Investor AB (publ)

Q4 and annual accounts presentation. Today as usual we have our CFO Johan Forssell, CEO Johan Forssell and our CFO Helena Saxon to go through the results. After Johan's and Helena's presentation we will have a Q&A session both over the phone, you can post your questions or you can write your questions over the web and we will address the questions. And by that, Johan, please go ahead.

Thank you, Vivica, and warmly welcome everybody to this presentation of our post quarterly report. So let me see. There we go. Well, as we all know, this was a tough quarter for the global or the year was very tough for the global economy. We had, as we all know, sharply rising inflation, interest rate, energy prices. There were significant supply disturbances during the year. But most of all, of course, the terrible war in Ukraine. In this environment, I do believe that investor and our companies had a very resilient performance. If we look on 2022, in summary, our net asset value and total share of the return outperform the stock market in Sweden. And we had an overall good operational performance in the companies. At Investor we had a strong cash flow generation and that meant that our financial position that was strong when we entered the year strengthened further and that in turn made it possible for the board to propose a dividend increase of 10% which is in line with our dividend policy to have a steadily rising dividend to our shareholders. If we then dig into the figures a bit during 22, our net asset value was down 10% and our TSR was down 15%. And that can then be compared with the stock market being down 23% during the year. Same four figures for the fourth quarter. The net asset value was up 7%. The TSR was up 16% compared to the stock market being up 11%. Moving then over to listed companies and you can see here that the total return continued to be very strong, up 12% in the fourth quarter, just ahead of the stock market being up 11%. More importantly, I think if we look on 22, full year 22, there was a significant outperformance in the listed companies being down only 5% compared to the stock market being down 23%. And Helena will later on come back to the reasons for that. If we look on the focus during this year, of course, there has been a high focus to handle the very volatile market environment that the companies have seen. It has very much been about handling the disturbances in the supply chain, but also, of course, high work with price management to offset the cost increases that we have seen in many places during 2022. But there has also been a number of important strategic initiatives taking place within portfolio management. I think ABB is a good example that did a spin-off of Acceleron during the year and actually this morning released that they are now also divesting the power conversion business for about 5 billion SEK. Working with the portfolio within the companies is a very important part of creating long-term value. Many other companies are spending a lot of money on R&D and actually accelerating those investments. I think one good example here is the strong development we have seen within AstraZeneca's Oncology franchise. And then many companies are also making complementary acquisitions to put the stronger foothold across different segments and regions. I think two good examples during last year was Atlas Copco and Epiroc that really strengthened the position within a number of important segments and technologies, I should say. And then finally, of course, there are many initiatives going on in the companies to improve the climate footprint, both in their own operations, but also to bring forward energy-efficient, environmental-friendly products and services to the customers. Moving then over to Patricia Industries, for the full year, total return was minus 2%. We saw good underlying growth with an organic sales growth of 9% during the year and a profit growth of 20%. Also within the companies, within Patricia Industries, of course, there has been a high focus on handling the volatility in the market with the supply chains and the price management that I talked about when I talked about the listed companies. There has been a number of important strategic investments. You know that these companies compared to the listed companies, they are smaller. And that means that we are spending significant efforts and money to really build these companies, invest more in R&D and development, building out the sales organizations, building strong footprints to really continue the long-term journey of growing these companies. There was also important add-on acquisitions made by a number of the companies during the year, for example Laboree, Advanced Instruments, PIAB and Permobil also made good acquisitions during the year. And also here of course there is a high focus on improving the climate footprint. Moving down to the fourth quarter, you can see that the organic sales growth was strong, up 11%, and the profit grew 34%. And I think this is interesting. That was achieved despite the weak margin in Mänlycke during the quarter. So the weak margin in Mänlycke was this quarter compensated by a very good development of the rest of the portfolio, which gives a strength, I think, to the Patricia portfolio. If you look on the total return being down 4%, given the fact that the stock market was up 11% in the quarter and we had a good profit growth, of course, that might look a little bit strange. So let me try to give a brief explanation for that number. You know that when we present our estimated market values, the purpose of that is basically saying that if our companies should have been on the stock market, roughly what would have been the value of the companies if we look on the multiples in the public market and just put those on our company's earnings. That's basically the basics