Ferronordic AB (publ)

Welcome everybody to this presentation on our fourth quarter for 2024. And we saw in the quarter continued strength in the United States, strong performance, and we created a much stronger position to go forward in Germany and Kazakhstan. We had a 43% revenue increase, obviously driven by the additional growth in the US operations, mainly. We had an operating result which increased to 2 million or 19 million, excluding effects of impairment of inventory in Germany and Kazakhstan. Net profit ended up at 9 million kroner, partly because of exchange rate effects. And we have, of course, after the acquisitions of the US operation, partly driven by expansion of the rental fleet in the US, we have a net debt of 1.978 billion SEK. And given the negative result we had for the year, no dividend is recommended. So if we look a bit more into the US, we're starting there. We saw, as I said, continued strong performance, good margin development and cash generation. Total revenue was 720 million SEC with a strong operating margin then of 9%. Overall, Our sales of machines grew by 15% while service and part sales were stable quarter on quarter. We do have a higher inventory and rental fleet in the US, which is in line with our strategy to take market shares further. In the articulated hoarder and excavator segments, we have been successful in gaining market shares in the US throughout the year. And we see opportunities to grow that further. If we go to Germany, the market declined by 14%. However, our own deliveries of new trucks in units actually almost doubled, which is partly on strong order intake we had of new trucks in the previous quarter, but also continued efforts to clear out old stock, which has been standing for too long. We'll come back to that. And given then the current marking conditions in Germany, we had to recognize another impairment of 13 million SEK on the remaining stock that we have left. There's not much left to be honest, but we took another 13 million SEK there. We saw stable parts and service business and we saw good continued development on our electric rental business. And we'll come back to the cost efficiency program in Germany, but we have now been able to take the cost down to the targeted level that we set for ourselves before that program started. And also in Kazakhstan, we had to give up margins to clear out all inventory. And we also recognized an impairment of 4 million kroner in Kazakhstan. Overall, then, group revenue increased 43% to 1.3 billion kroner. Strong growth in, obviously, in the US, German revenue more or less flat, and the decline in Central Asia. We had an operating profit increasing to 2 million and again 19 million if you exclude the impairment of inventory in Germany and Kazakhstan and most notably it's very interesting and very positive to see the profits that is delivered from our US operations at at going from 25 to 65 million Swedish kronor. Also in Germany, we had an increase in the operating profit, but we're still negative, obviously, partly because of impairments, but we are negative there. We'll come back to that. And then net income increased to 9 million. So some operational highlights from the US. The market for construction equipment was more or less flat compared to Q4 2023. In our own market, there was a slight decline, mainly in the excavator market. Our own sales, however, if we compare to Q4 2023, both, I mean, if we take sales from new machines and conversions then from rental fleet into account, we actually increased by 22%. And obviously, we then continue to take market shares in our markets. And we have, as I said, we've done that throughout the year. And it's very good to see that we're actually able to increase the sales and create a population for the aftermarket, also in a stagnant market. We had a particularly good increase in excavators and wheel loaders. Sold in all, we sold 65 new units, 53 were converted to sales from rental, and we had 22 units We have a stable service and parts business in the quarter. So the mix is basically 58% new and used equipment sales and conversions, 9% rental income, and a healthy 33% to service and parts. If we go to Germany, the situation is different indeed in the sentiment of the market and the economy, obviously. So we saw a continued decline by 14% in Q4. So all in all, the market was down 13% in 2024. And in our sales area, it was a decrease by 8%. But again, then we increase our own truck sales in units by 90% to 317. Compare them to 267 in Q4 23 and 96 in Q3 2024. Again, we had a strong order intake in Q3 2024, which part of that was then delivered in Q4, not all of it. But we also then obviously continued to sell our old stock, which we have had throughout the year. We still have some left of that stock. And given that the pricing level in the market throughout the year has gone down quite a lot and continued to go down in Q4. We had to take another impairment there. of 13 million so but as you can see total inventory then we had 574 million in q4 2023 and now that is down to a total inventory of 262 million in the end of q4 we saw parts and service sales remaining stable in the quarter However, we see a continued strong demand for aftermarket services. The problem is that we can't fulfill that demand because we lack skilled mechanics in some of our workshops. And we have a very high focus on attracting skilled mechanics to the network, both from within Germany, but also from other countries in the world where we have looking very promising for certain countries with a good regulatory environment when it comes to work permits, et cetera, outside the EU. There are a few other countries, quite many actually. And we have a high, high focus on attracting Skid Mechanics to the network. It's pivotal for making the German operations profitable. We go to the efficiency program, which we have talked about before, which was launched in Q4 2023. And obviously the key objective is to increase our absorption level, which is how much our fixed costs are covered by the gross profit from the service and parts business. And the expectation was that we would have a run rate of 60 million Krone less annually. And we have reached that target starting from Q3 2024, which obviously creates a