Ependion AB

Electronics Group Q3 2022 report. For the first part of the call, all participants will be in listen-only mode, so there's no need to mute your own individual lines. And afterwards, there'll be a question and answer session. Today, I'm pleased to present Jenny Sodell, President and CEO, and Joachim Loren, Executive Vice President and CFO. Speakers, please begin.

Thank you very much for that. Hi everyone and welcome to our quarterly report session for Q3 2022. As the headline of our report indicates, we are happy to share with you that we have a record quarter when it comes to both sales and earnings. Hold on a second, I'll just show the agenda first. So first of all, I will go through a general business update. And then Joachim Laurén will go a little bit deeper into our financial performance. After that we'll have some concluding notes and also outlook and after that we'll open up for questions. So with that let's move into the situation after the third quarter. As I mentioned before, we came in with the best quarter ever for the group when it comes to sales and earnings, so we are of course very pleased about that. What was especially nice in the quarter was that both business entities actually performed on a good level at the same time, which is of course the reason why we as a group show a very strong result this quarter. When it comes to the customer demand, we can see that it continues on a good level. We are posting our seventh quarter in a row now with increased order growth. And we came in with another quarter above 600 million Swedish kronor, 621 to be exact. That corresponds to a growth of 24%. The sales number came in at record high 567 or 38% versus last year. And that was the result of Bayer Electronics business entity continuing to invoice on a high level and the Vestimo business unit, which was really struggling in quarter two, as you may remember. managed to increase their deliveries quite significantly in the quarter, which led to this good level. However, we do see a challenging situation still on the supply of semiconductors, and that is still affecting our deliveries, especially on the Vestimo side. But what is positive there is that for the first time, we are hearing some positive signs from our suppliers of electronic components that they do see a light in the tunnel, consumer demand going down on electronics components. So even though we don't really see any results of that right where we are right now, we do believe that there will be a softening and an improvement in the supply chain in the next, let's say, six months or so. The earnings for the quarter came in at 12.2%. Again, a record number for the group. And again, both business entities contributed nicely to that. Vestimo, who had a very low level last quarter, or quarter two of this year, I mean, actually came back to a good level of 14.5%, driven by a stronger volume. And Bayer Electronics had another strong quarter at 14.2%. When it comes to the macro situation, we all read the papers. It is a bit challenging out there, and we, of course, monitor that closely. However, we do still see a very high customer activity. We see a strong pipeline, especially in the Vestimo business entity. where we stand right now we don't see a softening in demand even though we do believe that the bay electronics business entity will see a somewhat lower order intake level in the coming quarters so if we look a little bit closer on the business entities on on this slide here and as i mentioned before vestimosi is really really good demand still and that demand is driven by Our focus segments train and energy. And we see the fourth quarter in a row now above 300 million Swedish kronor. And what is interesting in the quarter as well is that we didn't receive any larger orders as we sometimes do in some months and quarters. So it was a strong demand built up of many medium-sized orders, you can say. I mentioned the supply situation. It improved in this quarter compared to quarter two, which was a bit of a disaster. But this quarter we managed the component situation better, which meant that we managed to ship out a significantly higher volume in the Vestamo business entity. And the profitability, as I mentioned, is now approaching the target levels that we have earlier communicated of 15%. And as I mentioned as well, the supply situation is still challenging. We would have liked to ship a lot more out of the Vestamo factories in the quarter, but we are still hampered by the component situation. So the balance between order intake and sales is still not quite there. If we move on then to the Bayer Electronics business entity, we are happy that they present another strong quarter. Continued high order booking, about 300 million Swedish kronor, again spread out through a lot of regions and a lot of customers. We are happy to see continued orders for applications such as EV charging for electric vehicles and so on, a very interesting segment for Bayer Electronics. And we can also mention that the order intake passed 1 billion Swedish kronor now after three quarters. In this business entity, we are seeing now a balance between the deliveries and the order intake, which is a good thing. Delivery times are coming down. So that's really positive. And if we then move on to a more graphical visualization of our orders and sales, as you can see here, as I mentioned, strong order intake still, however, a little bit lower than the past couple of quarters, which have been extremely strong, but still above the 600 million mark. And if you look at the right-hand side, you can see the improvement in sales that we achieved in the quarter. There are some favorable translation parameters adding to this, of course, and Joakim will go more into details around that. But I can also mention that we do have an all-time high backlog of 1.5 billion Swedish kronor in the group. Okay, so with that, I'll hand over to you, Joakim, for a little bit more of a deep dive into the numbers.

Thank you, Jenny. Good morning to all of you. I will go somewhat deeper into the numbers then, and we will start with the group. And as Jenny has pointed out, it is a record quarter, and of course, we are very happy to present the numbers to you. We have an order intake of 621 million, as Jenny said, sales of 567, and an EBIT of 69 million for the quarter, giving an EBIT percentage of 12.2%. And looking at the orders, another one above the 600 million asset, it's all time high on sales and it's all time high on EBIT. Of course, we know that we have a weaker Swedish krona and we have an exposure in euros and in dollars. So with this situation, we have a favorable FX impact. It's about 11 million, where about four and a half is translation and seven million is transactional variances. With the challenges in the supply chain and sourcing components, it's still impacting our working capital. And it kind of limits the cash flow situation or the cash flow generation in the quarter. We came in positively at 27 million, but of course, we still sit with somewhat too high working capital levels compared to if we have a more normal situation. Bottom line net income plus 51 million compared to the 21 million last year. And then earnings per share of 177 for the quarter. Let's go to Vestamil. 350 million in order intake or 8% growth. I want to point out that looking into this quarter on the order side for Vestamil, we have no larger orders than this. And the quarter last year was actually a quarter that had a significant larger order. We booked the largest Stadler order in 2021 of 50 million. So if you compare without the Stadler order, we still have a good growth on the order side. It's about 30%. So the comparison is quite tough. So you should not be too alarmed of the 8% compared to what we see on the other growth numbers. So sales managed to step up compared to last quarter in Q2 to the 263 million, giving an EBIT of 38 or 14.5% in the quarter. I think Janet pointed out already that the challenging component situation remains, and we will see continuous challenges when it comes to components. It's not over, but as Jenny said, there are signals of ease in 2023. We are working actively with price management. Of course, we do see cost inflation impacting, but we are compensating with active price management in the estimate, giving this kind of result level for the quarter. So let's go to Bayer Electronics. Here we have another quarter of orders above the 300 mark, 308 to be exact. We have a sales of 306 million, giving an EBIT of 43 million or 14.2% for the quarter. In Bayer Electronics, in Q3, we in Europe tend to believe that the pandemic is not impacting, but we have impact in Asia. Our organizations in China and Taiwan are affected by COVID-19. And in China, there has been partial close downs. during the quarter and in Taiwan now we see an opening up of the opportunity to come in and travel to the country. So it's been challenging for these organizations, but still they managed it in a very good way. also in bayer electronics we are working with price management to compensate for the cost inflation and we believe that we are doing so if you look at the uh the result for the quarter and as you all know that we are uh integrating the karenics the business entity the uh the integration work with karenics continues and there are more synergies to to establish when it comes to the joint operations. That kind of concludes the details on the financials, so over to you Jenny.