HEXPOL AB (publ)

Welcome to the HexBall Q1 2025 presentation. During the questions and answers 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 Dahlberg, and CFO, Peter Rosen. Please go ahead.

Thank you, operator, and good afternoon, everyone. And thank you for joining in on the HEXPOL Q1 presentation. I'm Claes Dahlberg, and I'm here together with our CFO, Peter Rosen. If you please turn to page two, I will start with a business update, tell you a little bit about our latest acquisition, Capcom in Turkey, and also the organizational changes we have done during the quarter, and then touch upon the US trade policy, how that affects us. Peter will take you through the financials and I will then summarize the quarter and focus areas going forward. After that, we're happy to answer your questions, of course. And if you please turn to page four. Let me start by going through the Q1 performance. We did have a good start of the year despite the uncertainty in the world. We're happy to report that we did see the effects of the expected increase in demand after the seasonally weak Q4 last year. We had overall stable sales in Europe and in the US in the first quarter. Asia showed a good improvement driven by engineered products. The somewhat lower EBIT margin was mainly driven by product mix. In the quarter, we delivered sales of close to 5.4 billion SEK and an adjusted EBIT of 839 million SEK with a margin of 15.6%. The organization continues to keep close track on the working capital. As always, in the first quarter, the cash flow is on the lower side, but the 188 million SEK that we achieved is still higher than last year. Moving over to demand and sales prices, organic demand was slightly down versus Q1 last year, mainly affected by lower demand from automotive. But that was largely offset by growth in building and construction, general industry, and also in wire and cable. Positive impact also of Piedmont that we consolidated from November last year. Sales prices were sequentially stable with no big variations in price for major raw materials. But there is, of course, an uncertainty going forward by US trade policy and changing tariffs. If you please turn to page five. Looking at the different business areas, starting with Hexpol Compounding, which is the majority of our business. Sales was in line with last year. Organic demand was slightly down versus Q1. But also mentioned, as we mentioned before, it was largely offset by growth in other areas. And I mentioned those building and construction and so on. The supply chain is sequentially stable and also versus last year. If we look at engineered products, we are happy to report a 15% increase of sales compared to last year and a good development across the product areas. I would like to highlight wheels that had a good first quarter. They have made a differentiation into new segments like defense industry, conveyor systems for airports and so on. And they were quite successful in that. We are firmly committed to sustainability and our focus continues both for our own operation, but also for our products. We still see a high interest in recycled products, resulting in a high number of projects, not least from the automotive industry. where we are well positioned. M&A is an important focus area for our growth plans. We look positively still on the environment and what's important is that we have the financial resources to make the acquisitions. The acquisition of Capcom was approved by the Turkish authorities last week, and we are planning to close the deal next week on April 30 in Izmir, where they have their facility. We acquired the remaining minority share of Almach in Germany in April, and the management remains on board, which of course is important to us. If you please turn to page six. Just a few words about Capcom. Capcom is the market leader in Turkey for wiring cable compounds and especially for so-called HFFR compounds, which is a compound that is, let's say, fire resistant. You don't get toxic smoke and so on. And that is a regulation that has been put in public buildings to use that compound for wires and cables. And they have been quite successful in that area. And we see electrification is driving this segment. in general, so we see a positive growth going forward. If you please turn to page seven. We have made some organizational changes to drive growth. We are building a stronger thermoplastic and TPE business by putting them into one product area. These compounds are produced in a similar way. We can also leverage on our customer relations, our application knowledge and geographical reach. High performance compounds will be integrated into rubber compounding because they are also closely related. If you look at page eight, if you turn to page eight, This picture illustrates the changes that we have done, giving us four product areas. Rubber compounding with a geographical split, TPTP compounding, gasket and seals, and wheels. Coming back to our growth plans or a strategic overview, we are planning to invite you all to Capital Markets Day on November 4th in Stockholm. There we will be more precise about the plans and you will be able to meet our management team also. Then if we move over to page nine, US trade policy, I guess, is something on everyone's agenda at the moment. And actually, in the first quarter, we did not see any material impact of the trade policies. And we see minimal impact of the US tariffs in Europe overall, because we're not exporting from Europe to the US. Going forward, we do expect a direct impact on HEXPOL in the US, primarily driven by prices on raw materials. Active work is ongoing to mitigate the effects of that by finding alternative suppliers, negotiating purchase prices, and we plan for necessary price increases. And all that is in line with our business model. We also expect to see a negative indirect impact on demand in North America, but that is of course impossible to quantify today, but we believe it will have some effect given higher prices. If you please turn to page 10. This is the heart of our operation, our business model. And that I think is worth mentioning when we meet like this, that that is really the backbone for our operations. If we turn to page 11, it's time for the financial update. And Peter will start with the sales development in Q1. Thank you, Claes.

