Garo Aktiebolag (publ)

Welcome everyone to the presentation of GARU's report for Q3 2024. My name is Patrick Andersson and I'm the CEO of GARU and with me today I have Helena Kleisson, our CFO, to present the financial performance. Next slide please. Let's start with an introduction. GARU is a company founded in 1939 that develops, manufactures and sells innovative products and systems for electrical installation and their own brand in European markets. Developing products that are at the forefront has always been a significant aspect of our success. Our focus is on developing user friendly and safe products with a modern design and long service life. Next slide please. We have two business areas, GARU Immobility, which consists of the Immobility product area and GARU Electrification, which includes electrical distribution products, project business and temporary power. As you can see on the chart, we have operations in several countries on the European market to meet the demand and to serve the customer in the best way. We also sell in other European countries where we do not have own subsidies. We have production facilities in Gnorsjö and Hillestock in Sweden and in Poland where we have invested the last years to meet the long term demand for both GARU Electrification and Immobility. And we are approximately 400 employees in the group. Next slide please. In the Immobility product area, we develop and market all types of vehicles. We have product and turnkey solutions for destination charging for various locations, including at home, in public, at workplace and along the highway. To make the Immobility business even more complete, we also offer a service agreement to assist our customer in a good way. We believe it's important to make life easy for the user to make it possible to charge in locations where people live and work. This area accounted for 28% of the total sales. Next slide please. The largest product area in GARU Electrification business area is electrical distribution products, which consist of approximately 3,500 products as well as turnkey solutions for the electrical installations markets. Product use daily in different applications such as new buildings, renovations, marina, camping sites, industry and Immobility solutions. This product area contributed for 46% of the total sales. Our product business area provides complete and customized solutions for all types of power supplies for apartments, single family homes, industry and Immobility solutions and accounted for 23% of the sales. The temporary power product area, which has a product portfolio consisting of temporary electricity, lightning, heating and charging products used on construction sites and events accounted for 3% of the sales. These four product areas make GARU's offer unique and easy for the customer. An example is when the customers require charging solutions with different charges and load balancing from Immobility and also requires power supply from the project business as well as safety installation products from electrical distribution products. This makes it easy, simple and safe for the customer and end user. Now over to Helena for some financial updates. Next slide please.

Thank you Patrick. I will start by looking at the financial summary for the third quarter. Net sales amounted to 270 million, a decrease of 11% compared with the same quarter last year. Sales within GARU electrification decreased by 4% while GARU Immobility posted a 26% increase in sales. The markets of both business areas continue to remain cautious where the lower sales in the quarter were mainly due to the cool market within Immobility. The adjusted operating profit amounted to 0.4 million compared with 5 million for the same quarter last year. During this quarter we have made a write down of 48 million for slow moving inventory. The write down was mainly attributable to the business area GARU Immobility and pertains to previous generation charging boxes and development costs for an older outgoing DC range. Quarter on quarter however adjusted EBIT for the third quarter of 2024 improved with approximately 5 million. Operating profit for the quarter came in at negative 48 million. And now over to you Patrick for some operational highlights and other news. Next slide please.

