HEXPOL AB (publ)

Welcome to the Hexfall Q1 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 good afternoon to you all. Thank you for joining this call and If you please turn to page two. At our Capital Markets Day in November last year, we presented our strategy for Hexbol up to 2030. I will get back to you with a few words about the strategy at the end of this presentation. But one of the clear goals we presented was to grow in thermoplastic compounds. We have singled out that business area and created a separate business area called Thermoplastic Compounding. By that, we now have three business areas related to rubber compounding, thermoplastic compounding, and engineered products like before. As you always see, we have made some changes to our presentation to align with that mindset. I will start with a After my part, Peter will take you through the financials, and then I will make a summary of the presentation. And then we are, of course, happy to answer any of your questions. If you please turn to page three. During the quarter, we have never had a momentum with an offensive approach, despite market headwinds. The general market situation is still challenging and we focus on our customers and defend our market share in a very competitive environment. In-house or so-called captive compounding increase in these market situations. As a result of that, the captive volumes are still on a high level. But what we do believe is that these volumes have peaked by now. In North America, we see continued economic uncertainty, which has a negative impact on the overall customer demand, whereas the European market shows more stability. The situation in the Middle East, of course, impacts our supply chain in all regions. The financial impact in this quarter, though, was limited, but it will be more visible going forward. But I will come back to this later in this presentation. Looking at volume and sales prices, it's very pleasing to see that we have managed to increase our total volume in the in the market protecting our market share has been successful. We have seen higher volumes to customer in many of our main segments like building and construction, wiring cable, industrial as well as automotive. Though the average sales price was lower versus last year. We receive recurring questions about the impact of any potential future higher prices for raw materials. The answer is clear. We will, in line with our business model, compensate for these product costs going forward. In the first quarter, we reached sales of close to 4.8 billion sacks. That was affected negatively by effects of some 526 million seconds. We saw positive effects from higher volumes and acquired Capcom in Turkey. but that was offset by a negative price-mix effect. We will explain more about that later. The EBIT margin came in at 14.7%, with an EBIT of 700 million SEK, with a negative FX effect at some 17.4%. Earnings per share in the first quarter was 1.47 SEK. If you please turn to page 4... I will now walk you through and summarize the quarter in each of the three business areas. First of all, this business area represents 69% of our total sales in the quarter or 3.3 billion. The total volume, market volume for rubber compounding are still on a relatively low level due to lower customer demand. As mentioned, captive volumes are still on a high level but has likely peaked. We have strong customer focus securing our market share and it's pleasing that we have managed to win captive conversion opportunities in North America which is in line with our threat. What this means is that customers choose to outsource all or part of their in-house compounding to Hextech. We see growing volumes to building and construction, wire and cable, industrial as well as automotive and customer segments, both in rural Europe but also in North America. The volume increase has a positive impact on organic sales, but the positive impact is offset by product and pricing. Coming back to the situation in the Middle East, with the closing of the Strait of Hormuz, it is ingrained in our supply chain in all regions, but especially in Europe. If you look at the map of the region, you can see several of our suppliers' facilities are actually in this specific area. itself and on transport. North America is affected to a lesser extent than Europe, and the reason for that is that they source to a large extent domestically, except for some additives that are being imported. As said, for Europe, a large part of oils used in rubber compounds and also base polymers are sourced from the Middle East. And as Hexpo, I believe we have an advantage in our size negotiating with certain suppliers. We also have very skilled chemists who can assist in finding alternative raw materials and suppliers faster than many of our smaller competitors. This has in reality already proven to be a real competitive advantage for us. We follow the development very closely and we take active decisions every day to mitigate the effects. As a result of the higher material prices, increased energy and transport costs, we will increase our prices towards our customers going forward. The financial effect of that is not to be seen in this If we then turn to page five, thermoplastic compounding, there we see that that represents some 23% of our total sales in the quarter, equivalent to 1.1 billion sales. In line with our strategy presented at the Capital Markets Day end of last year, thermoplastic compounding is where we anticipate to grow. We have to bear in mind that already with 4.6 billion SEC turnover in 2025, we're not starting from scratch. We have a good foundation to build from and we have exceptional knowledge in the field that we can now utilize on this growth journey. We talk just as in the overall strategy about both organic and the quiet road. The combination of producers in this area is central to us. The total market for thermoplastic, we should remember, is 10 times the size of rubber and our ambition to move up in the product pyramid. There we find the more advanced products called engineered polymers. Initiatives are ongoing to strengthen the organization in sales, in purchasing, but also in operations. In the quarter, we saw a growing volumes to building and construction, automotive, medical, but also to general consumer segments. The higher volumes had a positive impact on organic sales. If we turn to page six, This business area represents some 8% of our total sales in the quarter, or 313 million. In the quarter, we saw lower demand, primarily in Sweden, for wheels and gaskets. Bearing in mind, though, that the comparison from Q1 last year was on a very high level. engineered products is still on a very healthy level of 70 if you please turn to page seven and now it's time for the for me to hand over to you people for the financial