different base and the different resilience going into 2025. and at the same time then we continue to invest in our aftermarket business and in e-mobility. We go to Kazakhstan, Central Asia, the market grew and The economy is doing well. Our sales was unchanged and we have had a similar problem in Kazakhstan as we've had in Germany with too many machines on the yard basically stock units that we have worked very hard throughout the year to sell and we have been successful in that and obviously partly it comes at the expense of gross margins to do so but we are clearly in a much much better position now than we were going into 2024 Sales are used to create construction equipment, slight increase. But also here, given the age and the current market conditions for some of our remaining machines in the stock, we have to take a four million impairment in the quarter. But again, as you can see, we have more than half our inventory throughout the year. And we had this recovery of the service and parts sales from if you compare to quarter three, but it was slightly lower than in Q4 2023. So total revenue decreased by 38%. Equipment sales decreased 45% and 16% decrease in service and parts sales. um us network um some of you have seen this map before this is our footprint in in the united states um and we are operating them in either fully or partly in in nine states in the midwest in in the us and it is the second largest market for construction equipment and in the area where when we're operating the total market in 2024 for General purpose equipment, meaning bigger machines that we are mainly focusing on amount to close to 4000 units. In Germany, we have a network of 20 outlets spread out through the territory that we are representing. And in Kazakhstan, we have concentrated our efforts to these four locations that you can see on the map, which are where the main economic activity is taking place in our industry. And that's where we are. So all in all, I should say it was a good performance in the US, really. And we created a strong, I will say, platform uh in germany and also in kazakhstan for for profitable growth going forward we have a very very different situation and a much better situation now with with the balance sheet positions both in germany and kazakhstan and then we can we can operate now more in normality than we have been able to do due to the uh very many customer cancellations that came after the supply started to actually work again after the very, very long lead times we had during the COVID phase. And then a lot of customer cancellations happened because prices were different and they might have put orders in for different brands at the same time, just to make sure that they actually got some trucks. So that created far too big inventory that we have going into 2024. The situation is now very, very different and we're very happy with how we can focus on expanding the aftermarket going forward, which is really where we as a dealer make money. So all in all, I'm positively looking into 2025. So by that, I'm handing over to Erik for some More numbers, please.

Thank you very much, Lars. I'll pick up on the next slide, which you opened up for me. Thank you very much.

Yeah, as usually opening up with some of the macroeconomic context that we've worked in, Our industries do correlate with the macro economy, but also driven by specific investment programs, both government, but mainly private initiatives that are going on. Starting in the US, we saw strong growth in 2024, 2.8%. There is a consensus for about 2.1%, so continued strong growth in 2025, but the range of forecasts, I think, reflect an increased uncertainty about how the US economy will develop in the new political context. So I've seen from 1.5 to 2.8 there. Meanwhile, inflation lingers arguably a bit higher than the market had previously anticipated, also lifting the interest term structure a bit, so a bit higher curve. That said, the funds rate was decreased during the quarter. We are impacted directly by our funding, both with Volvo Financial Services and our other funding facility that we use in the United States, but it also impacts our customers, of course, their liquidity. And Germany, very different situation as Lars already indicated, negative point two growth in 24. That's the second consecutive year of negative economic development in Germany. It is an economy that is struggling at the moment. 425, there is an expectation for a turn and a small pickup, as you can see from this slide, at 0.8. Inflation rate, they're also arguably a bit still high above target for ECB to lower aggressively and that way to stimulate the economy. In Kazakhstan, continued strong growth. It's more for us, I think, how that translates into investments on the corporate side for companies working in construction and resource extraction. And there, I mean, funding is a factor in Kazakhstan. Inflation has come down to 8.6%, but the central bank rate remains high and that's propagated into the rest of the economy. So funding has been and remains a constraining factor on demand in Kazakhstan. So moving on from that macroeconomic again context to our income statement and performance in the quarter. uh starting from from the top line we we see a 43 increase in the revenue that's of course very much driven by uh the addition of the united states uh operations in um end of november of last year so that's one month we had a very strong month as we um commented uh in in the q4 report of last year but one month all the same and and uh yeah we have the effect of the full quarter now this year that drives a big part of the growth in the top line um if we look at a revenue mix in in the fourth quarter 55 us 43 germany and two percent um uh kazakhstan kazakhstan is smaller two percent uh but probably not expected to be more than five, but low in that quarter. And we continue to see a lot of potential for our main markets, United States and Germany, to grow organically from where we have them in this quarter. In terms of revenue mix, about two thirds equipment and trucks or 63% and 30% aftermarket. The 7% other I remind you is mainly rental income. Aftermarket is of course an area of intense focus for us. In Germany, Lars mentioned that even as the economy is weak, we