Elanders AB (publ)

Good day and welcome to the eLanders A-B conference call hosted by Magnus Nielsen, CEO, and Asa Wilson, CFO. Please note, this call is being recorded and for the duration of the call, your lines will be on listen 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 zero and we'll be connected to an operator. I will now hand you over to your host, Magnus Nielsen, to begin today's conference. Thank you.

Thanks, Ben. Welcome, everyone, to Lambert's quarterly conference call. I will now go directly to slide number five in our presentation and talk about our third quarter. We could see in the third quarter that our underlying demand improved, and if we adjust for declining prices in the air and sea forwarding area, we had a negative organic growth of 2% compared to 5% in the second quarter. And the recovery in demand was mainly driven by improved sales in September. Excuse me. If you look at our adjusted EBITDA margin, it continues to improve, and it came in better than both the previous quarter and last year, reaching 7.3% compared to 6.6% last year, and this is a result of our actions to lower our cost base. In the third quarter, we also decided to carry out further restructuring costs in our biggest subsidiary, LGI, as a result of the outcome of our new CEO's review of the company. These measures are mainly affecting their overhead costs, but also some conservation of warehouse space, but they will still, after this action, still have capacity for future growth. Positive in the quarter was that North America came back to organic growth, and Asia continues to be stable for us. Europe had negative organic growth, but that was mainly because of lower prices in the air and sea area. And that was especially affecting the trade lines between Asia and Europe. If we then go to slide number six and look at our cash flow and cash conversion development, we can continue to show that we deliver very strong cash conversion. In this quarter, it ended at 73% compared to 4% last year. We also managed to continue to reduce our working capital, which went down with 189 million crowns in the first nine months. And the decrease in working capital together with strengthening Swedish crown reduced our net debt with 280 million crowns in the first nine months. despite dividends of 147 million crowns in the second quarter. Including IFRS 16, our net debt has this year been reduced by 907 million crowns. If we then go to slide number seven to look at supply chain solutions, you can see that organic growth decreased at 4 percent compared to a negative growth of 3 percent in the second quarter. But if we adjust for air and sea, it was only negative with 1%. And in the third quarter, North America turned to positive organic growth, which was mainly driven by bagging logistics. And Asia remained stable, but Europe had some negative growth, but that was also mainly because of air and sea. Our adjusted EBITDA margin improved both by quarter by quarter and year over year, year-over-year as a result of our cosine measures and came in at 7.9% compared to 7.2% last year. And Supply Chain Solutions continues to have a very strong cash conversion and came in at 105% compared to 47% last year. We also have structural measures of 80 million crowns in the quarter And this was mainly in our biggest subsidiary, like I mentioned before, in the LDI. And the LDI has now implemented a new, more efficient organization that will give us savings, especially in the overhead, and without reducing the company's future capacity. If we then go to slide number eight to look at Princeton Packing Solutions, you can see that our result continues to recover. despite low sales, and Queen came in with an EBITDA result of 36 million crowns compared to 32 million crowns the year before, and their EBITDA margin improved to 6% compared to 4.9% last year, despite a negative organic growth of 4%. The print started the quarter with very low demand, but they could see a rather strong recovery in September. In the quarter was the additional new yearly sales volume of around 5 million euros coming from our consolation activities in the German print market. They were implemented successfully in Germany, and this was one of the reasons for the recovery in September, combined with improvements in other new sales. If we then go to slide number nine, look at the development of our different customer segments in the quarter and start looking at electronics. The picture continues overall to be positive, even if organic growth was only 1% as a result of electronics being the first customer segment to recover already in Q3 last year. when they had an organic growth of 5%. So overall continued good demand from electronics. Fashion had a negative organic growth of 5%, but if we just go ahead and see, we had an organic growth of, we actually had an organic growth of 1%, mainly driven by the positive recovery I mentioned before in North America by bag logistics that could show an organic growth of 4% in the quarter. The demand in Europe was in line with last year. If we look at automotive, they continued a negative trend, but improved compared to previous quarter and showed a negative growth of 6% compared to 13% in the second quarter. At the moment, it looks like demand is starting to stabilize from our customers, and we can also see that their forecasts are now more accurate than before. Also, other improved with a negative organic growth of 3% compared to 5% in the previous quarter. And the improvement here came mainly from print and packaging with increased publishing and packaging volumes. If you look at industrial, they had a negative organic growth of 7% compared to 12% in the second quarter. And if we just for air and seed, could we see a slight growth in the national segment of supply chain solutions, but print that is exposed to global truck sales showed a negative growth. When it comes to healthcare, we had a negative growth of 12%, but that was mainly as a result of two discontinued disc customers, and the other customers showed stable demand. If we then go to slide number 10 and look at how things will be going forward, then, of course, the ongoing trade negotiations continues to create a great deal of uncertainties, but despite this, we can see a higher activity regarding new inquiries in the quarter, and we also gained new customers, and we also managed to renew several important customer projects especially in the supply chain area. In the quarter, we were also able to see the result of our measures on the cost side, resulting in improved adjusted EBITDA margins compared to last year. And with the additional actions taken in the third quarter, we expect to enter next year at a much lower cost base, but with continued capacity for growth. And parallel with these actions, we continue to have a high tempo in our rollout of the group's global warehouse platform, CloudX, and also the implementation of AI solutions, which over time will lower our cost base even further, but also increase our efficiency and create even more competitive solutions for our customers. We also still believe that the trade barriers over time will create opportunities for global players, such as Alambo, by breaking up global logistics chains and replacing them with more regional and local logistics chains. Okay, that was everything from me. So we open up for questions.

Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question or contribute on today's call, please press star 1 now on your telephone keypad and to redraw your question, please press star 2. The first question comes from the line of Marcus Almirud calling from D&B Carnegie. Please go ahead.