Thank you Helena and before the operational highlights we also announced this morning through a press release that we have recruited Jonas Klaren as a new president and CEO for the Infratech Group. Jonas has also extensive experience from the energy and power supply industry and successfully developed Infratech within Vinci energies. He has also worked at ABB earlier in his career. Jonas will assume the position as president and CEO as soon as possible but in the six months at latest. Next slide please. And operational highlights and let's start with the GARU Immobility. Overall sales in the field of new technology encompasses product and service for example solar batteries immobility where there is a considerable need in the Nordic region and in the European transition to the new technology. The prevailing macroeconomic situation has led to a considerable slower transition than expected leading to us taking significant actions which I will return to later in this presentation. However we have chosen to focus on the business available in the require we'll create the conditions for our customers and GARU to generate business. Demand for public charging points drives sales in the business area. GARU Entity Pro accounted for half of the sales noted in the business area during the quarter which clearly clearly indicates that GARU's new platform is appreciated in the markets. In order to strengthen our offering for the home market GARU launched a new version of Entity, GARU Entity Home which is fitting complete complement to our previous version of Entity Pro and Compacts. The wall box is specially developed for the home market and for the connected homes and customized functionality and it's cost efficient charging which we have compromised on safety and has been well received of the markets. In addition GARU also launched a payment terminal creating a complete range for the customers need to comply with the requirement of AFIR regulations. GARU's effort to achieve an ICHREST approval GARU Entity's platform as well as certification of the production facility in Poland to meet the demand for ICHREST requirements are continuing according to plan and is a part of the establishment of the German markets. We go further on with GARU electrification. The construction of new housing in the Nordic region has declined considerably and new production of single family homes and apartments is expected to be weak throughout 2024. Positive signs such a lower inflation and falling interest rates are expected to lead to a gradual recovering in housing construction during 2025 which means that we know assess that the bottom has been reached and GARU's housing related products. In Ireland which is an important market for GARU both the market and GARU performed strongly during the quarter. This was a result of the success of the market initiatives and an expanded product range. We are noting continuing healthy demand in the public sector commercial properties industry and infrastructure combined with the investment for renovation and energy and chasements and the market connected to the electrification of society is also assessed to be stable. Sales has now stabilized and GARU noted several positive signs in discussion with customers that strength our assessment that the market has bottomed out. We expect the market situation to improve moving forward. Growth and profitability. In September we announced that GARU would expand its action program in GARU immobility business with annual savings of approximately 40 million SEC. In October we complete the trade union negotiation reducing the number of employees in the group by 28 which primarily involved white collar employees. The savings from personal expenses achieve full effect in the first quarter of 2025. In addition to the organization changes we also implemented a number of other cost saving measures larger involving the considerable reduction of purchased consulting services. During the quarter GARU has incurred 48.4 million SEC non-recurring costs primarily related to GARU immobility business area. This right down mainly pertains to components and inventories for earlier generations of wallbox and outgoing DC range. Heal and I will return to this for more respective business area. The three product areas including electrification together with immobility create a major synergy effect and provide a stable foundation for GARU operation which is particularly important during time of sluggish demand in some product areas. And now over to Helena. Next slide please.

Yes and I will continue with the two business areas separately starting with GARU immobility. Net sales amounted to 70 million for the quarter giving us as I said before a negative growth of 26% compared with last year. The current market situation with macroeconomic uncertainty continues to affect purchasing behavior and investments particularly in the Swedish market. Our established sales office in Germany has had a challenging quarter. The market in Germany is slow and sales of electrical cars have experienced a dramatic dip. Nevertheless GARU continues to work for an IHRECHT approval for the GARU entity products as well as the certification of the production facility in Poland for the production in accordance with IHRECHT standards. The adjusted operating profit for the quarter came in at negative 20 million compared with negative 15 the same quarter last year. During the quarter GARU has made a write down of 40 million for this business area regarding inventory for previous generation charging boxes and development costs for an older outgoing DC range. Besides this a combination of low sales a weaker gross margin production redundancies and an organization built for growth explains the negative adjusted results. Next slide please. And now looking into GARU electrification business area. Net sales amounted to 200 million for the quarter giving us a negative growth of 4% compared with the 210 for last year. Seasonally we usually have a lower turnover in the third quarter within this business area where the holiday season with less working days affect sales volumes. This was also the case for this year. Net sales for new construction of single houses and apartments remains at a low production rate in Sweden and in the rest of the Nordic region due to the continued weak economy influenced by macroeconomic factors. However it is still our opinion that the market has bottomed out. Positive signs such as falling interest rate levels combined with political financial incentives are expected to lead to a rebound in the housing construction in 2025. In Ireland which is an important market for GARU both the market and GARU continue to develop strongly also during this quarter. The development is partly explained by a broadened product range that can meet a price sensitive market but also creates the opportunities to strengthen margins. Adjusted operating profits amount to 20 million compared with the 21 in the year earlier quarter giving us an adjusted operating margin of 10 million. During the quarter GARU made a right down within the business area of 9 million for slow moving inventory. To summarize one could say that GARU electrification has had yet another stable quarter while GARU immobility continues to face challenging market conditions. Next slide please. And then from a cash flow and balance sheet point of view as a result of seasonal variation cash flow within GARU is typically weaker during the third quarter followed by strong cash flow during the fourth quarter and the first quarter of the next following year. Cash flow from operating activities before changing working capital amounted to 12 million. Cash flow from operating activities after changes in working capital amounted to negative 20. Tied up capital in inventories decreased net by 7 million. Furthermore we have a deposit with a supplier for materials ordered but not yet called off. At the end of the period the deposit amounted to 45 million where no additional deposits has been made in this quarter. Our net debt position amounted to 319 million compared with the 293 in the year earlier quarter. We had an equity asset ratio of 47.3 percent and available liquidity including overdraft facilities of 60 million. And now back to you Patrice. Next slide please.

