Hexagon AB (publ)

Hello, and welcome to the Hexagon Year-End Report 2021. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. Today, I'm pleased to present Ola Rollén. Please go ahead with your meeting.

Thank you. Welcome, everyone, to this Q4 report for 2021. And I suggest that we move straight to slide number four. We had a record quarter sales increased by 17%. The organic growth was 7%. And we could have shipped another 6% organic growth had we not faced component supply shortages in the quarter. Our largest divisions, Geosystems and Manufacturing Intelligence, managed to grow by 7% and 9% with solid margin expansion. PPM continued to recover, recording an 8% organic growth in the quarter. And this was also our first quarter with EAM Solutions, and EAM delivered a 42% SAS revenue growth. Our EBIT came in at 373 million, and that's an increase by 24%. If we now move to slide five, that is just a reminder that Q2 and Q4 are strong quarters seasonality-wise, and Q1 and Q3 are slightly weaker. moving to slide six key figures operating that sales amounted to 12 17 million euro which is 17 percent growth seven percent organic and our operating earnings came in at 373 million which corresponds to a margin of 31 percent And that is an EBIT increase of 24% in the quarter. Just for your revision, you got the full year numbers on slide seven. We have operating net sales of 4.3 billion, and we make an EBIT of 1270 million, corresponding to 29%. Using the old reporting structure, our EBIT margin would have been 28% for the full year. Moving to slide eight, cash flow. I think the most important thing to highlight is the change in working capital where we had a huge release of working capital in the fourth quarter of 2020. And we had working capital build up due to uh the the shortage of components in the fourth quarter of 2021. it was still a strong cash conversion 81 percent in the fourth quarter and if we move to slide nine we can see that working capital to sales is still at record no levels in spite of this small build-up in the fourth quarter Market development moving to slide 11. North America is now 32% of sales. The three global regions are one-third each. And we saw a slight contraction in Asia Pac down from 14% to 12% of sales. moving to slide 12 within these reporting regions we see north america growing stronger growth than eight percent organic so is eastern europe middle eastern africa as well as south america and then western europe is growing within the zero to eight percent range china up two percent on on very strong comparison numbers for Q4 of 2020. And then we have Asia excluding China, which is the only region that is contracting in the quarter. I leave slide 13 for your review later on, but highlighting that all industries, but possibly electronics, are at all-time high. Electronics had its peak in the third quarter, which is natural if you look at the customer base that we're servicing in that industry segment. Moving on to slide 14, EMEA market trends. Western Europe recorded 6% organic growth. We saw solid growth across all segments and a strong recovery in the automotive industry. aerospace and manufacturing, as well as construction and infrastructure sectors. Strong countries were, if I were to highlight some, UK, Italy, and Germany. Eastern Europe, Russia, and Middle East all recorded double-digit growth in the quarter. We move to America's slide 15. North America recorded 9% growth. The strongest country in North America was Canada. That's the good demand from both oil and gas as well as minerals and natural resources. But strong recovery in most verticals in North America. Continued weakness for our defense business in the United States. South America recorded double-digit organic growth. driven by solid development in mining and agriculture, as well as the continuous recovery in the Brazilian economy, where we grew by 18%. Finally, on slide 16, regarding markets, Asia. China, 2% organic growth on the back of very strong comparison numbers. uh continuous strong growth in the manufacturing sector despite the tough numbers we compare this fourth quarter with infrastructure and construction is hampered by availability issues and we made a decision to cut supplies to the asia region for geospatial solutions india Double-digit growth grew by 14% organic growth in the quarter. A good recovery for India. And Japan and South Korea were the only major markets contracting in the quarter. And that is really, we're seeing competition for our Japanese and South Korean customers coming from China. Reporting state. If we move to slide 18, geospatial enterprise solutions. Reporting organic growth of 5%, geospatial was the business area that suffered the most from lack of components. In spite of that, geosystems, which probably suffered the most, delivered 7% organic growth, SI-4 hampered by the US defense orders or lack of orders. Autonomy and positioning was another area that was hampered by component supply, but still managed to grow by 8% in the quarter. Sales 586.5 million and an EBIT margin of 31% in the quarter. Moving to slide 19, industrial enterprise solutions. So an organic growth of 8% had less issues in the fourth quarter with component supply compared to geospatial. MI continued to recover and grew by 9% organic growth. And we do see both automotive aerospace and design and engineering software coming back. PPM also recovering, 8% organic growth, was driven in the quarter by the asset information management software as well as our AEC portfolio. Good recovery in EMEA and EAM, which