Hexagon AB (publ)

Welcome, everyone, to this third quarter of 2021. If we move straight to slide four, the overview of the quarter. We grew by 15% recorded, 10% organic growth, and the bridge is M&A contributed with 4%, currency 1%, and organic growth 10%. Sales netted at 1,077,000,000 and EBIT came in at 28% EBIT margin. If we then move to slide five, just a reminder that Q3 is our second weakest quarter in the seasonal pattern where Q1 is the weakest typically and Q2 and especially Q4 are strong quarters. Moving to slide six, key figures for the third quarter. Net sales amounted to $1,077,000,000. And as I've just stated, earnings won or EBIT won $297,000,000, which is 19% better than the corresponding period of last year. We've got the nine months. Numbers on slide seven for your reference. And moving on to cash flow. Cash flow from operations before changes in working capital improved and was quite strong in the quarter. We had the setback in working capital where prepaid expenses was the single largest factor in the working capital buildup in this quarter. Investments were along the lines with our plan for 2021, so nothing abnormal there. And the cash conversion was 79% in the quarter. Moving on to slide nine, we can see that we're still at very low levels when it comes to working capital to sales, slightly shy of 6%. in the third quarter, but up from the 3.8% we recorded in the second quarter. Market development, if we move to slide 11, not much has shifted in the sales mix. We do see China up 1% in terms of mix, and the rest of Asia packed down 1%. The rest remains stable. And as you can see, we have one-third of our business in each region around the world. Slide 12, trends for organic growth per geographic region. North America, Western Europe, China, Asia, and South America all report above 8% organic growth. The only area with slightly lower organic growth in the quarter is Eastern Europe, Middle East, and Africa, where we had strong water intake and sales in Africa to the mining sector in the third quarter. Slide 13 is for your reference for studies later on. Slide 14, EMEA market trends. solid growth in Western Europe where we see 11% organic growth. And it's a combination of the recovery in the construction, the larger construction and infrastructure sectors, which is driving demand for surveying and engineering products. We also see a continuous recovery in the manufacturing sector automotive and aerospace across Western Europe. Weaker development cited in Spain and France for the quarter. Already commented on Eastern Europe, Russia, Middle East. Russia is driving that growth. Eastern Europe was also strong while Middle East Africa was slightly weaker. Moving on to America, slide 15. North America recorded 8% organic growth with strong demand in infrastructure surveying and construction. We also saw a return to growth in the manufacturing sector as well as power and energy. We saw weakness in our defense-related business connected to FI. South America recorded double-digit organic growth, strong development both in the Andean countries as well as in Brazil with a super strong double-digit growth. Moving on to Asia, slide 16. China recorded 10% organic growth, and it was a combination of a recovery in several sectors but also a strong underlying demand. from the manufacturing sector, broad-based manufacturing, anything from electronics, electric vehicles, aerospace, and general manufacturing. Tough comparison numbers for infrastructure and construction that recovered already in the third quarter of 2020, and we saw strong growth already last year in China. Japan, New Zealand, Australia, India all recorded double-digit growth. So did Southeast Asia, where we are beginning to see a recovery in the shift from manufacturing in mainland China to countries such as Vietnam and Malaysia and Thailand. South Korea was the only market that recorded decline. in sales due to weakness in the power and energy sectors. Reporting segments, if we move to slide 18 and discuss geospatial enterprise solutions, organic growth for this segment was 10% in the quarter. And within that segment, we saw geosystem surging at 16% organic growth. driven by strong demand from all core markets for geosystems. SI minus 6% organic growth, and that was the weaker US defense demand in the third quarter. Autonomy and positioning, 8% organic growth, strong growth in precision agriculture segment for the quarter. Sales amounted to 552 million, up from 487 million previous year, and EBIT margin was 30.3%, up from 24.4%, almost 2% improvement in the margin in the quarter. Moving to slide 19, industrial enterprise solutions, organic growth, The mix is MI growing at 13% driven by the strong recovery in general manufacturing, automotive, electronics, and the software portfolio. PPMM returned to growth in the quarter and recorded 2% organic growth. And it was primarily driven by a recovery in the North American market. and solid growth in our asset information management portfolio, as well as the AEC products. Sales amounted to 525 million, up from 453 million last year, and EBIT was improved by 0.1% to 25.5%. Now, the growth margin on slide 20 continues to improve. This is the 12-month gliding average. So, we record 64% for the last 12 months, up 1%. If we move to slide 21, it's good to see that we're now within our target range. We've passed 27% EBIT margin for the last 12 months. And we're continuing to improve the margin. Talking a bit about M&A, orders and product releases in the quarter. It was the big quarter we acquired Immersion on slide 23. Immersion is a pioneer in spatial mapping and visual positioning. And what they do is they do something called spatial anchoring technologies. Spatial anchors is basically the way we navigate being humans in our surroundings. And Emotion uses that same technology and we will now embed this in our Hexagon products going forward. Slide 24. Enhancing materials management capabilities with Jovix. Jovix was acquired during the quarter and it's an award-winning material tracking software that is developed specifically for the construction industry and that will be integrated into our construction portfolio. Slide 25, we did an acquisition in China in the quarter as well Wuhan ZG technology was acquired. ZG technology provides 3D digital solutions based on background of photogrammetry and remote sensing disciplines that Wuhan University