Hanza AB (publ)

Welcome to the HANSA Q2 2023 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speaker's CEO Eric Stensers and CFO Lars Ekerblom. Please go ahead.

Good morning, welcome to you all and thank you for joining this quarterly earnings call in the middle of the summer. My name is Erik Stenfors, I'm the CEO of the company and I will run this presentation as usual with our CFO Lars Åkerblom. So for some time now, our industry has been navigated in a recession. And therefore, we look forward today to report to you on the many activities we have done in order to stay on course for good development. And if we look at the agenda, to give you a clear picture, we will first summarize the market. trends and also hansa's position in all this next we'll walk you through the quarter both by words and by numbers and then we will give you our projections for both the short and long term and conclude the presentation as usual with a q and a session so the market the quarter and the first half of 24 has been characterized by a Very normal traditional recession. It means lower demands from different industries. We've seen that from the mining industries, from textile equipment, recycling machines. But we also have other sectors such as energy security and defense that continue to have a good volume in the second quarter. But in all, Q2 came in on the same sales level as Q1, which was also according to our estimate this spring. So we are experiencing a cyclical headwind. And if we look at the trends and the trends affecting our industry, the most important is regionalization. We see that globalization in general and global supply chains in particular are under evaluation. And one reason is constant disruptions. It was COVID-19 who highlighted this weakness. It's been under scrutiny ever since. We see some examples on the screen, the low water in the Panama, the Baltimore Bridge collapse that blocked one of the top 10 harbors in the US, the Red Sea pirates that makes attacks and force ships to go around Africa. So that's a reason right there to rethink your supply chain. And another reason is, of course, the environment. You reduce transport, you lower the emission of CO2 and also cost reason. And the manufacturing cost is determined by the supply chain. And we see that in the recession, there's a growing demand for optimizing your supply chain. So this and also geopolitical concerns now could be new trade barriers of possible change of precedent in the US. This also fuels demands for optimization of supply chains. And this is actually a good trend for Hansa. As you might know, Hansa is not just about selling manufacturing. We also offer to restructure supply chain. We have a special service we named MIG, stands for Manufacturing Solutions for Increased Growth and Earnings, where we try to find a better solution for the supply chain for our customers. We here see an example. It was Mitsubishi. They have a division called Logisnext, designing, selling forklifts, Had a traditional supply chain, we see it illustrated to the left, over 40 suppliers in Europe, their own assembly in Finland. We agreed on a mixed solution and started that a year ago. Now we are in full swing. See the picture to the right, forklifts produced, volume production now in Estonia. And look at the white square, this is just the module, the module for the forklift. That module itself would require two to three traditional contact manufacturers. Now we do the module, we do the heavy forks previously done in Southern Europe. We do the chassis and everything on one side of the street and we do the assembly on the other side of the street. A fantastic solution for Mitsubishi, a great order for us and also good for the environment. So with this general introduction, let's then dig into the second quarter. We have been focusing on three key areas. All of them are quite important for the future. First of all, we have intensified sales. And quite successfully so, we have got new customers from different areas and different geographies. We've got the largest order to date, 134 million SEK, from a global leader in the defense industry. We will start deliveries in January next year. We also got Munters as a new customer, which I think is a fantastic company. It's a Swedish company specializing in air treatment and climate solutions. And other customers as well. And We are in discussions of new MIG projects. So what we discussed earlier with Mitsubishi. Similar cases, we do expect to launch them somewhere during this autumn. Another key area for us has been to adjust the cost base. We did a large acquisition by the beginning of this year, Orbit 1. And of course, we had an integration plan. Came recession, we expanded that integration plan to be an integration and efficiency program. Started that in March, expected it to last half a year and somewhere in Q3. Happy to report it has been completed in second quarter ahead of schedule. Meaning that we will see some positive impact on earnings and Lars will come back to this in a couple of minutes. So a lot of work with the sales and with the cost side, but... You cannot get mesmerized of the ups and downs of the economy. This is normal situation for all business activities. You need to keep your eyes on the horizon, not to stumble. The horizon for us is what we call Hounsat 2025. And we did a lot of activities for that strategy. And the strategy is basically to expand and develop some of our manufacturing clusters. So one thing we did was to open a new factory in Estonia. We see the picture up to the right. A fantastic creation, if I may say so. We have now a new sheet metal factory, which is attached to our assembly hall. with an automatic transport system. And we also got some good PR around this. We had the economy minister to cut the ribbon at the opening ceremony. We also got the prime minister of Estonia to visit us. So she's not prime minister anymore. She stepped down now to become the European Union's foreign policy chief. So that's a very good thing for our future because of the tailor-made factories that increase our operations efficiency. So it's very important. We have another similar activity going on in Sweden. Decided in the beginning of this year to also build a new factory in Töxfors, Värmland, Sweden. It will be ready by the end of this year. A lot of work with that, of course, during the quarter. You are free to contact us and we will be happy to bring you to the opening ceremony by the end of this year. Moreover, in Hansa 2025 is to consolidate customer and technologies in a way that increase efficiency and therefore also during the second quarter we propose to merge a couple of our smaller units into our larger manufacturing clusters. We did the union negotiations, which we could conclude in Sweden during the quarter. We have still negotiations in Finland going on. So if you sum up the quarter, it's been a very active quarter, both to handle the present situation, but also to build for the future. And by that, I will leave the floor to Lars, who will talk about something else, which is really important, sustainability.

