Elanders AB (publ)

Hello, and welcome to the LANDERS AB conference call. My name is George. I'll be your coordinator for today's event. Please note that this conference will be recorded and for the duration of the call, your lines will be in the listen-only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point during the presentation, please press star 0 and you will be connected to an operator. And I'm going to call over to your host today, Mr. Magnus Nilsson, to begin today's conference. Please go ahead, sir.

Thanks, George. Welcome, everyone, to Lando's conference call. And together with me is also our CFO, Josep Wilson. And I will now go directly to slide number five and talk about our fourth quarter. Demand continues to improve in several of our customer segments, but was offset by negative growth from the automotive segment, which is facing major structural changes. This, combined with continuous soft demand from old-fashioned customers in North America, resulted in an unchanged organic growth, but it also affected our adjusted EBITDA margin negatively compared to previous year. In order to meet the decline from automotive and other uncertainties when it comes to future demand, we decided to reduce overall costs, and we carried out additional restructuring measures in the fourth quarter, on top of the early communicated cutbacks in our road transportation operations in Germany. These actions will reduce our exposure towards automotive, but also in general lower cost structure and will lead to yearly savings around 50 million crowns starting in 2025. In total, operating results in the fourth quarter negatively impacted by one of the items of 52 million crowns. We've mainly referred to structural measures and revaluation of additional consideration for CAMAC. If we then go to slide number six presentation and look at our cash flow and cash promotion development, We can show that we continue to deliver very strong cash conversion, which ended up 90% for the full year, and we also managed to reduce our working capital with 145 Indian crowns. If we then go to slide number seven to look at supply chain solutions, you can see that organic growth slowed down compared to the third quarter and ended up 1% in growth compared to growth of 5.2% in the third quarter. The low growth rate was mainly due to the slowdown from automotive in Europe and also continued soft demand from fashion in North America. The rest of our customer segments continued the trend and showed organic growth in the fourth quarter, and we continued to see a very strong inflow of new customers and products in our fashion segment in North America. Our adjusted EBITDA decreased to 5.9% compared to 7.3% previous year. And the major reason for the low margin is the unexpected reduction of automotive , which we couldn't compensate for in such a short notice, but also the continuous of demand from fashion in North America. In a , we continue to reduce our cost base and increase our share of value-adding services by reducing low-modeling business like the road transportation business in Germany. And this combined with the continued positive trend in demand from several customer segments makes the outlook for supply chain look much more positive in 2025. If we then go to slide number eight, look at Princeton's packaging solutions, You can see that they had a very challenging quarter with a negative growth of 5% despite the very strong quarter from online print customers and also some recovery from packaging and marketing. The main reason to the negative growth was the automotive segment that decreased organically with around 28% for print in a quarter. positive was that they still deliver a strong EBITDA margin at 8.9%. And to balance the growth from automotive, have we done several cost cuts during the year, but we also continue the transformation of going from traditional print production to digital print, which open up for growth, continued growth in online print, but also in publishing, packaging, and marketing materials. If we then go to the slide, Number nine, look at the development of our different customer segments in the quarter, and we start to look at fashion. Could we continue recovering Europe? But as I mentioned before, the demand in America remained on a lower level than previous year, and together it results in negative organic growth of 11%. Positive is that we continue to acquire new customers, and the number of new requests, has actually accelerated in January after the decision from Mexico to stop the possibility to deliver fashion products from Mexico due to fee to e-com customers in the U.S. As a result of this, we'll serve our fashion brands before we move warehouse volumes from Mexico to USA, which we expect will give us increased demand from fashion clients. When it comes to the chronics, the picture continues to be overall very positive. We could see a strong organic growth of around 9% in the quarter because of continued increase in laptop and server volumes, but also other products like office printers that have been suffering before. The growth was also supported by continued growth in our lifecycle management services as well. If we then look at automotive, it was the fourth quarter, very challenging for both supply chain and print. And several automotive customers started already in November to reduce their production. And in December, they reduced their productions much more than previous year. And this resulted in a negative organic growth of around 17%. Industry continues to show an overall stable demand, even if it continues to fluctuate quite a lot between customers. And we managed to deliver an organic growth of around 3%. When it comes to healthcare, we continue to see a recovery from our existing customers, but also a very positive development from new customers. And this recovery started already in fourth quarter last year, but organic growth this quarter was around 2%. ADDOC continues to show growth contribution both from our FMCG customers in the UK combined with continued growth from our online print segments. If we then go to slide number 10, and this is how things will be going forward, if we then exclude automotive, we expect to see a continued gradual improvement in demand from our different customer segments, combined with the growth of newly acquired customers. When it comes to automotive, we expect some new swings in the demand, which makes it very hard to predict the development in 2025. To counteract this uncertainty, we have implemented several structural measures during 2024, like the decision to discontinue large parts of our road transportation operations in Germany, but we also do the consideration of capacity in both our business areas to reduce our exposure towards automotive, but also overall lower cost, which will help to improve our margins. Positive is that we continue to see a recovery from our other customer segments, combined with a continuing inflow of new fashion customers. And it's also very positive that our new and first facility in Thailand are now up and running and are starting to deliver, which will have a positive contribution to our earnings in 2025. Thanks. That was everything for me, and now we open up for questions.

