Elanders AB (publ)

Hello and welcome to the Elanda's AV conference call. Please note this conference is being recorded and for the durations of the call, your lines will be on listened only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Magnus Nilsson, to begin today's conference. Please go ahead, sir.

Thank you. Welcome, everyone, to Lando's conference call. Together with me here is also Ösa Wilson, our CFO. And I will now go directly to our presentation, and I will start with slide number five and talk about our second quarter. The demand continued to be weak from several customer segments, but we could overall see that demand was improving compared to the first quarter, which resulted in an unchanged organic growth, which was a positive improvement compared to the first quarter when we had a negative growth of 9%. Also, our adjusted EBITDA margin improved compared to the first quarter, and it came in at the same level as previous year. And during the second quarter, Alando secured a very important contract with one of our biggest electronic customers, and this contract would give us the opportunity to open our first contract logistics site in Thailand, which is in line with our strategy growth in Southeast Asia, It will also be an important tool for us to capture volumes that are now moving out from China. If we then go to slide number six and look at our cash flow and cash conversion development, you can see that we continue to have a very strong cash conversion with 120% so far here. And we have also managed to decrease our working capital this year with around 264 million crowns. If we then go to slide number seven, look at supply chain solutions, you can see that we improved compared to the first quarter. And our organic growth was unchanged compared to a negative growth of 9% in the first quarter. We could also see an improvement in our EBITDA margin that came out at 6.6%. compared to 5.4 the first quarter and 6.2 previous year. And we also continue to have a very strong cash conversion in the supply chain solutions area. And in order to adjust our capacity to the current market situation, we also, during the quarter, decided to consolidate Dragon Logistics Pennsylvania volumes to their site in Atlanta, which, yeah, If we then go to slide number eight to look at print and packaging solutions, we also have here a recovery in demand compared to the first quarter, and organic growth was also unchanged compared to last year, which was a positive improvement compared to the negative growth of 7% in the first quarter. Our adjusted EBITDA margin was slightly lower than last year, but our cash conversion improved a lot for print and packaging solutions. We then go to slide number nine and look at the development of our different customer segments in the quarter and start to look at fashion. In fashion, we see some recovery compared to our first quarter, but organic growth was still negative with around 12%. The recovery was mainly in Europe with the help of our two new big customers, but also a recovery from some of our existing customers. but the demand in North America remained also very weak in the second quarter. When it comes to electronics, the picture is more positive, and we could see an organic growth of around 6% in the second quarter, despite that the demand from some product areas like office printers, heat pumps, and TVs is still very soft. The growth comes mainly from laptops and servers, but also from several other products and our lifecycle management services. We expect that the positive trend will continue going forward the second half year for electronics. If we look at automotive, we could see big fluctuations in demand during the quarter. Our customers closed down more than usual in connection with the Pentecost in May. Overall, this resulted in a negative organic growth of around 7%. Industrial could show an overall stable demand in the second quarter. even if it fluctuates quite a bit between different product areas, organic growth was unchanged compared to last year. When it comes to healthcare, we continue to see a good recovery from our existing customers, but also very positive development from new customers, and we had an organic growth of around 16% in the second quarter. Outdoor show growth driven by online print, And in other, there's also contribution from Canvax customers in the food and beverage sector. If we then go to slide number 10 and look at how things will be going forward, we still expect demand to gradually improve during the second half of the year. But the market remains very uncertain, and we continue to have a very high focus on new sales to support our growth. And a new contract is secured in Thailand. It's an important result of this work. We also continue to optimize our cost structure. And in the second quarter, we exited one big warehouse in the UK. And as I mentioned before, we decided to consolidate back in Pennsylvania, Williamsville, Atlanta. And we also have done a reduction of personnel in several locations. Parallel with this, we are focusing on reducing our net debt by optimizing our working capital and investment, and also improve our cash flow. As a result, our working capital decreased by 370 million crowns in 2023, and as I mentioned before, a third of 264 million crowns in the first half year. That was everything for me, and now I open up for questions.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. Our first questions come from Derek from ABG Sundar Kholia. Your line is open. Please go ahead.