Thank you, Erik. And the sustainability activities in Q2 besides the normal work we always do with sustainability has been to work with the CSRD. the dual materiality analysis and mapping the scope-free in order to come back later on this year with new goals for sustainability. We also have introduced a new intranet, what we call the Hansa Hub. It gives the possibility for all employees to communicate with us in the management. As Erik mentioned, we opened up a new factory hall in Estonia. It is built with sustainability aspects with solar panels on the roof. and this automated transport system that also reduce the emissions. And you can see in the KPIs that we believe are the main KPIs connected with the environment and the safety in the company that we are developing in a positive way or more or less in line with former quarters. but no major negative aspects on those KPIs. Coming into the Q2 financials, we have an increase of sales with 14%. of course connected with the acquisition of Orbit One. So if we deduct Orbit One and also the currency, we actually have a decrease of 8%. And the reasons are what Erik mentioned, the macroeconomic factors, and also the fact that we are now comparing to quite strong figures a year ago. was record high we had over 10 percent organic growth back in in q3 q2 23. we are now on four and a half billion sec in rolling 12 sales compared to to 4.1 in in 2023 for the full year and as Eric mentioned also we have finalized efficiency and integration program and we see a positive effect on those activities we said already when we launched them that they will reach full effect at the end of 2024 but what we can see is that we all already are starting to increase profitability, even though the sales are flat compared to Q1 this year. We also see that Orbit One is starting to increase their profitability, their margin. They are not at the level we want them to be, but they have a clear and positive trend towards a stronger margin And we see that trend also within Q2. For comparable units, we reached 6.7% in margin for Q2, and that is a little bit higher than the Q1. We reached 6.4%. We took a one-time cost for consolidating the volumes. We wanted to close down to two factories and consolidate the volumes into other factories within Hansa, including those cost we have an operating margin of 4.1 percent compared to 8.6 we have a negative effect on the finance net of with currency of minus six we had plus six in in q1 that led to a higher financial net that also affected together with the one-time cost affected the eps So, with half a crown, 50 öre. So, the EPS was 0.16 sec compared to 1.51 a year ago. If we look into the segments, we... See that main markets is up 20% organically or just for acquisition and currency, it's down 9%. We have still quite strong margin, 7.2%. And adjusted for comparable units, it's 8.2 compared to 2.8. So what we have said before is that within the Hansa, the old Hansa, if you say so, it's quite resistant when sales are decreasing. And we still see that. And we see that we increased the margin from Q1 to 7.2% from 7%. In other markets, we also see an increase of sales. We see more or less the same downturn of sales adjusted for acquisitions and currency. We also see the trend that the profitability is increasing compared to Q1. We see that the margin is up from 3.3 percent in Q1 to 4.0 percent this quarter. Looking into the balance sheet, we have a really strong cash flow. In Q1, we had a little bit weaker cash flow. We said already at that time it will come back. So we are glad to be able to present that we have really strong cash flow, 135 million SEC. And the main reason is that we have decreased the working capital by 77 million SEC in Q2. amounted to a little bit over 100 million, 108 million SEK. 18 million of that is connected with the building, both in Baltic and in Sweden. We have a net bearing interest up that is more or less increasing with the dividends that we paid out in May. And we have now net up compared to EBITDA of 2.2 if you add the first half year of Orbit 1, or the second half year in 2023. So if you add Orbit 1's rolling 12, if you exclude that, we are on 2.4. The equity to asset ratio is still strong. It's 37%. So we still have a strong balance sheet that allow us and give us the possibility to do acquisitions and bring in MIG projects. And by that, I leave back to you, Erik.