Thank you very much, Mr. Nielsen. Ladies and gentlemen, as a reminder, if you have any questions, please press star 1 on your telephone keypad and just make sure your line is not muted so that you can reach your equipment. Our very first question today is coming from Gustav Berneblad of Nordea. Please go ahead. Your line is open.

Yes, good afternoon. It's Gustav from Nordea. Hi, Gustav. Hello, hello. Maybe we can just start here on the margin in Q4 specifically for supply chain solutions. I mean, you comment on negative effects here from automotive, but also bearing logistics. I mean, are there any other effects that is also hiding in there, or if you can elaborate a bit on that?

No, I think the... No, I think the main reason that we couldn't match the margin last year was that we still, last year, had high levels of fashion volumes in North America, and that is a very important company for us when it comes to margin, and the levels were still much lower this year. And then on top of that, the massive closure in the automotive operations, which was unexpected, which then we ended up with overcapacity in both personnel and other things. So these two things was the main reason that the margin couldn't match the year before. And that's why it's very positive for us now that we can see that the North American oil really starts to recover, and then the automotive thing we just need to handle during the year by cost savings and adjustments if it doesn't recover.

Okay, great. Is it possible to say anything on the margin for bearing logistics today compared to when it was acquired?

The margins are still, they have a very flexible business model, so their margins are, even when it's a very low demand, it's still a good margin, close to double digits anyway, but if I say it like that, when they are more fully loaded, they do double digits still, but in a much higher range.

Okay, that's clear. And then if we move to the fashion here in Europe, I mean, if we sort of exclude the two new customers you're ramping up, are we still seeing a positive growth?

Yes, we actually do. It's been a bit surprising for us, but it feels like our customers are doing pretty well. One of our existing customers had really strong growth, one of the big ones in Q4. So it was not just the two new customers. It's also underlying we had a growth in Europe. So let's see here. I'm just looking. I think we said negative growth for fashion was around – but then it's still compensated by at least double-digit growth in Europe. So that looks good.

Okay, interesting. Is that sort of – is it low-end, high-end, mid-end? Is there any driver in the specific sort of segments?

It's more the low, mid-end that is doing well. it's uh you know it's not the the expensive the expensive product is still it has a big challenges we can see that but low mid-range is doing well and also we have some big retail business in germany that is doing really well as well so it's both econ and retail that's very clear and then maybe just the the last one here on uh

The other segment, I mean, 19% organic growth year-over-year looks like it's driven by fast-moving consumer goods, but is that due to easy comps from last year, or is there anything else we are missing here?

No, it is, like you say, it's growth from FMCG, especially in the UK, and then also online print that is driving the growth. So we are looking at to separate it more for the next year's reporting. But we had both of them was, we can see recovery now in UK. That was also partly, I didn't mention that in your first question on the margins in Q4. It's also still a bit more soft in UK, but now we could still see an increased amount. So it's FMCG and online print driving the growth, yeah.

Yeah, that's perfect. And then just, sorry, just one final one. I mean, it looks like you have some spots where you are seeing quite solid growth. I mean, electronics as well. Are there any areas where you are sort of starting to see an inflection point to the negative, so to say, in these sort of positive areas?

I think overall, you know, in our industrial customers, it's very difficult. As I said, it's really different from company to company and business to business. But, you know, in that area we have, you know, it's both trucks but also industrial products and things like that. So overall, stable, looks good. We have some customers that are doing farming equipment. That was really poor in Q4, but was compensated by other industrial clients. So, For the industrial clients, it's really a mix depending what kind of product they are delivering. It's more that we have a good balance in our area, yeah. And also we have some customers exposed to, you know, house construction that was improving a bit in Q4, and we do some big heat pump systems that was recovering a bit and things like that, so yeah.

Okay, perfect. That's all for me. Thank you very much.

Thank you, Gustav. Thank you for your question, sir. Ladies and gentlemen, once again, if you have any questions, please press star 1. We'll now move to Marcus Emerud of Carnegie. Please go ahead. Your line is open.

