Ependion AB

Ladies and gentlemen, welcome to the presentation of Bezier Electronics Group AB Financial Statement 2020. Today, I'm pleased to present Pierre Samuelson, President and CEO, and Joachim Lorrain, Executive Vice President and CFO. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Speakers, please begin.

Thank you very much, and all of you listening in, welcome to this report, a presentation of the report. This is the last quarter of 2020, and in one way I hope that we will not see the same situation in 2021 as we have seen in 2020. I hope and I'm sure all of you know what I mean by that. But we are going to do this presentation as we normally do between me and Joakim, And so I start, then Joakim comes in, and then I end up summarizing the end. If I start on the business update, a couple of words around the end of the year. We are, of course, not happy with the situation that we reported a small loss in the quarter four, because you never, in either of our positions, want to have this anywhere. But there are, as we tried to explain, we'll try to explain several positive signs and also substantial important things that have happened in the other year that makes us positive going forward. And we will try to explain that in this half an hour. First of all, we are still affected by the COVID-19 situation. And it's mainly, it's in all units, but it's mainly Bay Electronics that has gone, we have seen real effects on the volume side. Vestamer has, during this situation, they have been a little bit lower than expected, but still making profit every quarter and a decent level. And also, we had a tough situation in the beginning of the year, and I'm not talking about beginning of 2020 for Carenex, But step by step, they have improved, and we are happy to show a small profit, actually, after a couple of losses quarter in CoreNX. But the most important thing for us in a business like this is to look at the order situation. And we had some tough quarters, especially quarter two and quarter three last year. But now quarter four, we start to see now we are coming back up to levels where we should be. And as you can see in the second point there, that the orders increased by 28% compared to quarter three. And we, as you can see later on here, we are close to the 400 million that is important for us to come up to in the quarter. It's also extremely positive to see that Vestomu, they have now entered a supply agreement after the quarter four, that is in January 2021, with the train manufacturer Alstom. And that is, and you can see the value here, it's a five year contract and it's a 200, at least 250 million Swedish value on that one. This is also quite strategic for us because of course it's a nice figure for us. But it's also, some of you is aware of the fact that Alstom is in the process of acquiring Bombardier's train side. And there was a preliminary okay from EU authorities around this thing. And for us, of course, then this signals that we have a good position in Alstom and we have a good position in Bombardier already before. So for Vestamo and for Bay Group, this is quite important for us to get that signature, if I put it that way. We said already when this pandemic started, let's say March, April last year, we said in the call of the quarter one that we will concentrate on the financial situation, cash flow, debt, and so on, so that we don't come into problems on that side. And I'm happy to say that we have had, I mean, positive cash flows every quarter. especially now the last quarter with the 45 million. And given the circumstances, that I think is good. And that also means that we have lowered the net debt during this pandemic situation. So even though we had a negative result, a little bit hit by currency and things like that, there are also positive signs going forward. If we then go into a couple of words on the entities, I have already said that we see that Westomu, we have already stated, all the times we have stated that if business goes down, it goes down quicker in Bayer Lekonisk, but it also goes up quicker. And Westomu is a little bit more, a little bit down, a little bit up. And you can see that during 2020, that was exactly what happened. And Westomu has... Yeah, they are also back up on the order side. They have been profitable every quarter, and we can see also that there is a good backlog going forward. Bayer Electronics has been a little bit hit by, especially in the quarter four, that it's different things at the same time. I mean, a little bit mixed, a little bit higher levels of sales in the Asia-Pacific, lower in the U.S., And also, you can call it also a little bit on the product mix side. But the good news there is that now we can see the order intake going up in Bay Electronics. We can see that that will be balanced up again going forward. So there will be a better balance between the geographic regions coming into 2021. And then you will also probably see margins going up again in the Bay Electronics. I have already covered CoreNICs. I'm happy to say that they now start to be on the black side. I mean, they are making small, but a profit after several quarters in the red. We have said during the pandemic all the time here that we want to safeguard competence. We don't want to lose competence when it comes to development, but also sales side. And we have put a lot of emphasis into meeting customers digital during the whole period during 2020. And there I'm quite proud of the organization, that we feel that we have still very good customer contacts around the world, which means that as soon as the customer starts to order again, we will get up again because, as you know, when customers order, we get the business from them, so to say. And we have done some also improvements on the product side, so we are coming out of 2020 with a very good product portfolio, even better than compared to when we entered into 2020. We had confirmation, and I will tell you a little bit at the end of this presentation, that the long-term strategy remains. We can also see that overall market trends with digitalization, connectivity, and so on, even perhaps speeding up. So I think we still believe that the products that the markets we are in are good going forward. And also based on what we have seen end of quarter four, but also now beginning of quarter one, and based on the insights we have of today, we expect a market recovery in 2021, especially second half of the 2021. But it's also important to note that we have a good backlog going into 2021. The slide and the comment about COVID-19, the way we see it here is that, without going through all the details here, but we see that we will still be affected by the COVID-19 when it comes to travel, when it comes to how to communicate internally and with customers. That will be In our view, that will continue during the first half of 2021. So we see a little bit, I don't hope it's only wishful thinking, but we hope that coming to summer and after summer, we will be able to start to meet each other again. I would say as the CEO, if it takes longer time, you start to get the challenge to lead a company like this when you can't meet people. But hopefully the vaccine and things like that will make that happen. But also now important going forward, we have now said internally, we don't want to talk about the COVID-19 as an excuse not doing business, because this is a sort of a new normal when it comes to do business, which means that we hope and could see signs of that. Even first half, it will be improvements, but especially second half, we can see improvements in the business side. If we go into just a summary of the order and the sales situation, the most important thing is actually the order intake. Everybody realizes first you get an order, then it becomes sales, and then, of course, if you have higher sales, they get profit. But the order intake in quarter four, for me, it's the most important figure in the report. And you can now see that, in reality, we now have the same order intake Q4 as we had Q4 2019, especially if you're correct for the currency things. And also important is that the overall backlog that we have that you can see there is 492 million is also in the same level as it was 12 months ago. So we are coming out of 2020 in an okay position, if I put it that way. By that, I hand over to Joakim, and he will go through the financial situation.