is reported in the PPM numbers, So strong growth in both sales and order for its SAS solutions. Sales of 630 million, an EBIT margin of 32%, so a strong recovery for industrial enterprise solutions. Moving to slide 20, we report a increase of one percent in our gross margin for the full year 65 for the rolling 12 months past 12 months slide 21 is the old definition of our operating margin where we actually reached our target that we set in 2016 of 28 percent and if we move to slide 22 we can see according to the new definition where the last 12 months is a 29 percent unit margin we then move to slide 24 and we start discussing m a orders and product releases we launched a project during the fourth quarter where we collaborate with a non-profit organization called beneath the waves this is a super exciting environmental project where we try to preserve the seagrass meadows in the caribbean and we do it through our subsidiary our evolution and we've leveraged the hexagons airborne bathymetric lidar technology to cover the seagrass beds and document them. And we're going to accurately map thousands of kilometers of the seabed in just a few days using an airplane to validate the findings. If we move on to slide 25, we're very proud that our subsidiary PATH has been awarded the Global Company of the Year Award from Thorsten Sullivan. Moving on to slide 26, this is an exciting order where Hexagon's AMP and mining divisions collaborated in the development of an automated road train solution for the mining services company Mineral Resources Limited, MRL. And we integrate drive-by-wire technology with an autonomous management system to orchestrate vehicle movement in the road train haulage. So you can see two big, big lorries. acting as a road train on this slide. Moving to slide 27, we had significant orders from the automotive industry in India. Both Mahindra and Tata Motors bought Hexagon Solutions for simulations of future products. Slide 28. This is another interesting slide. sustainability application where a architectural design and consultancy company in Thailand, Greenwell, used our computational fluid dynamics to reduce the green footprint of this building. And this might be something that could become a standard where you optimize what's called HVAC, heating, ventilation, and air conditioning. Moving to slide 29, it was, as I previously commented, a good quarter for aerospace. We had orders from, among others, Kawasaki Heavy Industries, where they want to predict how sheet metallic components and materials will be affected by various forming processes in its manufacturing and they choose our design and engineering software to follow up on said operation slide 30 we also got an interesting public safety order in the quarter from the the country of Honduras where They're going to standardize on our cloud-based solution, Hexagon OnCall, and they're going to roll it out nationwide. And it's going to affect more than 10 million people. Moving to slide 31, we also got our first order from a Chinese company. And in this case, it was a chemicals company that selected Hexagon SDX. to digitally transform its processes. Slide 32, autonomous reality capture and momentum is building for our newly released product, BLK Arc, which in layman terms is called the dog, where we combine our sensors with the Boston Dynamics robotic platform. We've got a series of new orders in the quarter for the recently released product where they will use it for anything from airport security to plant inspection and better localization of robots and humans. moving to slide 33 we also launched BLK to fly in the quarter and we've also received orders for that platform it is one application where a construction company want to compare the actual construction against the BIM model and look for deviations against the BIM and we've also seen a lot of other BIM-related applications where you use this platform to verify your BIM data. Slide 34, we launch a new organization at Texagon today, a metaverse-focused business unit that will drive growth in digital transformation. In connection to that, we got two orders. We got one order from Enel, where they use us for asset and infrastructure digitalization. Enel is a huge company with plants in more than 30 countries, and they've ordered hundreds of our BLK sensors and our Cyclone software to digitally capture all their assets, their factories. and then create a digital twin. Another super exciting project is that we now have an agreement with the Federal Agency for Cartography, EKG, in Germany to digitize the entire country of Germany. And we kicked off that project and it's going to continue throughout 2022. With that, we come to the dividend. So if we turn to slide 36, as you've seen in our interim report today, the Board of Directors of Hexagon proposed a dividend of 0.11 euro, which is an increase of 22% over 2020. And in summary, if we end on slide 38, it's a record quarter. It's the best quarter ever. We missed 6% organic growth, so both EBIT margin and sales could have been much stronger without the supply constraints that we were faced with in the quarter. And the Board of Directors proposed a dividend of €0.11. And with that, operator, I think I've concluded my presentation and we are now ready to answer questions.

Thank you. Ladies and gentlemen, 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 zero and two to cancel. There will be a brief poll while questions are being registered. And the first question is from Daniel Jouberg, Condors Banken. Your line is now open. Please go ahead.