So if I can ask you to turn to page 12, look at the sales development here in the first quarter. As Claes mentioned, we delivered sales of 5.4 billion SEK, which is up by 1% compared to the same period last year. And if we break down the sales development, we see organic sales are down 3% in the quarter. while the acquisition of Piedmont added 3% in sales. And for a quarter as a total, we only saw minor FX effects. The lower organic sales are mainly driven by somewhat lower volume. Sales prices are stable, both versus Q1 last year, but also sequential compared to Q4 last year. And from a geographical perspective, both Europe and North America showed stable sales while we saw the increase that Klaus mentioned in Asia, driven by the performance by engineered products. And if we look at it from an end customer perspective, we did see slower or softer demand within the automotive segment. uh that to a large extent was offset by increased demand and sales related to building construction general industry and the wiring cable and customer segments if i can ask you to turn to page 13 just looking at the the financial overview for the quarter um an ebit of about 840 million sec with a EBIT margin of 15.6%, which is below what we did the same period last year. Main reason for the lower margin is the somewhat less profitable product mix and also somewhat higher OPEX in the quarter. Equity asset ratio remains very high at above 60% and return on capital employed is also high at about 17%. As Claus mentioned, a cash flow of just below 200 million, which is higher than what we did last year, 112. And just a reminder that this is the normal cash flow development that we normally see. It's always soft in the first quarter and will then pick up during the rest of the year and normally close quite strong at the end of the year and for the full year. If I can ask you to turn to page 14, looking at the financial performance from a somewhat different perspective, we see sales at 5.4 billion in line with last year, while the operating profit is down 7% to about 840 million SEC, which is below last year. And this is driven by the lower margin at 15.6% compared to 17% that we did same period last year. If I can ask you to turn to page 15, we'll look at the operating profit and the various profit drivers. We can see that the lower EBIT compared to last year is driven by the somewhat lower gross margin. And the lower gross margin is affected by the product mix, as I mentioned before. OPEX are above last year, and that is driven primarily by acquired PMO that has been added. Very smaller items such as the general salary increases, but also costs for some strategic products that we run here during the quarter. If I can ask you to turn to page 16, we'll take a look at Hexpool compounding, where we saw sales of 5 billion in the quarter, which is in line with the same period last year. I should mention that this includes acquired Piedmont, excluding Piedmont, we saw a small drop in sales, primarily related to the US market. As I mentioned before, from an end customer perspective, the lower demand and sales is seen with the automotive end customers. And that was to a large extent offset by higher sales to building construction, general industry and the wiring cable and customer segments. Operating profit at about 760 million SEC with a margin of 15.4% here in the quarter. if i can ask you to turn to page 17 looking at engineer products um very strong quarter at about 430 million second in sales which is an increase of 15 compared to saint pierre last year and within the business year we saw that all product areas showed good performance um operating profit at about 80 million SEK, also 15% above last year, with a stable EBIT margin at high 18.2%. So a very strong quarter for engineered products. If I can ask you to turn to page 18, looking at working capital, we continue to manage it very efficiently, I'd say. Despite adding Piedmont with about 100 million SEK in working capital, we see that the group working capital is below the same period last year, both in absolute terms and in relation to sales. And as I often mentioned, there is no change in the underlying payment terms. And if I can ask you to turn to page 19, looking at the cash flow in the quarter, As mentioned, we delivered a cash flow of 188 million SEK, where the growth in working capital offsets the EBIT in the quarter. And this is a normal pattern for us here in the first quarter. And then finally, talking about finance, I'll ask you to turn to page 20, looking at the net depth here at the end of the first quarter. We have a net depth of 2.3 billion SEC, a net depth EBITDA ratio of 0.663. And just a reminder that this is, of course, after the acquisition that we did in Q4 of last year, so that has some impact. But all in all, we continue to stand with a very strong financial position here at the end of Q1 of 2025. And with that being said, I hand over to Claes for some summary remarks.