Hello, everyone. This is Joakim. I will take you through more of the financials for the group and the three business entities. We start with the group. As you can see, the order intake was 392 million in Q4. The sales were 350, and unfortunately, we had a loss of minus 5 million for the quarter. The main reasons for the loss is, of course, the lower sales, as Perve indicated, and the fact that COVID is impacting mainly Bayer Electronics, but also, of course, impacting Vestamo and CoreNX. We have the foreign exchange against us. The impact on EBIT is around 6 million. and for the full year actually it's 20 million. So we've had an uphill kind of situation with the currency. You that follow us, you know that in Q1 we announced the restructuring program and we can now tell you that we have basically finalized that one according to plan and it will give what we said as well with around 25, 30 million savings this year, sorry, 2020, and the yearly effect of around 40 to 45 going forward. So that one is done, we can say. Looking at below EBIT on the financial net, there we also have a currency impact by the stronger corona by the end of the year. It's around 4.5 million. And the total number for the year is 8.2, actually. Net income negative, yes. Per stated the good thing is the cash flow, 45 million in the quarter and 70 million for the full year. Let's go into the business entity estimate. Heading here is order growth that Per mentioned earlier. and performance basically moving sideways. Similar numbers to what we saw in Q3. Order intake, 214 million. Sales 183 and an EBIT of plus 15 million or 8% for the quarter. And the order intake, I mean, we have landed a few, not a lot, but a few larger orders mainly on the train side. in the quarter, so it's good to see. It's not only one or two orders, it's in quite a few places, which we are happy to note. And Pär has already mentioned the Alstom contract. That is nice to see, and that is also providing for going forward with decent volumes. Earnings at 8%, as I said, full year at 11%. giving a pandemic year decent is the way we described it. We should also remember that we have continued to have the focus on our strategy, invest the more that we grow strategy, including focus on the segments power distribution track side that will cater for somewhat better growth going forward as well. And we also state that we have been working with the product and then our offerings, as Per said. We have developed a service concept also in Vestamo that we believe will add on going forward as well. So, yeah, all in all, good with the order growth in Vestamo. Barrel electronics, yeah, the heading here, continued impact of the pandemic. Order intake 159 million, sales 145, and a loss of 11 million in the quarter. The good thing here is that if you look at the sequential view on the order inside, the 159 million is actually a growth compared to Q3 with 24%. That is good to see. What we can say on the regional side is that we still see a tough time business climate or a challenging business climate in the U.S. and partly in EMEA, while Asia is actually showing a small increase. So there are lights in the tunnel for sure on that side. In terms of the loss, Pam mentioned it, we do have an unfavorable regional and by that product mix in the invoicing that's been done in the quarter. We have lower margins on the Asian side compared to the Americas and EMEA, and that has hit us in the quarter, giving the loss. We should be aware that we have taken down the cost, partly then related to the restructuring program that I mentioned before, but it's around 50 million lower level of cost in Bayer Electronics this year compared to the year before. We have before talked about the cooperation between Bayer Electronics and CoreNX. That has continued basically as planned, and we are coordinating the sales channels in EMEA and US, and we are working with the supply chains as well. And there are more to do on this matter, and that one we have in focus that we'll continue to work with. Finally, corenics. It's good to see that we have a positive sign, as Per said, positive development, turning it into the black numbers. Also here we see a sequential growth of orders compared to Q3. Good to see. Sales is also up compared to what we have seen earlier this year. Cost level we have taken down, and now with the somewhat higher volume, we do see the profit. So that one we are happy to note. We also want to highlight that during the last two years, basically, we have been having a relatively high level of development because we have... during this period, redesign the hardware platforms and also the software or the new operating systems for all the products in CoreNX during these years. And that means that going forward, we will actually release quite a few new products. So in these tough times, we have continued to invest, and that's important also to have in mind going forward. And as I said, the cooperation with Bayer Electronics continues with Forenix. That basically concludes my part, so over to you, Per.