continue to see strong demand for repairs and maintenance of the truck parks that are out there. Indeed, when fleets are not renewed, the demand for maintaining the older fleets tend to increase. But we are to some extent constrained by not having as many qualified mechanics as we would like. Gross profit up significantly again driven by the consolidation of the US business. SG&A I would tend to look more on a percentage of revenue basis and there we are down year on year 15.6% compared to 21.5% last year. Operating margin positive but not by wide margin, but a big increase versus last year, 0.2%, or Swedish krona, 2 million. That's after, of course, these provisions or reserves that we took on the trucks in Germany, 13 million, and inventory also in Kazakhstan, 4 million. So without those, we would be at 19 million Swedish krona. in the fourth quarter. Net income positive nine. significantly driven by foreign exchange effects, 66 million positive effect in the fourth quarter. Remind you there that's driven by the assets the parent company has in the subsidiaries. So investments in Germany in euros and in US and Kazakhstan as it were in US dollars. Moving on to the balance sheet, in a summary, again, movements year on year now would have the US included. So when it comes to increase in PPE, it's really driven by changes in the businesses as they stand and in the US, You will probably recall that we have said that we have increased the rental fleet as part of our core strategy to gain market share in the United States. So that is reflected also in the balance sheet. Looking at these segments and in terms of our effort on working capital, we do aim for as a strategy to increase our capital turnover. on the operating capital side. In Kazakhstan or Central Asia, networking capital increased, but it's really a decrease in inventory. What we have had at the same time is the maturing of payables, so that's what drives up the working capital. In Germany, networking capital is down, and that is as Lars described, as we had been selling out the old stock, but also had good sales of new trucks in this quarter, specifically with big volume sales. So lower inventory driving the change in working capital there. And in the US, the change is more marginal with a more business as usual replenishment of inventory in the quarter, increasing that a little bit. Again, the rental fleet sits in PPE, so that's not included in this calculation for working capital here. Net debt is a small increase, very much driven by a move which is non-cash, as we stress here, of payables into debt, other financing arrangements, and thereby it goes from working capital into the net debt calculation. And then equity to assets decreased slightly quarter on quarter to 30%. Moving on, added this and it's really a response to questions on our PPE. So I thought it would be good to illustrate the distribution of PPE in the different segments. And I would say notably the United States here, the American segment that we have. So to make clear to investors and readers of the report, the share of property, plant and equipment that is related to the rental fleet, and you can see it's almost 70% for the group as a whole, and more so in the United States. And really most of the rest of PPE is properties. So our workshops, the ones that we own, And then I put the IFRS 16 separately here so you can see that as well. That would also mostly be related to properties, but to some extent also carpools, vehicles that are mechanics and employees work as they produce for the business. Moving on, this one slide illustrates the EBIT year on year. So mind you, this is all compared to Q4 of last year. So here the U.S. increase is very much driven by again adding two months more. December last year was very strong. So it's more of an effect here of again having two more months added. Germany, we took a hit on the inventory and Laura said we have made efforts to really clean up the balance sheet and put ourselves in a good situation as we enter into 2025. We've also in 2024, as you know, made a lot of efforts to streamline the organization and increase efficiencies in in our SG&A and OPEX. But in the fourth quarter, we are up versus last year. But again, maybe more investments going still into this quarter to put our in a better position really for the year to come. Kazakhstan, small change and a small saving also on HQ costs in the fourth quarter. So with that, I move on to the next slide to explain movements in net debt. And here I really put this in to show, as I mentioned on the balance sheet slide, that the movement in that it is very much driven by non cash effects in the US and in Germany. So again, to explain that we initially buy inventory and into rental fleet with the payable term. So it's payables in our balance sheet, and then it moves over to other funding arrangements, typically Volo Financial Services related as our supplier. But then it moves over from payables to interest bearing debt at that time. And that's, again, a non cash transaction. On our Group NAV, really just illustrating the shape of our balance sheet there. Again, you can see the inventory and the US rental fleet we have separately here, making up a big part of that. Then you can see other property, plant and equipment. In this case, that other property, plant and equipment would hold also the German rental fleet. So that is that on the balance sheet. And then I move over to our financial objectives that we introduced at our capital markets day on the 2nd of October, I think it was. Um, and we have, but started our journey towards those objectives. Um, we are, uh, growing versus our, our starting point, but we obviously have much more ambitious targets there. Uh, similarly on, um, operating margin, uh, we do believe we can, uh, lift our, our, uh, whole organization, uh, to a large extent by, by organic growth. Uh, and then, uh, on our net debt, uh, we. are working to come to the target levels we set there. With regards to dividend, as Lars mentioned, given that we had a negative earnings result for 2024 as a whole, the board is not recommending a dividend is paid on the year 2024. So with that, I give back to Lars for a very brief outlook and before we take questions from the audience. Thank you.