Elanders AB (publ)

Welcome to the Landers AB conference call. My name is Alan and I will be your coordinator for today's event. Please note this call is being recorded and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero and you'll be connected to an operator. I'll now hand you over to your host Magnus Nelson to begin today's conference. Thank you.

Thank you, Allan. Welcome everyone to Landolt's conference call. And together with me here I also have Elsa Wilson, Landolt CFO. And now I will go to our presentation and I will go directly to slide number five. Look at the third quarter and And we could see in the third quarter that demand continued to improve, like we also could see in the second quarter. And we could also see that several of our customer segments continued to improve, and the improvement was mainly in Europe and Asia. But North America, that has very high exposure towards fashion, continued to remain weak. But all in all, this resulted in an organic growth of 3.9% for the group. And if you look at our adjusted EBITDA result, it also improved and came in 12% higher than previous year. And it was mainly our business area supply chain solution that was the driver behind both the growth but also the improved result. Our non-adjusted result was positively impacted by one of items of 149 million crowns. and this was mainly connected to a revaluation of the earn-out for CAMAC. When we acquired the UK company CAMAC, we paid two-thirds upfront, and the size of the payment for the remaining third was based on the outcome of the results for the full year of 2024. And even if we now can see that CAMAC has started to perform better and it looks much more positive going forward, with still that soft start of the year result in an earn-out payment that is lower than expected. If we then go to slide number six and look at our cash flow and cash conversion development, our year-to-date figures went down to 86%, and that was a result of organic growth in the third quarter that resulted in an increased working capital growth. If we then go to slide number seven, look at supply chain solutions, you can see that we managed to grow organically with 5.2% compared to 0% in the second quarter. And the growth came mainly from our activities in Europe, but also Asia could show a pretty good recovery. As I mentioned before, North America continued to be very soft. But in the end of the quarter, could we see an improvement in the share of prospects that was converted to new customers? And we have also seen in the third quarter that we have a lower shown, and that means that we have lower amount of small, medium-sized customers that goes insolvent or exit us because of financial problems. So we could see a stabilization in that area as well. We also managed to improve our adjusted EBITDA results with 23%, and our adjusted EBITDA margin increased to 7.2% compared to 6.7% previous year. We can see now when sales recovers that our strategy to increase the share of more value-adding services, the discontinuing of low-margin deals, and acquiring companies with higher margins results in improved margins. If you look at the market going forward, it continues to be rather soft, and our customers' forecasts continue to change regularly, and it's hard to predict how the demand will look like the coming quarters, but overall, for us, it's a trend more positive than before, and we continue to have a good inflow of requests from new potential customers. If we then go to slide 23, Number eight, to look at Princeton packaging solutions, you can see that we had a very challenging quarter. As normally, it was always very soft, but the big difference compared to last year was that also September was very soft, especially regarding demand from our automotive customers. But it was also lower volumes of market materials because of lower marketing activities from our customers. And this resulted in negative growth of 2% and an adjusted EBITDA margin of 4.9% compared to 6.5% the previous year. But on the other hand, if you look at the year-to-date, the adjusted EBITDA margin is still better than previous year, and we continue to focus on increasing our share of online print, which over time will make us more robust to changes in demand of traditional print and improve our margins. And we will also now enter the most important quarter for the whole year, the fourth quarter for print. So we hope that we can see some recovery also from that point of view. If we then go to slide number nine to look at the development of our different customer segments in the quarter and start to look at fashion, we could see some continued recovery compared to our second quarter. even if our organic growth was still negative with around 7%. The recovery is mainly in Europe, with the help of new customers and also recovery from some of our existing customers, which actually resulted in an organic growth of 15% in the fashion segment in Europe. But as I mentioned before, the demand in North America remained pretty weak, and they had a negative organic growth of 19%. But as I mentioned before, we could see a better conversion of prospects and new customers in the end of the quarter. And we should also have in mind that it was in Europe that we started much earlier. I think at least nine months before we could see downturn in demand in Europe, and North America was nine months later. So I think there's some delay in the recovery process. It was positive to see the better trend in Europe, and then we hope that North America will start to improve, especially during next year. And when it comes to electronics, the picture continues to overall be positive, and we could see an organic growth of around 5% in the quarter, despite the demand from some product areas like office print and heat pumps are still pretty soft. And the growth comes mainly from laptops and servers, but also from several other products. And our lifecycle management servers continue to have a positive trend. And we also expect that this positive trend for electronics will continue going forward. If you look at automotive, what's the third quarter, very challenging, especially for our print divisions, because their sales is very connected to the number of cars that are built and in the quarter resulted in a negative organic growth of 18% for print and packaging. Our supply chain activities are much less sensitive to the number of cars that are built, because we are also providing lots of different services, and their negative organic growth was only 3%, which resulted in a total negative growth of around 7% for the group. Industrial continues to show an overall stable demand, and even if it fluctuates quite a lot between different product areas, we managed to deliver an organic growth of 2%. When it comes to healthcare, we continue to see recovery from our existing customers, but more importantly, also very positive development from new customers, and we had an organic growth of around 16% in the quarter. Auto continues to show growth. There was a contribution from Camax customers in the food and beverage sector. And in other words, we have online print that also continues to grow but was in a bit slower pace compared to before. If we then go to slide number 10 and look at how things will be going forward, I think I mentioned it before, but we continue to expect a gradual improvement of the demand in the coming quarters, even if the market continues to be very uncertain. And we need to calculate with some setbacks from some of our customers and also that there will be continued swings in the demand. But still we think it will be improving for us step by step. So over time balance these swings and to gradually improve our results, we are continuously working with optimizing our cost structure, and we also had a big push to drive new sales. And when it comes to new sales, we saw the positive results, and this was also an important reason that we could show a growth in Europe in the quarter. UK, that has been more challenging, even more challenging for us throughout the year. It's now starting to develop in a more positive direction, and we have started to convert more of our prospects to new customers in UK as well. We have also started the establishment of our first country logistics facility in Thailand, which is a very important step in our strategy to fetch volumes moving out of China and also to grow in Southeast Asia. And this will also help us to support our organic growth during next year. Overall, can we also see that our actions on the coast side, more focus on business with higher margins, gives a very positive result on our margin as soon as sales is recovering. Thank you. And now we 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. You'll be advised when to ask your question. We will take our first question from Derek Laliberte, ABG Sandor Collier. Your line is open, please go ahead.