Ependion AB

Welcome to the Bayer Electronics Analyst Conference. For the first part of this call, all participants will be in listen-only mode, and afterwards, there'll be a question-and-answer session. Today, I'm pleased to present Jenny Schordahl, President and CEO, and Joachim Loren, Executive Vice President and CFO. Speakers, please begin.

Okay, thank you very much for that. Hi, everyone, and welcome to this quarter four call for Bayer Electronics Group. With me today I have as usual Joakim Laurén. We are currently in Malmö and we will walk you through our Q4 and 2022 results. As usual, I will start with a business update. Then Joakim will move into more details around our financial performance. And then finally some concluding notes and outlooks and then of course we open up for Q&A. So let's move right into the summary of the quarter then. We are happy to see that we have achieved another strong and stable quarter. It's a strong ending to a record year for Bayer Electronics Group. And if we start with the customer demand side, which is, of course, where it all starts, so to say, we can see that the customer demand continues in general on a good level. And we posted our fourth consecutive quarter above 600 million Swedish kronor in order intake. Driven mainly by Vestema, I would say, in the quarter, who had a fantastic, strong order intake. But also Bayer Electronics came in on a stable level where for Bayer Electronics, Americas and Europe were strong and the China market actually showed some weakness. In terms of sales, we posted a new record quarter of 589 million Swedish kronor. That's 26% up on the same quarter of last year. And both business entities contributed to that. Bestimo came in finally at 300 million, which was a significant step up in delivery. So that was good. However, we do still see constraints due to the component situation. I wish I could say that those problems are gone. They are mainly gone, I would say, in the Bayer Electronics business entity with the components that they are using. But on the Vestimo side, with the very high spec components that we need, there are still fewer, but the number of suppliers that are still letting us down, so to say, in terms of capacity and are pushing out confirmed deliveries, which are still causing issues for the Vestimo delivery situation. Earnings came in at 10.7% for the quarter, somewhat lower than quarter three of last year. There are some explanations to that, which Joaquin will come back to in just a bit. In terms of Vestamo business entity, as I mentioned, good increase in sales and an EBIT level of 12.3%. And as I mentioned, the component situation continues to affect us quite a lot. We are prioritizing deliveries to our customers. And in the quarter itself, we were forced to buy components on the spot market to an extra cost, so to say, of 12 million in quarter four. And we have seen that issue throughout the year. But just to point out that this is still having a major impact on the earnings in Vestimo. Bayer Electronics came in with another very stable quarter and posted an EBIT of 13.9%. So they are staying on that higher level, so to say, that we have seen over the past two quarters in that business entity, also with a nice sales volume. When it comes to the global situation, so to say, there are, of course, as we all know, a lot of uncertainties still out there. And we of course follow that development and we are preparing for different scenarios. However, for the time being, we are not seeing any major effects on our demand side related to that. And today the board has decided to propose a dividend of 0.50 Swedish krona, same dividend as last year, basically based on the fact that there is a lot of investments and good things that we would like to do during 2023, and that is the reason why the board proposes to stay on that dividend level. Okay, I think I mentioned already quite a few things about the business entities. In Vestimo, we see that the high demand that I mentioned is driven by mainly our focus segments with the train and energy segments really sticking out with very, very nice order intake from our key customers there. And of course, despite the component issues, the organization is fully focused now on continuing to step up the sales volumes. We have a very, very strong backlog, as most of you are aware, and we need to deliver that backlog to our customers. Bayer Electronics, again, stable demand. America's very strong growth. EMEA, Europe, Middle East, Africa also on a good level. We are seeing a weakened demand in China at the moment due to the issues that they have over there right now. But we believe that that situation will somewhat improve throughout the year. The delivery situation in Bayer Electronics is on a good level now. There are a few issues related to capacity of suppliers, so to say, and components. But in general, we are in balance now with the water intake. And as I mentioned, a very stable profitability level now for this business entity. Okay, here in a graphical format, orders and sales. Order level again, it came down a little bit as you can see there because of the Bayer Electronics, a little bit weaker demand in Bayer Electronics. Vestimo is still very strong, but you can see fourth consecutive quarter above 600 million Swedish kronor, which of course historically is a very, very high demand. Sales 26% up compared to last year, almost 590 million Swedish kronor. That's an all time high for the group. We have an FX effect that you can see here in the quarter compared to last year. And our backlog, as we have been talking about before, is at an all time high of 1.5 billion Swedish kronor now going into 2023. So with that, I hand over to you Joachim to give some more meat to the bone. Thank you very much.