of it. The mechanics we do to do that is that in this particular quarter, as an example, we take the average market cap of the peers during the fourth quarter. We add the net debt at the end of December to get an enterprise value. And then we put that enterprise value in relation to the last 12 months EBITDA. And then we get the multiples for the companies. And of course, the multiple is dependent on both the share price performance of the peers, earnings and the net debt development. And we use the median multiples of the peer groups and normally have quite broad peer groups. So that's the mechanic. In this particular quarter, we had a very pronounced V shape of the stock market. As you can see on the graph from September 30 to December 31, the Swedish stock market was up 11%. But if you look on the weighted average market cap in the fourth quarter compared to the average market cap in the third quarter, it was more or less unchanged. If we do the same for the peer group of Mönlycke, the development from September 30 to December 31 is plus 10%. while the weighted average 4Q versus 3Q is actually down somewhat. So that is an explanation. All else equal, this will of course mean that we will have higher multiples expansion in the first quarter. So it can of course be timing between the quarters, but the basic is the same. We take how the market values public companies and we put it on our earnings. And the reason why we see this call it a little bit strange this quarter is just because of the v-shape during these two quarters. So with that explanation let me then move over to what is much more important. The operational performance in the companies. Here you can see on the blue bars the quarterly profit within Patricia. and we reached 3.3 billion in profit in the fourth quarter which is the second best after the last quarter and on a rolling 12 months basis we reached 12.3 billion during the year here is a short summary of the development of the different companies as you can see both Braunability and Permobil had a very strong development during the quarter. And the reason for that is that both companies saw strong demand, but also the fact that these two companies have had significant supply chain challenges during the year. And that, especially in the beginning of the year, and that has now eased up. So they have also been able to deliver good out to the customers. And that in turn has led to good operating leverage. So you see good growth and good margin expansion in these two companies. Menlycke, I will come back to. Labori, good development, organic growth of 9% and a good margin expansion. Atlas Antibody, organic growth of 9%. Here the margin was down, but there is a good development in this company. This is, as you know, a small company, and we are investing heavily behind this company to put the right platform for long-term growth. Piab had an organic growth of 7%, and here the margin was down due to strategic projects that are going on in the company. Saranova had an organic growth of 6% and a good margin expansion. And then Advanced Instrument to Befair had a tougher quarter. And the main reason for that is that in the quarter, the sales of instruments to the biopharma sector was down. And we have very good gross margins on these products. So let me then go over to Männlycke. If we start on the top line, it continues to be a very strong development, as you can see, with an organic growth of 9%, mainly driven by wound care and gloves. On the other hand, the margin was weak in the quarter, and to be fair, the margin should not be at the level where we were in the fourth quarter. There are three main reasons for the weak margin. Number one being customer care reorganization, mainly in Europe. Secondly, disturbances in the U.S. wound care manufacturing plant. And thirdly, the new factory in Malaysia within Glaus. So let me expand a little bit on these three areas. The customer care, basically what the company has done is that they have had, call it a central customer care organization in Belgium. And to be more agile, they have pushed out these service people out in the sales organization in Europe. And that has led to extra cost during the quarter. So that is one reason. The second one is the production disturbances in the wound care plant in Maine in the US. As a reminder, wound care has two major plants in the world, one in Mikkeli in Finland and one in Maine in the US. The disturbance is related to supply issues, but even more perhaps due to staff shortages. Staff shortages is actually a big problem generally in the US today. After the pandemic, not all workers have come back to work. And to give you some information of what has happened, I can say that the staffing shortage has gradually improved during the quarter. so the situation we are now is clearly better than it was in the fourth quarter but there are still challenging remaining so that is the short summary and of course the management is putting all efforts now to normalize the situation in the plant moving then finally to the third factor and that's related to the new plant in Malaysia producing gloves And here we are in a ramp up phase with the new factory. So the utilization in the fourth quarter was low. But here we can see when we look forward that the utilization will gradually improve in the coming quarters. So those are the three main explanations for the weak margin in the quarter. But as you all know, disregarding this quarter, It's a good cash flow generation in the company, so Manrique was able to distribute 300 million euro to Patricia during the quarter. If we then look forward, I think we have an excellent portfolio and I'm very pleased to see that the rest of the companies were able to cover up for the week. These companies have very good growth opportunities due to the industries and the positions they have. So