Eltel AB (publ)

Hi and good morning and welcome to this call where we will go through EL-TEL's results for the first quarter. My name is Elin Otter and I'm Head of Investor Relations here at Eltel until the rest of the day actually. With me today I have our President and CEO Håkan Dahlström and our CFO Tarja Leikas. Håkan and Tarja will start by going through the presentation and we will open up for questions after that. You are welcome to submit your questions either through the website or through the phone conference. But with that I'm handing over the word to you Håkan.

Thank you, Elin. And good morning, all. So during the first quarter of 2024, we see a net sales development where we have 176 million in net sales, and that is down with 12 million, where eight of those are within the segment. Happy to see that the order book continues to increase, and we estimate it to be 1.2 billion it has now. That is an increase from 1.1 a quarter ago. During the quarter, we have been able to sign new contracts to a value of 112 million. And of this, the share that is new businesses, as we call it, is 6%. So the new strategy we launched a little bit more than a year ago is starting to deliver new commitment from customer. I think that is really great. However, what is not so great during the first quarter is the net sales development in Norway. So of this eight million lower net sales in the first quarter that we have in the segment, six, six and a half is from the Norwegian business. And that is, of course, a problem for us. And that also visible in the result. And the result then is negative four million, an improvement from last year with one and a half. But nevertheless, not on the level we sort of expected. expected to be. So what is then good in this first quarter is that this part of the year the seasonality effect is very rough on us and normally we build up network capital and the cash flow is quite demanding during this time of the year also for the second quarter. But this year I would claim that we have a relative very strong development in the financial position. We have improved liquidity, we have been able to reduce the net working capital and of course a part of this reduction with 54 million in less net working capital is due to the divestment that we have been able to sign an agreement about for high voltage Poland. But the part of that is roughly 14 million of this 54. Also, the cash flow is a bit better than last year, and with this, we see a return of capital employed of 9.7%. So, to me, this is a good step forward in the right direction when it comes to our financial strength. As I mentioned, and most likely you have seen, we have during the quarter also agreed with Mutares that they will take over our high voltage business in Poland. And I will open up a little bit more about this on the next slide. And then after that, we will also talk a little bit about the progress we have in executing of our strategy. But on the right side, I would also like to point to you an example in this strategy that is the solar. solar pv and here is a picture from a park outside helsike it's a 10 megawatt solar park meaning that it is utility scale it's our first utility scale solar installation and we are ahead of schedule in this we started to work on the solar park last year, in the later part of last year, and we see great progress. And this is a really important proof point for us that we can deliver these sorts of things, and also that our IT support process and everything has been developed in the right way. So really good to see that the team that is doing this is ahead of plan. With that said, I come back to High Voltage Poland and the agreement about the divestment here. High Voltage Poland, in short, is a business that has a minor part services, it's services on substations, but a larger part of the business, a very large part of the business, is project. And those projects can be to build a substation or an overhead line. They are quite long projects, they are quite complex, and in this market that we now are talking about, the condition in that market is very customer friendly. When you have this type of complex project, long lead time, complex situation with write away and other type of permission. It is frequently so, at least in our experience, that unexpected things is happening. And when the market conditions are so customer friendly, it's very difficult to find common solution on those issues. So our business in Poland with 410 employees will be transferred to Motares somewhere here during the second quarter. To be able to take this step, we have prepared this for some time. We have reshaped the scope of the business, we have reduced the networking capital, also improved the cash flow from this business significantly. This has made this portion of our business sellable, I would claim. On the right side, you can see the net sales and adjusted EBITDA for this part of our business during the last four years. And of course, if we now can leave this behind and in new hands, this will improve our possibility in ELTEL to have an operation going forward with a stronger growth and a lower net working capital, but also a possibility to reach a higher EBITDA margin. So reduced risk, less complexity, also a possibility for me and other people in the management team to focus on our core market. All of these have then a financial impact, of course. So the cash flow effect of this is 3.75 million, and that is sort of the whole cash flow effect of this. Then, of course, there is a one-off on the EBIT here with 23 million in effect. With that said, I would like to come back to the demand in the market and the same picture that we have shown for some time. So we see here a good development in the committed order backlog, meaning that this is purchase order received from frame agreements and project. And here we see that we have a double digit improvement year over year. So I'm really happy with that. We also see that these new commercial terms that we have talked about, that the portion of them that is impacting the operation that we have at hand is growing according to plan. So we expect that this 44% of everything we do during this year will be based on these new commercial terms. So I think that is also really important for us because this is one important cornerstone in our work to improve our profitability. When we look at what is the content of the market demand, we see that power is increasing faster than we have estimated it before. We also see that the intensity in the communication business is reduced and also is reduced a bit more than we have expected. So I will claim that there is an accelerated shift in volumes from communication to power. With that said, I would like to hand over to Tarja to talk us through the group numbers.

