Indutrade AB (publ)

Welcome and good morning on our behalf as well. As usual, let's start with this quarter's highlights. We had stable order intake. The growth was 4% in total and 2% organically. And four out of five business areas had organic order intake growth. The strongest demand for companies in the process industry and in the energy sector. Net sales increased 2% in total. Organically it was flat versus last year. EBITDA margin was stable and at the high level 14.8%. We continued with inventory reductions in the quarter and we also had a strong cash flow. One acquisition completed in Q3, one so far in Q4 and 13 in total 2024 and a continued strong pipeline. And I will elaborate more on all these points in the presentation here. So if we start with the order intake and the sales situation, as I said, order intake plus 4% and sales plus 2% in total. And this was supported by a good acquisition pace and acquisition impacted with plus 5%, both in order intake and sales. Organically, order intake grew 2%, and for the sales, it was flat. And we should also note that we had one more working day in the quarter versus Q3 last year. Book-to-bill was below one in the quarter, partly because of seasonal variations. We usually start the year in quarter one with a really good book-to-bill and quarter three, it can be a little bit weaker, but the ratio this quarter was above last year's level. Four out of five business areas and more than half of the companies had positive organic or green take growth. But as usual, there were large variations between companies, segments and countries. And companies with customers more broadly in the process industry and the energy sector had the strongest demand, whilst the business climate in the infrastructure and construction and also parts of the engineering customer segments remained more dampened. And I will comment a bit more on all these points when we talk about the business areas. If we look at sales in a market country perspective, as it has been for some while, the strongest development was in the Nordic with the highest sales growth in Denmark. And as we have had it for some quarters, the growth in Denmark mainly related to pharma production and deliveries to Novo Nordisk. Aggregated slightly lower growth in general. We have also commented on this. Quite a lot of base industry CapEx driven sort of business in Finland and that's a bit weaker now. The decline in the UK Ireland mainly relates to weaker sales within the construction segment in the UK. And we also had strong pharma customer references on Ireland. In central parts of Europe, the general business climate continues to be dampened. I would say Germany is the driver in terms of a weaker business situation there and broadly the automotive sector. And sales to North America and Asia is slightly volatile and the development can fluctuate with single projects since these areas are rather small for us. And this year so far more activities and projects noted primarily from US customers. In terms of profitability, EBITDA margin was stable and high at 14.8%. But lower than the 15.2% we had the same period last year. Organic sales development in combination with slightly higher expenses are the main drivers of the EBITDA margin decline. The gross margin was slightly better than last year if we exclude some one-off items and acquisitions and divestments were margin accretive. All in all, EBITDA decreased within total 1% compared to last year, where of 4% organically and acquisitions and divestments did however have a positive effect of plus 6%. If we then turn to the business areas on an aggregated level, almost half of the companies showed organic sales growth in the quarter. Business area life science had the strongest development, mainly driven by sales of diabetes related products in the Nordics. And as mentioned previously, production equipment in Denmark. Stable and high sales for process energy and water with good contribution from for instance the energy sector but also the marine sector. Again partly offset by weaker market situation in Finland. The slightly dampened market climate continues to impact business area, industrial engineering and also infrastructure and construction. If we talk about industrial and engineering I would say it's broadly linked to the automotive sector and companies with direct and indirect business relationship to this sector. This can for example be cutting tools or production equipment related. It's mostly demanding in Germany I would say but also other countries around Germany. Offsetting positively is the automotive aftermarket, which develops well for those companies involved in that sector. And if we take infrastructure and construction, I would say it's sequentially rather flat and it's not getting worse, rather expecting positive improvements at some point next year. And this is obviously linked to expected lower interest rates and the more positive investment climate in that area. The organic sales development in technology and system solutions is mainly explained by strong references in a few companies. During Q3 last year, some companies had exceptionally high sales growth. For example, in the marine segment driven by regulatory requirements for shipping vessels, as well as strong growth within leak detection for hydrogen tanks. As mentioned earlier the organic sales development and slightly higher expenses was the main driver of the EBITDA margin decline. The gross margin continued on a good level and the margin in industrial engineering and process energy and water was basically in line with the same period last year. Infrastructure and construction had positive contributions from acquisitions and divestments which supported their margin improvement. And the margin in life science was record high in Q3 last year, presenting a challenging reference for this year, driven, for instance, by strong sales in the single use area. This year, we had a less favorable product mix in the sales and also some one offs impacting the result. The margin decline in business area, technology and system solutions was mainly connected to lower sales in combination with a slightly increased expense level. I would say in general, The companies are working with their cost situations and in general our companies are as you know entrepreneurial, opportunity driven and a bit hesitant to reduce cost too quickly if they see that their activity levels will generate growth in a medium term. It's also in general difficult to find really good people. I would say a logic hesitation to lay off people because of that. But there are absolutely some companies working with cost reductions and this will have effect already in Q4. If we then look at acquisitions it's been a high pace in general so far in 2024. We have been able to acquire 13 well-managed companies and the combined annual sales account for a bit more than 1.2 billion SEK. If we look at this geographically 60% Nordic companies and 40% outside the Nordics. In Q4 we have welcomed one company so far, but I would say that the pipeline is still very strong and we have a number of projects in different phases ongoing. So you can expect that we will be able to conclude some further acquisitions already this year and hopefully a good start of 2025. When we look at our acquisition track record we usually say that it's good to have a longer time period perspective on this and as I said so far in 2024 good contributions in Q2 and Q3 following a weaker Q1. Regarding the financial effects, the bridge effects from acquisitions over the last 12 months have added close to 60 million SEK to the group's EBITDA in the quarter, corresponding to an EBITDA margin of around 16%. By that I leave the word over to you, Patrik, to comment more on the financials.

