HEXPOL AB (publ)

Welcome to the HexBall Q3 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 Rawson. Please go ahead.

Thank you, operator, and hello to you all, and thank you for joining this call, and welcome to the HexBall Q3 presentation. This is Claes Dahlberg speaking and I'm here together with our CFO, Peter Rosen. If you please turn to page two. I will start with a business update. Peter will take you through the financials and I will summarize the quarter. After that, we are happy to answer your questions. If we then go to page four, please. I will start by going through the Q3 performance. We see that most markets continue to be affected by the geopolitical uncertainty, but it's pleasing to see that the European market continues to be rather stable, while the North American market is still challenging. We had only minor direct impact from tariffs, whereas the indirect impact on end customers affected the overall demand, especially north america it's also pleasing to see that including acquisitions volumes were actually higher than last year and excluding acquisitions they were in line with last year but with an unfavorable mix looking at our main segments we saw that the automotive and customer segment continued to be slow primarily in north america That was partly compensated for by increased demand in building and construction and also in wire and cable. Our most recent acquisition Piedmont in the US and Capcom in Turkey contributed positively to the quarter. Sales prices as well as prices on major raw materials were stable both versus last year but also sequentially. High uncertainty continues, triggered by US tariffs and US trade policy, and that is impacting us indirectly, as mentioned before. In North America, that is the main reason why we could not grow the overall sales and results compared to last year. In the quarter, we delivered sales of close to 4.7 billion SEC, with a negative FX effect of some 300 million SEC. Piedmont and Capcom added some 240 million in sales that was offset by lower organic sales in rubber compounding Americas. Compounding Europe showed rather stable organic sales. We reached an EBIT of 688 million sec and a margin of 14.7%. impacting negatively by fx of some 50 million sec and an unfavorable mix the operative cash flow continued on a good level and we reached 740 million sec in the quarter if you please turn to page five if we look into the different business areas starting with hexpole compounding The overall organic volumes were in line with last year. The lower sales were impacted by negative effects of some 290 million sec, but also by the mix. The automotive end customer segment was down primarily in North America, but that was partly offset by increased demand in building and construction and wiring cables. The price on major raw materials were sequentially stable and also versus last year. And the lower operating margin was affected by an unfavorable mix. Rubber compounding Americas is, as you know, an important part of the HEXPOL group. And we are very happy to welcome Ken Bloom back to HEXPOL as the interim president for Rubber Compounding Americas. Ken has a clear mission to take the next step capturing and growing that business. If we then jump to Hexpol engineered products, if we exclude the negative currency impact of 22 million, we actually had a small increase in sales compared to last year. And also good development across all product areas leading to a stable EBIT. We are firmly committed to sustainability and our focus continues. We are on a good path to deliver on the 75% CO2 reduction target that we set for the end of this year. We're also working on the sustainability strategy and the new targets will be completed during Q1 next year. M&A is, as you know, an important focus area for our growth plans. We have the financial resources to accelerate acquisitions. Short term, the political uncertainty impacts the M&A activity level. There is somewhat a wait and see mentality among some companies. And that is affecting that. And last but not least, on November 4, we will have our capital market day in Stockholm and then we will share more about our growth strategy. If we then turn to page six, it's time for the financial update and Peter will start with the sales development in Q3. Thank you very much.

So if I can ask you to turn to page seven, we'll take a look at the sales development in the quarter. And as you've seen, we delivered sales of 4.7 billion SEC in the quarter, which is down 6% compared to the same quarter last year. And if we look on the drivers, we see that organic sales are down 4% in the quarter. And at the same time, the acquisitions of Piedmont and Capcom added 5% in sales. And as Klaus mentioned, there were large negative effects in the quarter, adding up to 312 million SEC. Coming back to the volumes, overall organic volumes were on the same level as last year, but sales were still down, affected by a less favorable mix. Looking at it from a geographical perspective, Europe showed stable sales in the quarter, while we saw a decrease in North America that also translates into the decrease in group level. From an end customer perspective, automotive showed soft demand, which was partly offset by increased demand primarily from building construction, wiring cable, but also several smaller end customer segments that showed higher sales in the quarter. If I can ask you to turn to page eight, just taking a look at the financial overview and the P&L. We delivered a profit of 688 million SEK. That includes a negative FX impact of just above 50 million SEK. EBIT margin of 14.7%, which is below what we did the same period last year. And the main reason for this is somewhat less profitable mix, but also OPEX in relation to the lower sales that we saw here in the quarter. Strong cash flow in the quarter. With an EBIT of 688, we delivered a cash flow of 740 million SEC in the quarter. If I can then ask you to turn to page nine, taking a somewhat different view of the financial performance here in the quarter. We see that sales came in the 4.7 with an operating profit at 688 milliseconds below last year as mentioned, and an operative margin of 14.7%, which is done below what we did last year. If I can ask you to turn to page 10, looking at the drivers of the operating profit, we see that the lower EBIT is primarily driven by the lower sales, but also impacted by lower gross margin. The lower gross margin is affected by mix. OPEX is somewhat above last year levels, but that is driven by we've added Piedmont and Capcom to the cost base compared to the same period last year. If I then ask you to move over to page 11, starting to look at Hexpool compounding in the quarter, delivered sales of 4.3 billion in the quarter, which is below what we did the same period last year. Negative FX has a sizable impact of almost 300 million a second a quarter. Recently acquired Capcom and Piedmont added about 230 million second sales, while as mentioned before, organic sales were down some. And these lower organic sales are seen in North America, while Europe showed sales on the same level as last year. and as mentioned from an end customer perspective that the lower sales is seen with automotive customers and this was partly offset by higher sales to end customers within building construction wiring cable and also some other smaller segments operating profit came in at 624 million sec with a margin of 14.4 percent for the quarter If I can ask you to turn to the next page, we take a look at engineered products. We're adjusting for negative effects in the quarter. Sales were up 3%, and this is driven by strong performance by the Gaskets products. Operating profit at 64 million with a good EBIT margin of 18.1%, both in line with last year levels. If I can ask you to turn to page 13, taking a look at the working capital, you can see that we continue to manage working capital efficiently. Despite adding Piedmont and Capcom, working capital is on the same level as last year, both in absolute terms and in relation to sales. And as mentioned also in last quarter, there are no changes to underlying payment terms. And if I can then ask you to turn to page 14, taking a look at the cash flow. As mentioned, we delivered a strong cash flow in the quarter, 640 million SEK with smaller movements across the various items, but well above the EBIT that we delivered in the quarter. And then finally, when it comes to the financial part, if I can ask you to turn to page 15, looking at the net debt standing at 3.9 billion SEK and a net debt-to-ebit ratio of 1.14 at the end of the quarter. This is higher than last year, but this is mainly driven by the acquisition of the minority share of ALMAC, as well as the acquisition of Capcom that we've done this year. So all in all, after a third quarter, we continue to stand with a very strong financial position. And with that being said, I hand over to Klaus.