Inission AB (publ)

Good morning and welcome everyone to today's earnings presentation by Initian. My name is Henrik Intsa, I'm an equity research analyst covering Initian, here to moderate today's Q&A. But before that, we'll start off with a presentation from CEO Fredrik Berghil. If at any point during the call you think of any questions, please type them in the chat and I'll read them out for Fredrik to answer after his presentation. With that, please go ahead, Fredrik.

Thank you very much, Henrik. Welcome to Nischen Q4 presentation. My name is Fredrik Bergel. I'm one of two co-founders and one of two principal owners of Nischen. Myself and Olle Hulteberg, we started this company for over 18 years ago and we are still both active. I am the CEO and Olle is the chairman of the company. Inision Group consists of Inision EMS, contract manufacturing of industrial electronics. Inedo, which is a company developing, marketing and selling power supplies. Both these businesses areas are operating with customized high-end and high-mix low-volume industrial electronics. I will go through the financial performance of the quarter, comment on the highlights of the quarter, and then also mention or go through our financial targets. And as Henrik said, we will end this with a Q&A. So please come in with your questions. Reported sales increased 23.7% to 657 million SEK. However, adjusted for Celteca 49 million, sales increased 77 million SEK or 14.5% organically. I think it's important to point out here that we, despite very high sales, still have a book-to-bill ratio at 1.1%, which indicates that this higher speed can be maintained. We are also really happy that Enedo are back in black, at least on EBITDA level for the quarter. To explain the numbers on a high level, our net added value turnover minus direct material net added value was 35.9 million SEK higher. If we adjust for Celteca with takeaway there now at 29, the material share was somewhat lower compared to last quarter, partly due to Celteca, which have a quite low material share. Cost level was 11.3 million higher. Axe adjusted for Celteca. We also have restructuring cost, mainly in Enedo during the quarter of 5 million. And we have also restructuring cost at Inisen EMS on 1.8. To me, this indicates now that we are down in cost level. So if we can keep this volume now, we have a cost structure that corresponds to our income level. All in all, this gives an EBITDA of 38.6 million SEK, which is 20.8 higher than last year. Celteca in the quarter contributed with 2.1 million. We have quite a high financial cost in the quarter, which makes the earning per share dropping 0.56, from 0.4 to minus 0.1. And this is explained by the acquisition of the last 49.9% of Zeltek that we made in the quarter. compared to the original acquisition analysis. Since AXA was performing better, the earn out made the company valuation coming out higher. So we have a financial impact here, financial cost of 20.9 million SEK in the quarter, which is non-recurring, of course, and it's also non-cash. This is quite in detail described in the press release 14th of November. The rest of the difference here in financial cost are currency that we had a small plus last quarter. Now we have a small minus. If we look at the interest cost itself, it comes out very, very close to last quarter. Year on year, as the last picture illustrates, shows that we are back on the growth track, which of course we are very happy for. If we look at the quarter in sequence, as this picture shows, it's even clearer that turnover and profit are recovering. So far, our cost cutting actions have been eaten up by restructuring costs. But from Q1 this year, we will have a clean situation. If volume stays now on this level, we have a good chance of even further recovering of our profitability during 2026. Clearly improved networking capital. We have stock coming down, receivables going up a little bit and payables going up. If we net all this up together with the profit, we have an extremely strong cash flow in the quarter. 101 million SEK compared to 70 million last year. This gives a lower debt and now with this improved EBITDA have taken down the net debt EBITDA ratio to 2.3 well below our targets. Also thanks to this strong cash flow the board of directors have decided to propose a dividend of 0.6 SEK per share to be proposed for the shareholder meetings that we have in early May. If we look at the full year numbers, sales increased with 56 million to 2.206 billion. But then, of course, Celteca and Axe. Celteca contributed six months and Axe contributed one month. And that sums up to 106 million. So organically, we have a small decrease. We decreased with 50 million or 2.3%. If we look at the explanation of the EBITDA result here, we had a really slow start for both business areas. And then we had also losses for the Enedo business area, the first three quarters, which brings down the EBITDA result to 111 million, which is then 14 million lower than last year. And then as explained earlier, the profit per share here or the profit after tax is clearly affected of this 20.9 million re-evaluation of Axe, the last 49.9% as I just mentioned. Looking at the year numbers and the long picture here, it certainly doesn't look like a recovery, but I think I proved my point with the previous pictures. Net sales coming out at 2.2 billion, EBITDA amounting to 111 million or 5% as a margin. And as I said last quarter, I think this picture really illustrates our long-term performance and growth here. And then you can clearly see the overheated market, generally the overheated market 22 and 23. And then we have destocking and our customer had too much on the shelves 24 and the