Thank you, Klaus. If I can ask you to turn to page eight, just looking at the snapshot of the first quarter. We delivered sales of 4.8 billion SEK in the quarter with a need of just about 700 million SEK and given a margin of 14.7%. The operating cash flow, although always relatively weak in the first quarter, came in at 235 million SEK, which is up 25% compared to the same period last year, despite the lower EBITDA we saw in the quarter. And also, and I will come back to this, the net dipter ratio stands at about 0.88, and it's somewhat higher than the same period last year, and this is due to the acquisition of Capco and the acquisition of the minority share of Alamark after the first quarter last year. If I can then ask you to turn to day nine, looking at the financial highlights, and look how this compares to first quarter last year. Sales are down 11%, to the 148 million, all which negative effects make up 10%. organic sales development and the acquisitions that we've done. And I'll come back to this one in a little bit more detail later on. EBIT stands at a drop of 130 million SEC, or 16% compared to the same for last year. And of this decrease, half is related to negative effects in the range of plus 70 million a second. EBIT margin stands at 14.7%, and it's down less than EBIT at the negative 90 bits. And we will come back to the drivers of the future later on. If I can ask you to turn to page 10, we'll take a look at the sales development in the quarter. And we see that the decrease of 11% in sales is driven by negative FX effects of 10%. In addition to this, we see organic sales are down somewhat at 3%, while the acquisition of Capcom adds 2% in sales in the quarter. The organic sales development is positively affected by higher volumes, but this is offset by negative price mix effects. The volumes are on low single digits, while the negative price mix effect is in the mid single digit range. From a geographical perspective, the American business showed 18% lower sales, out of which some 13% are negative effects. While Europe is on the same level as last year, despite some negative effects related to the euro. Asia, although also affected by effects, had a relatively weak quarter. the drivers of EBITS. Of the total decrease of 16% in EBITS, a little bit more than half comes from negative effects, more specifically 74 million SEC or 9%. If we then look at the remaining drivers in the quarter compared to last year, all of the impact comes from the lower sales volume in the quarter. The gross margin in percentage is on the same level as last year and OPEX in absolute terms are also on the same level as last year. Lower sales value is affected by two things. One on the positive side is the higher volumes mentioned and this is offset by negative price mix effect. The negative price mix effect primary comes from volumes produced and sold that have a lower sales value in absolute terms. If I can then ask you to turn to page 12, we'll start to go through the three business areas. We're starting with rubber compounding. in the quarter, down 11% compared to last year. And of this decrease, 10% are negative. Acquired income as 2% in sales, while organic sales are down 3%. Lower organic sales are seen in North America, while Europe showed sales on a similar level as last year. From an end-customer perspective, the higher audience are seen with most end-customer segments, not least the larger segments, wiring cable, building construction, industrial and automotive. EBIT is negatively impacted by negative FX effects of 60 million, or 10%, somewhat lower sales and gross margin, and it came in at a 520 million second margin of 15.8% in the quarter. If we then turn to page 13, we have thermoplastic compounding. As Klaus mentioned, this is now reported separately. We delivered sales of 1.1 billion SEC in the quarter, which is down 10% compared to last year. And out of this decrease, 9% are related to negative currencies. The organic sales development was positively affected by higher volumes to most end-customer segments, not just building construction and general industry, but also building modern medical. The higher volumes were, however, offset by negative price mix effects, resulting in a net negative 1% organic sales development. The lower EBIT is fully explained by negative FX effect of 30 million cents. And the EBIT margin is still the same level as it was last year. If I can then refer to page 14, looking at engineered products. We delivered sales of 362 million second quarter compared to 429 million last year. The decrease is driven by negative FX effects and lower organic sales, making up about half The lower organic sales are primarily seen in Sweden, affected by lower demand. But, as Claus mentioned, the lower demand should be seen in relation to Q1 last year, being a record high quarter, where many customers were delivering on high orders. lower in the lower sales but still very strong margins in line with last year levels if i can ask you to turn to page 15 looking at working capital As always, in the first quarter of the year, working capital is up at a very strong Q4, but we continue to manage working capital efficiently. Capcom adds working capital, but apart from this, there are no major changes to underlying payment terms or payment periods. If I can ask you to confirm, We delivered a solid cash flow of 235 million SEK, where depreciation investments are valid, while as always in the first quarter, working capital is up, affected by the very strong closing of the solidity candle. Although a first quarter is always weak from a cash flow point of view, cash conversion of ETH during the last 12 months remains high at 107%. And if I can ask you to turn to page 17, we have a net debt at the end of the quarter, 2.9 billion SEC and a net dividend ratio of 0.88. This is somewhat higher than what we had last year. And this is mainly driven by the acquisition of the minority share of Alma, as well as the acquisition during the second quarter last year. So all in all, we continue to stand with a very strong financial position here now in the first quarter. And with that, I hand over to Klaus.