one of the key priorities going forward is clearly now moving into 2023 to make sure that we achieve a good organic growth. That's number one. The second priority for this year, of course, is to come back to higher margins in Vanrycke. Moving to EKT, the total return was weak during the year, as you can see, being down 35%, driven by the weak share price development of EKT AB on the stock market being down actually more than 50%. On the other hand, we had a record cash flow during the year, as you can see, more than 6 billion, which can be compared to an average of about 2 to 3 billion over this period. In the quarter, the performance or the TSR was up slightly in EQT. So summarizing then, I think that we are well prepared, both for challenges and opportunities. If we look forward now, it looks like if we look on leading indicators that we We are entering a tougher period. On the other hand, we can also see that most macroeconomists believe that inflation will come back during the latter part of this year or the second half of this year. And of course, if this would ease a little bit on the central banks, that could, of course, support consumers. We also know that China has opened up and we also see that the gas prices in Europe has come down significantly. Let's see how sustainable that is. But there are, of course, a potential that this could change going forward. Irregardless of how the market will develop, I think we are ready. So let's see if it will become more of a mild downturn or a tougher one, but I think we are ready. We have a good cash position, good financials, good cash flow at the investor, and our companies are really well prepared with plans should it be tough out there. So to summarize, what are our priorities for this year? We will continue to stay here and now, manage the current market environment and that is a top priority for us and of course all our companies. But we will also continue to make sure that the companies invest in areas which are important to drive continued good organic growth long term. So all continuous plan contains two parts. If it gets tough, why should we cut? And the second one, why should we not cut? Why should we continue to invest? Because it's so important to win long term. And we will use our financial strengths to capture opportunities. And I do believe, continue to believe that there is an advantage of being able to act both in the public and the private setting here. So with that, I will hand over to Helena.

Thank you, Johan. Let's go into the financials. The adjusted net asset value ended the year at 673 billion, and the average annual growth with dividend added back was 14% for the last five years, and that should be compared to 6.10. Looking at the total return by business area, the 7% in the quarter that Johan talked about was built up of So somewhat mixed picture with excellent development in the listed companies of 12%, Patricia down two and EQT around 2%. Looking at the full years minus 10%, we can see that the listed companies and Patricia's return was negative five and 2% respectively, while investments in EQT, the return was minus 35%. Looking more carefully at the listed companies, 70% of total adjusted assets or 475 billion. We can see that the return here was also a mixed picture. The massive outperformance of minus 5% compared to 6 Rx minus 23%. It was built up of strong absolute return in our healthcare companies and Saab. And we also had significant outperformance in some of our larger holdings, ABB, SEB and Nasdaq. Going over to Patricia Industries, some 20% of the assets or 138 billion, we can see that the estimated market value was down compared to the end of Q3. And here two companies stand out, Permobil on the positive side and Manlyke on the negative side. And this graph also shows significant distributions in the quarter. Looking at the major drivers of estimated market value in the quarter, we can see that Malnyke's estimated market value declined by 8.5 billion in the quarter, and this was due to lower multiples and the distribution. 3, Scandinavia was down 1.6 billion also due to lower multiples and distribution related to the divestment of the passive network infrastructure and this is the last distribution from that exit. Advanced instruments estimated market was market value was down due to lower multiples and here also FX We see the same development in Laboree, lower multiples and negative impact from currency, but here higher earnings impacted positively, so we had a slight mitigation there. Permobil had a positive development. So estimated market value of Permobil increased 2.6 billion and this was due to higher earnings, actually a doubling of earnings in the quarter. And this of course increased the value even though multiples contracted in the quarter. Our financial position remains strong and leverage at 1.5% at the end of the quarter. We have no debt maturities until 2029. And looking at this graph, we have added a year to this summary of cashflow generation. And we can see that all business areas contribute to the 145 billion generated accumulated over the period and this has allowed of course for investments in both listed companies Patricia it's also allowed for net debt reduction and distribution to our shareholders And talking about distribution, this morning it was announced that our board of directors proposed a dividend of 4.4 krona per share to be paid in two installments during 2023. And this represents a 10% increase compared to the dividend paid last year. And then I always end with this slide showing the total shareholder return. And we can see that the investor share was resilient in a very difficult year, but has also outperformed the stock market, both in the long term and the short term. So with this summary of our performance, I'd like to conclude the presentation and hand over to you, Vivica.