Thank you, Bo. Let's dive into the details. So total growth in orders and sales for the quarter was 4% and 2% respectively. Year-to-date orders have increased by 3% and sales are 1% higher than last year. Book-to-bill ratio in the quarter was 95 and is 99, almost on the same level as year-to-date. said earlier Q3 is normally a seasonally weaker book to bill quarter. As also then mentioned earlier, we had some one offs impacted the gross margin. So excluding these one offs, the gross margin was actually slightly better than quarter three last year. And if you look at the year to date, the gross margin shows a small improvement. EBITDA decreased with 1% in the quarter, mainly due to soft organic sales development and slightly higher expenses. And if we elaborate on the expenses slightly more, They are slightly higher than last year, but if you look at the sequential development during this year, it is flat or even slightly declining, I would say. So I think the trend is on the right path, so to say. And coming back to the EBITDA development year to date, we are 4% behind last year. On the margin side, we came in at 14.8 compared to 15.2, slightly lower than last year. And behind the scenes, we had some one-offs in the quarter, primarily connected to earn-outs and write-downs, but the net effect was close to zero. And accumulated, we are on 40.3 versus 15.1 last year. Continuing down in the P&L, the finance net increased with 7% in the quarter and 12% year to date, driven by the higher interest rates. Tax costs were actually down 21% for the quarter, resulting in a relatively low tax rate of around 20%. And this This comes from the tax treatment of the different one-offs we have. So the lower tax rate is temporary during this quarter. Year-to-date tax cost is decreased with 14%. Earnings per share increased with 3% in the quarter, but is down 7% accumulated. And we will look at the trend on a coming slide. Return on capital employed amounted to 90%, slightly lower than our target level due to the flat earnings development. We had the last couple of quarters, but continued high acquisition activity. Cash flow remains strong, I would say, at around 1 billion for the quarter, but it's slightly weaker compared to last year, when we had a lot of the release of working capital. The accumulated operational cash flow for the quarter, for the full year, was 2.5 billion, down 15%. percent compared to last year. And lastly then the net debt to EBITDA ratio improved slightly to 1.6 versus 1.7 last year. And then elaborating some more on the cash flow and it is as I said slightly more than 1 billion in the quarter and that's lower than last year and but still at a good level and actually the second highest Q3 ever. And the decrease, as I said, we had a lot of working capital release last year, and we have that also this year, but not to the same extent. And if you dive into the inventories, those continue to decline organically also during this year and this quarter, so that is good. And I think also if you zoom out, I think it's important then to emphasize and highlight that we have capitalized companies and we normally have strong underlying cash flow, which is normally seen in a good cash conversion, as you can see then in this slide. And we're right now trending on a rolling four-quarter basis at 130% compared to net profit less capex. And in terms of working capital efficiency, the lower organic sales development is, of course, creating some headwinds, but the metric improved slightly during the quarter compared to last year. But we are pushing on this, and we continue to work with it in a structured way going forward. Moving to the EPS, earnings per share for the quarter, it came in at 1.92, an increase of 3% versus last year. And earnings before taxes was slightly lower than last year, so the increase comes from the lower tax rate I talked about due to these one offs in the quarter. If we zoom out and look at the longer perspective, longer term perspective, the growth, the three year growth average and the five year growth average is 10% and 13% respectively. Lastly then, looking at the net debt and the financial position development. And as a consequence, as an effect of the strong cash flow we have, net debt decreased both sequentially and compared to the same period last year to around 8.8 billion. And looking at the ratios, net debt equity was low, 56%. 66% last year. And the net EBITDA, as I said, 1.6 versus 1.7. And if you exclude earnouts, which we of course include in the official measurement, if you exclude them, it was 1.4 versus 1.5. So in summary, despite continuing to push on with high acquisition pace, our debt ratios are well balanced and a strong financial position. Then I leave back over to you Bo.

Thank you. Some comments on the organization. As you know we launched a new organization from the beginning of the year. The reason for this is that we want to proactively scale the group and we introduced five new business areas but more importantly we also introduced a new layer in the organization of approximately 30 business segments and we appointed 30 business segment leaders. And these persons now drive clusters of five, ten companies and they were all internally sort of promoted into these roles so they know our values well, our culture well and the business sort of logic we use in a really good way. And they can now work a little bit closer to the companies and proactively support them organically and also actively work with the acquisition agendas in these 30 respective segments. So I think. medium term long term this will drive both organic growth and and definitely also acquisition growth of internally generated projects and also drive learning better knowledge sharing between companies and I think we will also be better sort of owners board members in our companies with more specific sort of segment market specific knowledge So we are very optimistic and positive about this organizational change. So by that, let's summarize the quarters and focus on the key takeaways here. So we had organic order growth and stable high profitability. We have a solid financial position and a strong cash flow. We have completed 13 acquisitions so far in 2024 with annual sales of a bit more than 1.2 billion SEK and we have a really good inflow of acquisition projects and are in a number of projects in different stages. There is some uncertainty in the general business climate but we have a diversified Business structure and entrepreneurial agile companies and this together will provide resilience. And the business segment structure implemented to improve the capability to grow both organically and through acquisitions. So all in all good conditions for further sustainable profitable growth and the competitive value creation going forward. So by that we end the formal presentation.