Thank you, Håkan. ELTE's first quarter result is in line with our expectations, even with the rapid reaction from our customers to the updated regulation in Finland, the material logistic hampering four week long political strike in Finland and the heavier than normal winter conditions in Nordics, which I pointed out when we previously met. Our net sales declined 6.4% in reporting currency and 5.9% in local currencies. In Sweden, we report positive development in net sales, and in Norway, net sales development was the most negative. Regarding profitability, we note that our adjusted EBITDA has improved to negative 4 million. The positive contributors here were Finland and other business. We report positive development in return on capital employed, which has turned from negative 7.9 to positive 9.7. This is an outcome of, of course, our result improvement and a lower amount of operative capital employed. Håkan already gave some light to our Poland divestment. The HV Poland divestment has been estimated to have 23.2 million negative impact on group EBIT. The negative cash impact of the divestment is, as mentioned, 3.75 million. Then we move on to the segments, starting from Finland. which share of Eldell Group is 35%. Here, net sales took small step backwards compared to previous year, declining by 3% to 62.4 million. We had good winter volumes in communication and smart grids, but the four week long political strike had negative impact on power distributions, material logistics. Additionally, the updated regulation has disturbed our customers investment plans. Adjusted EBITDA improved 2 million euros and came to negative 300,000, where the main contributors were communications good volumes and stabilization of the two unfavorable power services contracts. Particularly welcome here is the table that we show in the lower right hand corner. There is the positive 12-month rolling EBITDA development. It reflects the energy built in the Finnish organization. In Finland, we have created a good momentum. And then I go to Sweden, which share of Eltel is 28%. We are very happy to note that Sweden has continued on the growth path. We saw decline in communication, but smart grids volumes more than compensated this. We recorded 49.8 million net sales, which equals to 2.7 growth in local currency compared to previous year. Adjusted EBITDA was euro-wise on the same level as previous year, being 500,000. Then we go to Norway, which share of Eltel operations is 14%. Net sales declined in Norway and it has continued to decline, now minus 16.6% in local currency. This is below our expectations and reflects the further reduced level of customer investments and delays in 5G. the heavy winter conditions made the outcome even more unfavorable, leading to lower than expected utilization rates. As a result, profitability adjusted EBITDA remained negative, minus 1.7 million. The positive side here is that despite further reduced volumes, Norway succeeded avoiding further profitability decline. But performance improving actions, including reduction in staff, investments to growth and efforts to broaden the customer base and service offering continue. Then we move on to Denmark, which share of LTL operations is 12%. Throughout last year, Denmark had record high growth, as we can see in the net sales table in the right hand corner. Last year's fourth quarter was very high in volumes. This has now impacted the first quarter volumes, and we see more typical start for the year. We also faced expected endings of two customer contracts and now reported net sales decline of 700,000 is in line with our expectations. The profitability reflects the short term top line decline and came to 700,000 and to 3.4% margin. For our Danish operations, we are confident in our ability to grow as the year progresses. And then I go to other business where we had the divestment news to share. Business-wise, net sales declined from previous year and came to 18.7 million. HV Poland's share of this was 7.3 million euros. Here we report profitability improvement. EBITDA loss has halved and came to negative 500,000. And that completes the first quarter segment financials, and I have the balance sheet items for you. In all here presented balance sheet items, we report major improvement underlying our strengthened financial position. Our leverage has improved from last year's slightly over six, now to 3.5. Net debt has decreased from 158 million to 115 million. Interest-bearing debt from 130 million down to 76 million. Networking capital development has been positive. From negative 5 million, we go down to negative 59 million. And with this balance sheet news, we complete the first quarter financial report and take a look at Elta's financial target setting, which we keep unchanged. And these targets are by the end of 2025. profitability, group adjusted EBITDA margin 5%, growth, annual growth 2-4%, leverage between 1.5 and 2.5 and dividend payout is of course subject to leverage target. Thank you for your attention and I hand over to Håkan.