has developed. And this will strengthen our position in industries like auto, aerospace, 3D printing, biomedicine, rail, heavy machinery, and so forth. Slide 26. We had a big launch of autonomous sensors in the quarter. We introduced Leica BLK Arc and Leica BLK to fly. And BLK Arc is initially based on the Boston Dynamics rover or robot. but it will deliver a fully autonomous mobile laser scanning solution. Leica BLK2Fly is the first fully integrated autonomous flying laser scanner. We don't call it a drone. It is a flying sensor. And the beauty about it is that anyone can use it. With a few simple taps on the tablet computer, you can quickly learn how to operate both the ARC and the BLK2Fly. And this is seamlessly integrated into our cloud-based software HXDR. Slide 27, introducing hexagonal line meshes. Hexagon Mine Mesher is the tailored solution that combines BLAST design software with drilling and BLAST movement monitoring. It brings accuracy and precision to every step of the drill and BLAST process in mining operations. Slide 28. We've also introduced a new rail security and surveillance portfolio. It's from the BLK series. And we call it rail security and surveillance. Slide 29. The Hexagon Content Program also launched a new functionality, and that is digital twins of major cities. It's an off-the-shelf product where if you're interested in the city, you can buy that in 3D, 2D or 3D. And it will enable users to better manage and monitor critical assets within those city centers. And assess risks, provide visualization of new projects, and so forth. Slide 30, accelerating autonomous quality assurance. Hexagon launched our HXGN robotic automation. which is the new robotic programming and control software that enables non-specialist quality professionals to program industrial robots to perform fully automated quality inspection. Slide 31, we launched a product called HDL-1010. And this is a small revolution when it comes to measuring blitz and blade applications, which are crucial for anything from wind power to turbines and aerospace engines. Slide 32, we're also supporting India's new bullet train project. There will be a corridor operated between Mumbai and Ahmedabad. And the train will travel at 320 kilometers per hour. And they used our surveying total stations and levels to do precise alignment, which is crucial for high-speed rail. And we proved it in several markets, among others in the Chinese build-out of high-speed trains. Slide 33. Hexagonal on-call continues to reach success in the market. We had several orders in the quarter, among others in Bahia, one of the largest states in Brazil. But we also had an installation to monitor traffic in Sao Paulo. I'm moving to slide 34. We've also helped Yamaha Motor to simulate an unmanned helicopter in the quarter. Yamaha Motor was in need of a robust solution to accurately simulate the fluid and structural performance of unmanned industrial use helicopters, and they choose our simulation tools to do so, and we streamlined the efficiency and the cost-effectiveness of the platform. Slide 35. Lane Shine Minerals in Laos has used Hexagon's Mine Operator, OpPro and Mine Enterprise to assist in the process of transforming this from a copper to a gold-focused mine. Slide 36, building an end-to-end engineering digital twin. Harbor Energy is UK's largest independent oil and gas business. Now, they had legacy solutions to track their asset performance, and they turned to Hexagon to help to standardize these processes and enable multiple external and internal uses. to work concurrently and collaboratively within a single controlled environment. So they choose Hexagon SDX as the basic platform and several add-on solutions to create this digital twin. Slide 37, Numaligria Refinery choose Hexagon as well to support its digital twin. And this is a trend that we see more and more in plant assets, that you need to digitize your processes. They also choose Hexagon SDX as their platform for digitalization. Slide 38. we're introducing a new car body positioning system, which is very important in automotive factories. Vipo 6D car body positioning system is using something called six degrees of freedom to position car bodies against industrial robots. And this system enables robots to adjust positions in real time, mitigating inaccurate positions which can lead to collisions or failed quality, and simply avoid collisions between robots and the car body. Slide 39, robotic cells powered by Hexagon's technology is helping to inspect challenging components. In this case, it was Skoda Auto in the Czech Republic that needed to switch from so-called tactile measurement. to optical measurement technologies to increase throughput and overall efficiency, but without sacrificing the accuracy of the system. And they used our robot automation software to do so, and our optical metrology sensors. So that was the summary of this quarter. And if we now turn to the final slide, slide 41, we have a record third quarter in sales and operating earnings. It is actually the second strongest quarter ever in the history of Hexagon. We did see supply constraints of certain components. That hampered the growth and profitability, and we estimate that to a 2% impact on growth in the quarter. We also hosted a capital markets day where we launched new financial targets. We've stated that between 2022 and 2026, we will, in average, grow by 8%. 12% per annum. The split will be 5% to 7% organic, 3% to 5% structural growth, and we will achieve an EBIT margin above 30%. And with that, we've come to the end of this presentation, and we now open up for questions, if there are any.

Thank you. So if you wish to ask a question, please press 0 and 1 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 0 and 2 to cancel. There will be a brief pause while questions are being registered. The first question we've received is from Joaquin Gunal. EMB markets, please go ahead. Your line is now open.

Thank you for that. Good morning. So if you can perhaps help us a little bit more with regards to the commentary here on the sequential development of the supply chain constraints and more in particular what that alludes to and what the mix shift you see for both, I mean, what's the differences between the your different business segments here. If we start off with geospatial, which seems to have weathered this better, and industrial as well. Thank you.