Ependion AB

Ladies and gentlemen, welcome to the presentation of Bayer Electronics Group AB23 2020 report. Today, I'm pleased to present Pierre Samuelsson, President and CEO. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question-and-answer session. Pierre, please begin your meeting.

Okay, thank you very much. First of all, welcome to all of you listening to this presentation of Bayer Group. Quarter 3 Report 2020. This is Per Samuelsson talking. If we start to go to the next slide, we can see that there is, and you can see that we have the normal agenda that we normally have, and business update, where it's sort of a summary on the statements on the report. Jay Joaquin will come into the finance and performance, and we will come into sort of the concluding notes in the end of it. And after that, we will have, if you want, a Q&A like that. If we start with a summary of the report, I think everybody realizes, and that's the same, I guess, for all companies presenting a report, Q2 and Q3, we have impact that comes from the COVID-19 like that. And, of course, for us, it has been that we have a drop in volumes during Q3. mainly Q2, and also now Q3. We indicated in the last quarter, and we saw then that Q3 probably will be in line with Q2, and that's more or less what happened. A very important statement for us in this is, of course, that we haven't seen any loss of the customers. So we can see that the volume decreases that we have had it's more or less related to that customers that we have have not ordered as they normally do without the pandemic. We think that some of the customers have a little bit lower capacity because they can't really run the factories with 100%, they perhaps run them with 90%. And we also saw that we know that some of the customers have been taking down inventories and things like that. But the important thing for us going forward is that we know that if we go around the world and also in the different entities, we haven't seen any loss of customers, which also means that when the customers start to order a little bit more and also increase their volumes, we will get the orders again, if I put it that way. We took very early on in March, we started and we took a cost reduction program, and that has definitely had the effect that we wanted to have. We also have seen that we have a stronger Swedish krona, mainly both in Q2, but now also Q3, has affected the result with roughly minus 8 million. But nevertheless, we have going out of the quarter still, even if it's low figures, we have a profit going out of the quarter. When this COVID-19 situation started in March, if I put it that way, February, March, we directly decided that, first of all, of course, the cost thing, but then also we decided to make sure that we Of course, have a good cash flow as possible and also have a good financial position so we can really handle the company during this period. And we also realized, I would say March, April time, that the product development and also to do everything we can to get out of this situation in a good situation was important. And that's also what we have done. We have, after now, the first three quarters, we can see that we had a small positive free cash flow during the quarter as well, but also accumulated for the nine months. And we, as I said before, we have come down on the cost side, but we have done it the way we see it, in a smart way, meaning that we still have an organization in place that is good and motivated. products that is, I would say, better than ever, and we also are organized and prepared to take care of volumes going up the next, hopefully, the next half year. If I go into the next slide, we can see that all three entities, Vestamo, Bioelectronics, and Coenics, they have had impact from the COVID-19, but Vestamo came in a little bit later, And now we start to see in bioelectronics and querenics mainly that we have seen during the end of the quarter three small but significant increases in the order intake. And we also are saying that we can see that signs that the bottom has passed. We believe now when we have gone out of Q2 and Q3 that, as we say, now we see clear signs that the bottom has passed. And we can see that already in the Q3 when it comes to Bay electronic synchronics. And we can also see some signs, but also beginning of Q4 when it comes to Vestamo. We have all the time been saying that the whole strategy is to make sure that when we're coming out of this crisis, when it starts to fade off, we will be in an even better shape and ready for growth. and with the aim as quick as possible to get back to the financial targets that we have, meaning the 7% organic growth, but also the EBIT level of 10%. When it comes to the COVID-19 measures, I will not go through this slide in detail, but I mean, we were sitting actually an hour ago here discussing about this thing. I think we have found out that we have one in the whole organization that have got COVID-19, which is of course very positive, that it's only one and it was not a serious one. And of course we continue with the different things where people work from home, but we also now are back into where more or less in the all offices around the world, definitely in Sweden that people are now also in the office. So I would say 50, 60% working from home and the rest in the office. Otherwise, in Q3, we don't have major effects on result or the financial positions that has to do with things we have got from governments and things like that. So I would say that it's a sort of a clean result. It's clean from COVID-19 supports. We got an agreement of an additional credit facility if we would need that, but as we see it today, we are far from to take that facility in place. With that, I go into order intake, and of course you can see on the volumes the last couple of quarters that the volumes have gone down, both when it comes to sales and the order intake. But the way I see it is that this is very much, as I said in the beginning here, related to that the customers that we have have, of course, then ordered lower volumes, but we haven't lost any customers. And when we now talk and listen to what customers are saying, I mean, they are now starting to be, they have inventory on the right levels. I would say the majority of the customers that we have, with some few exceptions in the U.S., by the way. Otherwise, I would say that most of those customers are now starting to go back into order, to put normal volumes into our order books. And that's, once again, why we state that we have passed the bottom. With that, I'm passing on to Joakim, and we're coming into the financial performance.

Hello, everyone. This is Joakim. I will now, on a couple of slides forward, give you the financials and comment somewhat on those. And I will start with the group perspective. In the heading, we state that, as Pat said, COVID-19 has for sure impacted our earnings. and so has the currency effects. So if we look at the numbers, the order intake was 310 million, the sales was 335 million, and the EBIT was five million. Clearly, as stated before, the currency impact that we have on the EBIT of a bit above eight million is mainly transactional variances. And the major part of that has actually hit Bayer Electronics, even though it has impacted Vestamu and Carenix as well, but the major part is actually hitting Bayer Electronics. As Pat said, we have launched the restructuring program in early part of the year. We see clearly that the effects of that has paid off, you could say, and we see reductions. And if we look on a sequential basis on the overhead costs, we reduce the overhead costs further 7% from Q2. So, yes, we lose on the top line, but we also handle our cost positions all across our organizations in a good way. Bottom line, net income, also positive. or an EPS of five euro per share. Of course, low levels, but this is how it looks. Per said also that we have had a positive cash flow, and it's actually the third quarter of this year. Every quarter up to now, we have had positive cash flow, even though it's small numbers, but still on the right side. So that concludes the group. Now we'll talk Vestamu. In Vestamu, we have for sure also here seen impacts of COVID, but we want to state that the strategic focus that we have had in Vestamu is still there, and it's still the main target that we have for the organization. The orders, they were hit for sure. We had an order intake of 164 million in the quarter. The sales was 182. and the EBIT was 15.6. When it comes to the order situation, as Pat said earlier, we have had negative impact in the quarter as our customers are deferring the investments and reducing stocks, et cetera. However, what we see in the pipeline and going forward we do see good potentials. And this then is also part of the qualification of our statement that we believe what we see today that the bottom has passed. The EBIT was then the 15.6 in the quarter. Of course, a relatively low level compared to where we come from. But again, it is an impact of the lower volumes of COVID, of course. We want to highlight for you that are following us that the two acquisitions that we did last year, Neratech and Virtual Access, when it comes to Neratech, we are basically done. It's fully integrated. We have changed the name of the entity, et cetera, and that is something that we put behind us and look forward. So that's all done in a good way. Virtual access is ongoing, basically on plan. And we want to state that both these entities, they contribute well in the quarter.