Yeah, hi, Marcus. Marcus at Carnegie here. A couple of questions. Starting maybe with automotive, so you talk about the structural change in the automotive sector, and I'm just If you could elaborate a little bit how you go to change this and how you're going to meet this change. And is there, do you need to change to be able to meet that? Or do you expect automotive volumes to come back in this kind of a temporary situation? Because, yeah, you can change cost and keep cutting cost. But if you can just, yeah, elaborate a little bit on your thoughts there.

No, but, you know, it depends. But it's really hard to estimate if it will come back and how big it will come back and things like that. We are more handling it, if I say, in a very careful way. And if you look at the group today, automotive is down in 2024, it's around 18%. But, you know, this big change we do in Germany for road transportation will actually When that has a full year effect, automotive will go from 18% to 12% for the whole group. And so for us, for the moment, we handle it like it could go down around 8%, 10%. And that's why we do adjustments on the cost side, both in supply chain and print. Because I don't think it's really hard for anyone to predict, and there was lots of positive news coming out also today about global factories and things like that. So we will, of course, we take care of all the conflicts we have, but we are handling it very careful, and we will adjust very quickly if we see there's not a recovery or it continues to decrypt. I must say, it's very complicated because there's no clear outlook, so we have to be very careful approach, and better for us to adjust too much and then adjust

if it should recover more than expected so that is how we look at it and if i look at the the automotive business that you have left after you closed the the road transportation business i mean is it is it very different also within that segment or is it kind of across the board bad

No, I think, you know, road transportation has always been very competitive, and we would see that as almost no more news left. That's why we exited. But, you know, the contract logistics in supply chain is still a good business for us, and that is something we all, you know, will continue to work with in supply chain. More tricky is the exposure in our print division, where roughly also 17%, 18% is print, because there is the the volume which is connected to number of calls. So if the number of calls continue to go down, we need them to adjust our capacity there. But that is something we have been working with, you know, moving to online print, develop other digital prints and things like that. So there we are more prepared to see that it will go down step by step. And we also have an approach to handle that. In the supply chain, We still think the contract logistics is good business, as long as we can do, you know, reasonable, good margins, good business, we will continue in that area. But in the same time, we are not acquiring so much new customers. So I think the other areas will grow. So I think in two years, automotive could be under 10% of the group.

But the way we should see it is maybe that it's not the business that will grow, but but it will grow relative to the others, and then it will be kind of hopefully stable over time, the business that you do have, the contract logistics business.

Yeah, I think that's the good thing to be working in like we do in actually both print and supply chain is that we are not, you know, just a sole supplier of automotive. We can handle all types of products or, So, of course, we will continue to push for growth in electronics, fashion, healthcare is very important for us, and FMCG as well. It's thought to be an interesting area for us. So we will have to use the same resources, but for other customer segments to find growth and to compensate.

And moving on to fashion and fashion in the U.S. in particular, you mentioned that you saw some positive signs in January and more client requests coming in in January. Did you see that trend? Was it a trend that continued from the fourth quarter? Or is it so that you saw the same kind of pattern in the fourth quarter? Or is it completely new for this year?

No, no. We have seen already in third quarter an increase of requests. And we also gained new customers in Q4 that will start this year. So we already have a positive trend. And then in January, after this decision by Mexico, it really accelerated. So the first weeks in January, we have lots of requests of customers. So I think that we will anyway see growth, but I think this Mexico effect can even speed it up even more.

Perfect. And then finally, maybe on the UK, where you also saw some, if I remember right, you saw some signs of recovery in the fourth quarter. I mean, UK has been difficult. And now it sounds like it's gone a little bit better, if you can elaborate a little bit on the UK.

Yeah, we could see, especially in Carmack, that's very dependent on volume and consumption. We have started to see more requests. And also, we can also see some sales growth for the first time this year in Q4. And so we can see some good signs there. And also, Bishopsgate, they are more in technical logistics and have managed to do very well anyway. But they also signal now that it starts to look better in UK. There was lots of uncertainties after the election, but it starts to look better. It's still a challenging market.

Okay.

Thank you very much. Thank you, Marcus.

So, operator, is there any more questions, or should we go?

Yes, sir. Yes, sir. I'm just having problems opening my microphone, but please, there are no further questions, sir.

Okay. Then we thank everyone for calling in to our conference call. Thank you very much.

Bye-bye. Thank you. Thank you very much, sir. Ladies and gentlemen, that was today's conference. Thank you very much for your attention. You may now disconnect. Have a good day, and goodbye.