And we'll go further on with the outlook. In the short term the recovery of the immobility markets is proceeding slower than expected. Therefore we have a completed and additional action program and at the same time fully focus on the available business in the markets. In the long term we anticipate a continued good trend with further expansion of charging infrastructure and the market for charging infrastructure growing structurally in line with the number of plug-in vehicles. Goro has a good position in the market with capacity, knowledge and a strong product range for destination charging on the European markets. The construction of new housing in the Nordic region has declined considerably and a new production of single family house and apartment is expected to be weak throughout 2024. Initiated interest rates cuts most recently, recently now in November by 0.5 percent combined with political initiatives will increase purchasing power in 2025 which is expected to be positive impact housing construction and investment willingness in Sweden. Goro has noted several positive signs in discussion with customers that strength our assessment that the market has bottomed out. We expect the market situation to gradually improve moving forward. The demand for other commercial and public construction combined with renovation requirements and energy efficiency remains favorable. We believe that the market will gradually improve for both business area and that the outlook for 2025 is more positive. Goro have both capacity and the product portfolio to provide the market with the right products and service. And we are also glad that we have finalized our recruitment of a new president and CEO and welcome Jonas to the Goro team. Next slide please. Thank you everyone for listening and we are now ready for questions.

Ladies and gentlemen we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue you may press star and two. Participants are requested to use only handsets while asking questions. Anyone who has a question may press star and one of these five. Our first question comes from Anton Lund with Kepler Subro. Please go ahead.

Morning Patrick, Helena can you hear me? Yes we can hear you. Morning. Morning, morning. We have previously discussed inventory levels among your resellers. Can you please explain what the situation is like now?

The situation with the resellers is as we spoke the last time it's on low levels so to say. So with the improvement market situation they will start to increase the level which is positive for Goro. So it's still on a low level.

Good. And it's for both e-mobility and electrification or?

Yes correct.

Good. And then I mean we're now halfway into queue four and you mentioned uptake in inquiries. What can you say about the quarter so far for e-mobility?

For the queue four?

Yeah.

Ah we are not communicating any numbers for the queue four so sorry I can't give the indication for that.

That's fine. And then you mentioned that the Goro Entity Home product has been appreciated by the market. How much has it generated in sales in queue three?

In queue three it's not much sales because we launched it during queue three and we have discussed with all the retailers and installers. Therefore we have got good information from the market and hopefully we now can see during queue four, queue one and queue two an increased sales with the Entity Home. So we have not so much sales in queue three.

Got it. And then one last question from side. Despite the inventory write down you're still at quite elevated levels. How do you view the risk for additional write downs going forward?

At this point we don't foresee any additional risk. We have made a thorough calculation and believe that this is the numbers so to say.

All right very good that's all for me. Thanks. Thank you.

It seems like we have no more registrations for questions. So I will hand over back to Patrick Aderson for any closing remarks sir.

Thank you everyone for listening and I wish you a great day. Thank you.