We start with Bay Group and up in the left corner, you see that the order intake came in at 603 million. The sales was 589 and EBIT almost 63 million representing an EBIT percentage of As Jenny pointed out, it is the fourth consecutive quarter above the 600 million mark, despite the fact that China market has developed quite low when it comes to order bookings in the fourth quarter, where they've had a very good or very strong early 2022, but the last quarter was weaker. Sales, as Jenny pointed out, all-time high. And the EBIT level, well, it's almost three times better than last year. And in the second quarter now that we are well above the 10% mark. If you look at the graph, you see the orange line, the solid orange line, that is the last 12 months development and the trend there is of course in the direction that you would like to see going upwards. FX impacts and with the weaker corona in total for the group we have a positive impact of about 4 million corona in the quarter. We have been struggling for quite some quarters during 2022 with cash flow. Now, by the end of the year, we post a quarter with, I would say, positive free cash flow of 57 million. Still, our working capital, it's a bit challenging with the component situation. So we state it's still on two high levels compared to where we want to be. But still, we show a positive cash flow in Q4, which is, of course, good for us. Net income, bottom line, 51 million compared to 11 last year. And EPS increased nicely from 0.37 last year to 177 this year. So let's go to Vestamil. Estimate order intake, 326 million, sales of 300, and an EBIT of 37, representing 12.3%. The order intake, all-time high as well, fifth quarter above 300 mark, very strong development in Western, as Jenny pointed out. And we're also happy to see that we have been able to step up the deliveries, giving us the 300 million in invoicing in the quarter. But still, I mean, you should look at the pace that we are booking orders compared to what we are delivering, so we still have a way to go when it comes to increasing our ability of deliverance. EBIT margin, 12.3. Decent is what we describe it as. But we should be aware, as also stated before, that we needed to do expensive spot market purchases of some components to be able to deliver. And as Jenny said, we are prioritizing deliveries to our customers. And then we have to do these kind of activities that will or have affected the result with the 12 million, as we pointed out before, in the quarter. and it's what to expect when it comes to the component situation. Well, it is still challenging for us, and it will impact us in the short perspective. Of course, with the inflation and the cost increases that we are facing, we are active on price management, and also our strategies when it comes to working with development to make sure that we have the latest technology that's needed with those focus segments that we have. So we continue that on full force, making sure that we will be competitive and open up for the growth going forward. Bayer Electronics. we have an order intake of 279 million, sales of 290, and an EBIT of 40, representing the 13.9% EBIT. If we are comparing to Q4, we state it's a stable bookings, where China, as said, has had a weaker development, but Americas and also EMEA, they are developing in a good way, so it's The slowdown in order bookings is not general. It is limited to the Asian or specifically the Chinese market. Deliveries, stable development without too many hiccups in balance with what we have booking orders. Profitability, well, we can conclude another quarter around the 14% level. It's actually the third quarter in a row where we've been on this level. Also in Bayer Electronics, of course, we need to be active on price management, and that we are doing. We have for quite some time talked about the integration of CoreNX into Bayer Electronics. Now, when we close this quarter, we can conclude we're done. It's fully in place, and we will now basically globally operate under the name Bayer Electronics only. And also in Bayer Electronics, it's full focus on R&D activities to maintain the position that we have and to make sure that the offerings that we have, both hardware and software, are competitive and the best to offer to our customers. That concludes the numbers so over to you Jenny.