first half of 25. So... I think this is a good picture illustrating that. Then it also illustrates initial specific situation where we actually were eating, we're taking a high amount of inedible losses 2021 and now also 2025 here. But looking at the long trend, EBITDA level, looking at the growth here. I think if we extrapolate numbers from pre-COVID, you can see that 2025 was quite okay. Looking at the business areas separately. All in all, I think the EMS portion performed decent considering the quite slow start. And then now we have had a strong increase in the last both Q3 and also now Q4. Here in Q4, we have an organic growth of 19% for the quarter. For the margin here has been affected of the very unbalanced first half year and second half year. But I'm thinking with this higher speed and if we also have a better balance in loading over the year, that we should have good chances of improving the margins further. Looking at the comparing with our midterm target, we are only 2.4% away compared to the last two years now, ending up at 6.6 EBITDA margin. In Edo of course different situation also this quarter we are shipping lower volume compared to last year but we are very much closer now it's only six million below or six percent as explained earlier we have taken down cost level both in Tunis and also in Italy at the Enedo side and now we are in balance so it has been offset also for the last time now in this quarter by 5 million in restructuring cost but still even having that included we have 3.5 better EBITDA in this quarter compared to last year If we put these five back, we will be at an EBITDA level of 6.2 or 6.7%, which happens to be very close to the EMS or the same as the EMS result. From this quarter on, there will be no extras for restructuring. And if volume stays here, also Enedo will be able to produce decent margins forward. And then some main items from the quarter. We have applied and the board of SOF have accepted our application being a member of the SOF. And that is an association for companies within safety and defense. We have, as I have said now, acquired the last outstanding 49.9% of the Axie shares. And this has hit us with this financial impact that I've talked about. And then, of course, what is better? Acquiring a company that goes better than you think and then you have to pay a little bit more or that it goes worse than you think and you have to pay less. One can be philosophic about that, but still we are very happy about the Axel performance so far. We have also employed a new managing director for our company, Inis & Syd, Torkel Skoglösa. He has a background from Häxpool and Nolato, and his latest was from Bona in Downing, Skåne. And he has a very relevant industrial background from a similar industry as ours, same setup here. So we are really happy that we have Torkel on board. Over to our financial targets. The board of directors for Inison have decided the financial targets for 2026. Sales for the full year to be between 2.3 and 2.5 billion SEK compared to last year of 2206. Also EBITDA margin. is expected to be above 6% to be compared with the actual for 2025 of 5.0%. We also want our net debt over EBITDA to be between 1.0 and 2.5%. Looking at our mid-term targets. Thinking about our historical performance. We have always had good growth. And now we have... We are talking about having 50% annual growth. That is our target. And the dividing here, 10% organic and 5% by acquisition. Actually then compared to history, slowing down acquisition speed and focus on organic growth. EBITDA, EBITDA, we think... We over time should be able to be among the best in class. So nine is our target there. And there, of course, if we are home with our growth in volume, we have more to prove when it comes to profitability. Historically, five-ish has been our standard. Our strategy have, however, brought the EMS portion of the business up to even eight, 2023, and as shown here now, seven-ish the last two years. Inedo, we have turned around twice now under our ownership, but now Inedo is a smaller, more focused company, and they should be able also to produce decent markets. But all in all here, we think we are in a good industry and we think our shifting from acquired growth to organic growth will be helpful for our profitability. We also think that we that the mega trends that I have talked about many times, they are still super duper valid. We see this regionalization and nearshoring. We also see that robotization, automatization, digitalization, and now also Internet of Things with machines talking to other machines. And this will be even more driven by AI. and then not the least we have electrification here as a strong driver that are a driver for electronics. So just to sum this up a few takeaways before the Q&A session. We had a really strong sales in the quarter, increase of 24%. The last of the restructuring cost has been taken in the quarter, 6.8 million. Order taking follow positive trend and comes out at 1.1. We have a very strong cash flow at 101.6 million. we have also the board of directors have decided to propose a dividend of 0.66 per share to be decided by the shareholders in our meeting in may so that was all from me do we have any questions henrik

I'm sure we do. Please, everyone listening in, go ahead and type your questions in the chat. While we wait for that, I'll ask some questions of my own. So first of all, I thought we could maybe dig a bit deeper into Eniado here. So in the quarter, you achieved an adjusted margin of 6.7% EBITDA. And you say there will be no more restructuring costs going forward. So is that sort of a reasonable level to expect in coming quarters in the near term? What do you say to that?