HEXPOL AB (publ)

Welcome to the Hexbol Q3 presentation. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO Klaus Dolberg and CFO Peter Rosen. Please go ahead.

Thank you. And good afternoon, everyone, and thank you for joining in on the HEXPOL Q3 presentation. I'm Claes Dahlberg, and I'm here together with our CFO, Peter Rosen. If you please turn to page two of the presentation, I will start with a business update. I have an interesting case from Germany covering recycled material that I would like to share with you. and I will also highlight the importance of our business model. Peter will take you through the financials, and I will summarize the quarter and our focus areas going forward. After that, we are happy to answer your questions. If you please turn to page four, then I will go through the quarter. When looking at demand and sales in the third quarter, Demand was down versus Q3 last year, mainly affected by lower demand from automotive end customers. S&P Global Mobility Report shows that the U.S. and European automotive production is down some 6% to 7% in Q3. As you know, some 40% of our total sales is to the automotive sector. But saying that, it also means that 60% is non-automotive. Sales was also impacted by lower sales prices, driven by lower prices on some main raw materials, and also by a negative currency effect, and Peter will come back to that. In the quarter, we delivered sales of close to 5 billion SEK and an EBIT of 800 million SEK. giving us a solid margin of 16.1%. Building and construction is still low, but we can see a slight increase versus Q3 23. The fact that demand is down versus Q2 this year is mainly affected by seasonal pattern that we normally see actually related to vacations at end customers. but also somewhat lower underlying demand. Sales prices are sequentially stable, but they have decreased compared to last year, as I mentioned before. Our focus on sustainability continues. We see a high interest in recycled products, resulting in high number of projects, not least from the automotive industry, where we are well positioned. If you please turn to page five, You will see an example how we are able to turn post-industrial waste into a recycled raw material. I visited our company Allmark in Germany some weeks ago. This facility is located 10 kilometers south of Berlin, and 90% of all their end products contain recycled materials from post-industrial waste. It's mainly European-sourced raw materials, for instance, residual textiles from airbag manufacturing. The production line you see on the picture is one example of how we invested in advanced processing equipment to enable recycling. We are well prepared for the proposed ELV, or end-of-life vehicle amendment from EU, stipulating the use of up to 25% recycled material for passenger cars. If you then turn to page six, M&A is an important focus area for our growth plans. We look positively on the M&A environment, and we have the financial resources to do more acquisitions, and that is very exciting and also encouraging. looking into the different business areas starting with hexpole compounding as mentioned before demand was down versus last year in q3 mainly affected by lower demand from automotive end customers and this is a result of the macro environment and not so much related to our performance the demand in building and construction is up somewhat And supply chain is stable. Most raw materials see lower prices year over year, but sequentially stable, as I mentioned before. And we see a decrease in operating margin driven by lower sales, but still on a solid level. If we look at hex pole engineered products, last week I visited our facility on Sri Lanka, producing wheels and gaskets. Four facilities all in all with close to 1,100 employees. I met very skilled teams there focused on quality and sustainability. Sales for engineered products is in line with last year. It's actually slightly up by 1%. Operating profit is somewhat lower, but a strong operating margin. Please turn to page seven. I have now visited some 20 of our 54 facilities and I feel very confident when I see the skill and dedication from our teams. I can confirm that we have a strong culture within Hexpol. We are committed and we are willing to work hard. On page eight, you find our business model. You have seen that model many times, but this is also a very strong model and its core for our business. With that being said, I have together with our group management team started to investigate the possibility for further growth, focusing on acquisitions, on organic growth, and as well work on efficiency. And we will come back to you with the development. In the short run, if you look at the lower right side of the model, you find flexible and efficient operations. That means with our decentralized structure, we are ready to adopt to the current business environment, and we are able to scale up or down when necessary. If you please turn to page 10, it's now time for the financial update, and I will hand over the word to you, Peter, to go through the financials.

Thank you, Klaus. As Claes mentioned, we delivered sales of about 5 billion SEC here in the quarter, which is down some 9% versus the same period last year. And looking at the 9%, 7% organic sales, organic sales are down 7% in the quarter, while the acquisition of Star added about 1% in sales. And we also saw negative effects of about 170 million sec here in the quarter. The lower organic sales are more or less equally driven by somewhat lower volume and somewhat lower sales prices. For the total hex pool group, the lower volume comes from the automotive segment. We see relatively a little bit more so in the U.S. than in Europe. And that is because some manufacturers in the U.S. close down production a little bit more than they normally do during the summer period. Also, the majority of the negative effects are related to the U.S. dollar, and that also helps explain why we see a little bit lower or a bigger sales decrease in the U.S. If I can ask you to turn to page 11, looking at the financial overview. We delivered an EBIT of 800 million SEC in the quarter. The margin came in at 16.1%, which is below what we did the same period last year, and also a little bit below Q2 this year. And main reason for this is the lower volume, where we in the short run within a quarter cannot offset with lower costs. The equity asset ratio remains very high. at 64%, and the return on capital also high at 18.4%. We delivered a solid cash flow of 803 million SEC, where EBIT was turned into cash. If I can ask you to turn to page 12, looking just at the financial highlights for the quarter, 5 billion SEC Down 9% compared to Q3 last year, while the operating profit came in at 800 million SEC and below last year. At the same time, we saw an operating margin at 16.1% here in the quarter. And if I can ask you to turn to page 13.