Lindab International AB (publ)

Hello and welcome to this call. My name is Olle Ringdahl and I'm the President and CEO for Lindab Group. Next to me I have our CFO Lars Ylner. We start with a Q2 summary. The second quarter was a good quarter for Lindab. We increased both sales and operating profit and we managed to improve our operating margin despite tough market conditions. Business area ventilation systems accounted for 75% of sales during the quarter. Sales increased thanks to acquisitions and the operating margin strengthened to 10.4%. Business area profile systems turned the first quarter's loss into an operating margin of 8.7% in the second quarter, a very welcome improvement. In total, Lindab Group sales was the highest ever for a single quarter. Sales increased by 5% and we reached an operating margin of 9.6%. Cash flow from operating activities developed according to our expectations and increased compared to the same period previous year. I now hand over to our CFO Lars Ynner for some more comments on the financial development.

Thank you, Ola. Let's first take a closer look at the revenue development. As you can see in the chart, both Linda Group and Ventilation Systems had record sales in the quarter. Ventilation systems increased sales by 7%. Organic sales growth was negative by 4%, while acquisitions contributed positively by 11%. The Nordics reported a sales recovery in the quarter, where organic growth was in line with the previous year. Particularly strong growth was reported in Denmark. Germany showed negative organic growth, but we saw positive organic growth in Ireland, Italy, and the Netherlands. For profile systems, the reduced construction activity continues to impact demand. Despite that, net sales during the quarter only decreased by 2% compared to previous year, which is a clear trend improvement. The Nordic market, which accounts for approximately 80% of profile systems, total business reported sales in line with the previous year let's now move on to operating profit profitability also improved improved across the board in the second quarter ventilation systems operating profit was 276 million sick with an operating margin of 10.4 percent The improved operating profit, which is the highest ever, is mainly explained by strengthened gross margin. Completed acquisitions have also made a positive contribution. Lindab has adjusted its cost in markets with a lower level of market activity. The group has also actively worked with the balance between volume and profitability with the clear objective to prioritize profitability. In profile systems, the operating Profit increased to 75 million SEK and the operating margin was 8.7%. This is the first time since the recession began two years ago that Profile System has improved its results year on year. This trend shift shows that the measures to strengthen profitability are effective. For the group, the operating profit for the quarter amounted to 338 million SEK and the operating margin was 9.6%. Let's now take a look at our financial position. Lindab had a continuous strong cash flow during the second quarter as cash flow from operating activities amounted to 342 million SEK. In June, Lindab signed a new long-term credit agreement with a group of four Scandinavian banks. The total credit facility has increased by 1 billion SEK and 50 million euros respectively. If we now look into a net debt situation. Net debt to EBITDA increased slightly to 2.1 times due to acquisitions. Financial net debt to EBITDA is at 1.5 end of June. I'm now giving the word back to Ola.

Thank you very much Lars. We have for a couple of quarters included this slide to show our ambition to reach 20 billion SEK in sales in 2027. Growth will take place in ventilation systems in a combination of organic growth and acquisitions. The goal is for the operating margin to exceed 10% and over time I believe that an operating margin between 12 and 15% should be possible. Demand for energy efficient solutions and a healthy indoor climate will be high for a long time to come. Our ventilation business is developing in a very exciting way, adding smart products and new technologies. Acquisitions will continue to play an important role in Lindav's future development, and we estimate acquisitions to account for approximately two thirds of our growth until 2027. One of our focus areas to achieve our 2027 plan is to continue with good profitability focus and cost control. The growth margin continues to improve during the quarter. We continuously analyze the market, our competitive position and our cost structure. And we implement measures to streamline the organization and adjust our pricing. We are also accelerating the synergies with the acquired companies as well as rationalizing our footprint. As an example, we are merging distribution centers where the Lindab organization and the acquired organization have branches located close to each other. We still put extra energy into profile systems to bring that business back to stable and predictable profitability levels. And we have seen some good signs of improvement in the second quarter. If there are parts of the profile business that cannot perform at the right profitability, we are considering structural measures. Another focus area for us is investments and to ensure that we get the planned improvements in terms of efficiency from those investments. Lindor's investment program has been at the top of our agenda since 2019. We see very good results in terms of higher production efficiency, higher capacity and a safer work environment. As planned, this accelerated investment program is coming to an end in 2024. And moving forward, we expect an annual investment level of approximately 250 million SEK, which is in line with the actual investments that we have seen in the last 12 months, which have been 229 million SEK. When the market picks up again, Lindab is in an excellent position quickly take advantage of higher demand. The operating margin will increase with growing volumes thanks to our investment program. Lindab is now shifting the investment focus to digital tools and services in order to further increase our service level to customers as well as to increase efficiency even further. Acquisitions. We are continuing to add high quality ventilation companies to the Lindau Group. In May, we acquired Venti in Denmark. Venti is a company manufacturing circular and rectangular ventilation ducts, and they are also a distributor of ventilation products, such as silencers, ventilation fittings, and a wide range of technical products for air diffusion. Sales and distribution take place in two locations in Denmark, outside Aarhus and Copenhagen. Venti are not currently selling Linda products, so there is good potential for increased sales via Venti's current sales channels. Venti has an annual turnover of approximately 120 million SEK and has 34 employees. The acquisition was closed on the 2nd of July and Venti's numbers will be included in our Q3 report. In total, we have already added almost 1 billion SEK in revenue to acquisitions in 2024. And I'm convinced that several more will follow. Let's now conclude this presentation with some comments about the market situation and the outlook. Year to date, we estimate that the European ventilation market has declined by an average of approximately 5%. The Nordic region has had more challenging market conditions and western and southern europe so far the market situation remains subdued with many projects on hold but signs of recovery have been noted in the second quarter especially for profile systems but we also believe that in ventilation systems the bottom has been reached and we are going to see improvements continued interest rate cuts will stimulate the construction industry Linda believes in gradually increasing volumes during the second half of 2024, however, from low levels. The long-term demand for energy-efficient ventilation will be strong. There are several factors working in our favor. Energy-efficient ventilation is an attractive investment in itself, and furthermore, stricter legislation and the sustainability agenda are creating strong forces to invest in energy-efficient buildings. We saw a recent example of this now in May of this year when the European Union adopted the revised energy performance of buildings directive. In short, new buildings must meet the requirements for net zero emissions by 2030. And for existing properties, residential buildings must reduce their average energy consumption by 16% by 2030 and by 20 to 25% by 2035. And since ventilation is one of the areas that offers the highest energy savings in the building, the directive is expected to have a positive impact on the demand for energy-efficient ventilation, much to Lindab's benefit. Our assessment is that the ventilation market will enter a multi-year growth phase from 2025 and onwards, and we are excited to utilize this opportunity to grow our group even further.