Elanders AB (publ)

Hello and welcome to the L&R's ABE conference call. My name is George. I'll be your coordinator for today's event. Please note this conference is being recorded and for the duration of 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 default keypad to register your question. If you require assistance at any time, please press star 0 and you will be connected to an operator. I'd like to hand you over to your host today, Mr. Magnus Nielsen, to begin today's conference. Please go ahead, sir.

Thanks, George. Welcome, everyone. Magnus speaking, and together with me is also our CFO, Elsa Wilson. And I will now go directly to slide number five in our presentation and talk about our first quarter. The demand decreased for the majority of our customer segments, which resulted in a negative organic growth of 2%. It was mainly print and packaging solutions that felt the effects of declining volumes, and supply chain was able to withstand better. In response to the declining demand and uncertainty in the market, we acted very quickly and implemented structural measures around 87 million crowns, and these actions will reduce Alambo's annual cost base with around 145 million crowns, whereof 81 million crowns in already in 2025. And as a consequence of the declining sales, the market turmoil, the adjusted EBIT margin came in at 4.1% compared to 5.5 the year before. If we then go to slide number six and look at our cash flow and cash conversion development, we can show that we continue to deliver a very strong cash conversion, which ended at 138% in the first quarter. We also managed to continue to reduce our working capital, which went down at 190 million crowns. And the decrease in working capital combined with the strengthening of the Swedish crown reduced on net debt, excluding IFRS 16 by 345 million crowns, and including IFRS 16 on net debt was reduced by 862 million crowns. If we then go to slide number seven, look at supply chain solutions, you can see that our organic growth slowed down compared to the fourth quarter and decreased with 1% compared to a growth of 1% in the fourth quarter. Europe was in line with the previous year despite low demand from the majority of our customer segments through growth in lifecycle management and also in the fashion segment. North America, on the other hand, had a very soft quarter with negative growth, but the inflow of new customers continued to be positive, but we could also see a slowdown in the end of the quarter. Asia that is very exposed towards electronics continues positive trend with organic growth, and our new site in Thailand continues to grow just as planned. And our adjusted EBITDA decreased to 4.8% compared to 5.5 the previous year. The major reason for the low margin is the continued reduction of automotive volumes and the continued soft demand from fashion in North America. We also had an extensive system change at one of our biggest sites in Europe that affected the result negatively. This is now completed and will not have any negative effect going forward. Structural measures of 1 million crowns were implemented in the quarter with a focus on adjusting our costs related to the automotive customer segment. Cash conversion continues to be very strong and improved compared to last year. We can then go to slide number eight to look at print and taxing solutions. You can see that they had a very challenging quarter with a negative organic growth of 6%, which resulted in an adjusted EBITDA margin of 3% compared to 7.5% last year. Print was clearly more affected by a weaker market, and this combined with a very uncertain market outlook made us act both quickly and substantially on the cost side. and we decided to concentrate two production sites, one in the U.K., and close down our offset production in Hungary and concentrate these volumes to Poland. These actions impacted our results negatively with 56 million crowns. If you then go to slide number nine, look at the development of our different customer segments in the quarter, and start to look at electronics. The picture continues to overall be positive, and we could see an organic growth of around 4% in the quarter, plus a continued increased demand and also growth in Asia. Improving demand in the lifecycle management area in Europe was also supporting the growth. Fashion continued to see recovery in Europe and compensated for lower demand in North America, which resulted in an organic growth in line with previous year. The trend we have seen the last month in North America with lots of new requests, new customers, slowed down in the end of the quarter as a consequence of the ongoing trade disputes, especially between U.S. and China. Despite the turmoil in the market, we continue to see a high volume of new requests, and we have also secured new customers that will be implemented in the second and third quarter. If you look at automotive, continued a negative trend from previous year with a negative organic growth of 12%. And for print and packaging, it was even worse with a negative growth of 16%. Supply chain came in slightly better with a negative growth of 11%. Outer was stable in the quarter with an organic growth in line with previous year. and industrial that showed a stable demand last year turned to negative growth of 3% in the first quarter. When it comes to healthcare, we could see negative growth of 5%, but the segment continues to look positive going forward with lots of new requests from both existing and new customers. If you then go to slide number 10 and look at how things will be going forward, So to meet the uncertainty in the market, we continue to have a high focus on lowering the group's cost base and to consolidate capacity when possible. In parallel with this, we have a very high activity in the sales side to secure new customers. And we think that over time can trade barriers create new opportunities for global logistics companies as a landlord by breaking up global logistics chains and replacing them with more regional and local logistics smart logistics chains, which will increase the need of warehousing. This will also increase the need for smart solutions that make it easier for companies to quickly redirect their inventory volumes to in different markets. And here, Alambos has an advantage with our own WMS system, CloudX, which with just one integration makes it possible to utilize our global capacity. And to support this even further, we will increase the tempo in developing more AI functionality in the system. We also continue to work with reducing our net debt by optimizing our working capital, investments, and cash flow. And as a result, have we managed to reduce our working capital with 634 million crowns the last two years. And that was everything for me. And now I hand over to the operator to handle questions. Please, operator, go on.

Sorry about that, sir, the microphone. Ladies and gentlemen, as a quick reminder, if you have any questions, please press star 1 and just make sure that your line is not muted to allow your signal to reach your equipment. So, it's star 1 for questions. Today's first question is coming from Mr. Marcus Anirudh Al-Kharnegi. Please go ahead. Your line is open, sir.