year? And this is a result that we continue to grow in the online print area, but also an effect of the price increases we did last year. And we also have good effects of stabilized energy and material prices. If we then go to slide number eight to look at the development of our different customer segments in the quarter, and if we start with fashion, We did expect a lower demand from our fashion customers, but it was clearly lower than expected, and we could actually see a drop of around 20% in both Europe and in North America. But we think that this was an extra negative effect, that lots of our customers really tried to push out their products in Q4, and there was also a discount, and that We expect in the coming quarters that we will see some improvement from existing customers. And we're also ramping up to two new major customers in Germany that we have talked about before. We'll be ramping up in the second quarter. So we think it will be step-by-step improved, but still a very soft demand in the fashion part. That is a lot of biggest customer segments. When it comes to electronics, The other picture is actually more positive, and we could see an organic growth of 4% in the first quarter, and that was despite the demand from some product areas like office printers, heat pumps, and TVs is still very soft. But then on the other hand, we could see a growth that already started in the fourth quarter when it comes to laptops and servos, but also from several other product areas in the electronics area. And our lifecycle management services also continues to show growth. And so if we summarize this, we expect that this customer segment will continue to have a positive trend going forward. If we look at the automotive segment, we could see a very slow start in January and February, a good recovery in March, and we expect that it will continue on more stable levels the coming quarter. And if we look at the demand from the industrial segment, it continues to be rather solid except in one area, and that is where we deliver heat pump systems for our customers, which was very weak demand also in the first quarter. If we then look at healthcare, Could you see a similar positive trend like in electronics? And we had it on the Gannic world for 3%. And, of course, we also had an increased sales in this customer segment because of the newly acquired companies, Camac and Bishopgate. That also increased our sales compared to previous year. And if we then look at Adore, we continue to grow in Adore because there we have the online print. But we also have contribution in this segment from CarMax customer segment in retail and food, in both retail and but also food and beverages. If we then go to slide number nine, I want to update you on our very important acquisition of the UK-based company Bishopsgate that was done in February. Bishopsgate has a yearly sales of around 27 million pounds. with double-digit EBITDA margin, and they are the absolute market leader in the UK and Ireland when it comes to what we call technical logistics, which is part of what we call in the landlord's lifecycle management. Their customers are mainly active in electronics, healthcare, retail, and the bank sector. For these customers, they handle storage, distribution, installation, take-backs, refurbishment, and also do service of valuable equipment like it could be medical devices, big digital printing machines, data centers, but also charging stations, and also things for retail like parcel lockers, vending machines, and also some refrigerators. Customers who demand this type of service usually have the same needs in several different countries. And by complementing Elambor's existing capabilities with Bishopsgate, we can now offer complete solutions for both EU and UK. And Bishopsgate, for you who remember, is very similar to the Dutch company, Eigenhausen, that we acquired in 2021. And then if I go to slide number 10 and look how it looks forward, even if the first quarter was very challenging, we expect that the demand will gradually improve during the year as a result of recovery from our existing customers, but also newly acquired customers, We are also at the moment having a very strong pipeline when it comes to ongoing inquiries. So as we see it, it's thought to be a recovering Q2, but we expect that it will be much better in the second half of the year. But, of course, you need to be prepared. So in parallel with the high level of activity on the sales side, We are continuously reviewing our costs and working on various solutions, such as consolidation of warehouse facilities. We look at short-term rentals and also subletting to reduce our open capacity. And in the end of 2023, we were consolidating two warehouses in the Netherlands. In Q1 now, we have done some consolidation in the UK, so we are working actively also to try to lower the overcapacity if the market should continue to be very soft. We also continue to focus on reducing our net debt by optimizing our working capital and improving cash flow. And as a result, our working capital decreased by 370 million crowns in 2023. And as mentioned before, we managed to reduced its total by 241 million in the first quarter of 2024. Okay, now I open up for questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. So the first question comes from Derek. Lalibert from ABG Sondal Collier. Please go ahead.