Lindab International AB (publ)

Hello and welcome to this call. My name is Ola Ringdahl and I'm the president and CEO for Lindab Group. And next to me, I have our CFO Lars Inno. We start with a Q3 summary. In the third quarter, Lindab increased sales by 3% and reached the highest sales ever for a third quarter. Business area ventilation systems, which accounted for 76% of sales in the quarter, continue to grow as a result of completed acquisitions. For the group, the adjusted operating margin was 9.1%, which is lower than the same period the previous year. The profitability was below our target and our own expectations. Further cost savings will be implemented during the fourth quarter to achieve the profitability targets. Cash flow developed according to our expectations and cash flow from operating activities amounted to 259 million SEK. Let's first take a closer look at the revenue development. Ventilation systems increased sales by 6%. Acquisitions continued to contribute strongly to our sales growth. And in the third quarter, acquisitions added 11% to our sales. Organic sales growth was negative by 3% due to a slow market demand. For profile systems, total sales decreased by 6%. Sales in the Nordic region has stabilized on a low level and early signs of market recovery can be seen. The Nordic region represents 80% of profile sales. However, sales development in Eastern Europe shows no signs of improvement. Let's now move on to operating profit development. Lindab has successfully managed 24 months of negative market development. ventilation systems has shown a stable operating margin during this period. In the third quarter, the adjusted operating margin amounted to 9.5% for ventilation systems, somewhat below our targets. Actions to reduce our cost base will be implemented during the fourth quarter in order to fulfill our financial targets in 2025. Over the past two years, Profile systems has been negatively affected by reduced construction activity in the Nordic region and a very challenging situation in Eastern Europe. Profile systems had a weak start of the year, but has gradually reversed the trend in the Nordic region and improved profitability. In the third quarter, the adjusted operating margin was 8.8%. The strategic evaluation of activities for profile systems in Eastern Europe are being intensified during the fourth quarter. Let's now take a look at our financial position, and I'll hand over to Lars Ynner, our CFO.

Thank you, Ola. Linna had a solid cash flow during the third quarter, as cash flow from operating activities amounted to 259 million SEK. During the third quarter, The operating profit is adjusted with one of items and restructuring cost of 30 million SEK, which is related to the write down of assets in the company Leapcraft. Leapcraft is an acquisition of a minority stake in a software and sensor company in Denmark, which Linda acquired in 2020. Leapcraft is working with visualization of indoor climate. It's been difficult to find the optimal commercial revenue model for LeapCraft and we have now taken the decision to write off 100% of the investment. Lindab's target for net debt to ABTA is that it should be below three times. In Q3, net debt to ABTA increased to 2.3 times due to acquisitions. Financial net debt to ABTA is at 1.7 end of September. We conclude that Lindab has a healthy financial position. And now back to Ola.

Thank you Lars. And then let us look a bit at what we do and how we are building a stronger Lindab with high ambitions. For a number of quarters, we have included this slide to show our ambition to reach 20 billion in sales in 2027. Growth will take place in ventilation systems a combination of organic growth and acquisitions the goal is for the operating margin to exceed 10 percent and over time 12 to 15 percent should be possible demand for energy efficient solutions and the 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 We'll continue to play an important role in Lindab's future development, and we estimate that acquisitions will account for two thirds of our growth until 2027. Now let's talk about profitability and what we do to strengthen that. As you all know, the construction market in Europe is in a challenging situation. Lindab has experienced seven quarters of negative organic growth. In the past two years, we have worked very actively on our costs and our efficiency. We have gradually in these two years reduced headcount by 400 people or close to 10% of the total number of employees in Linda Group in order to adjust to lower volumes. Since the market recovery is delayed, we are now taking additional actions in the fourth quarter of this year to adapt the cost base to updated volume forecasts and to ensure that we reach our financial targets in 2025. In addition to the cost reductions, we are putting extra focus on cost synergies with the acquired companies. We aim to fast track insourcing of products that we can manufacture in our own factories instead of sourcing them from external suppliers. Finally, The disappointing development for the profile systems business in Eastern Europe will lead to an acceleration of structural actions in that region in the near future. I will have reason to come back to that later during the fourth quarter. Lindab's investment program that has been running since 2019. We see results from the program in higher production efficiency, higher capacity and a safer work environment. But obviously now with lower volumes in our factories, the depreciation on those assets is a bit of a burden in the short term. As planned, the accelerated investment program is coming to an end in 2024. Moving forward, we expect an annual investment level of approximately 250 million which is in line with the actual investments yet to date of 181 million SEK. Lindab is now shifting the investment focus to digital tools and services in order to increase our service level to customers as well as to increase efficiency even further. When the market picks up again, Lindab will be in an excellent position to quickly take advantage of higher demand. Our operating margin will increase with growing volumes thanks to our investment program. Another important focus area in the 2027 plan is acquisitions. In the third quarter, we added ATIB in France to the Lindab Group. ATIB is a well-established French distributor of ventilation and indoor climate products. Most of the sales consist of ventilation systems for commercial properties. The product range includes air handling units, silencers, air diffusers, fire protection, and filters. Sales of technical products are, to a large extent, directed through ventilation consultants who prescribe the products to be used in ventilation systems. ATIB has in-depth knowledge of technical sales and long-standing relationships with important customers in the field. This creates opportunities for additional sales of Lindab's technical products and knowledge transfer to other parts of Lindab. ATIB is based in Nantes and Bordeaux in Western France. The company has annual sales of approximately 250 million SEK with an operating margin in line with Lindab's operating margin. Then we move focus to the UK. In mid-October, the UK Competition and Markets Authority announced its decision regarding Lindab's acquisition of Hasven, Husvent, that acquisition was signed in October 2023. The decision from the UK Competition and Markets Authority is that in two locations where Lindab and Husvent both have one branch each, one of the branches in each location will need to be divested in the near future. Now, after We have divested those two branches. Lindab Group will have 30 3-0 distribution branches in the UK. So the divestment is estimated to have a very small impact on our sales in the UK. We approximate it to a possible reduction of sales in the UK of around 2%. This competition investigation has been ongoing for approximately one year and has led to delays in the integration of the businesses. But once we have now finalized the investigation, we can move to the next phase and together we will build a strong business in the UK with significant synergies. Now let's end this presentation with comments about the market and the market outlook. The market situation remains weak with many projects on hold. Year to date, we estimate that the European ventilation market has declined by approximately 5%. And that is approximately the same rate of decline as we saw in 2023. Although early signs of recovery have been noted, this will not have a positive impact until next year as ventilation installations are completed in the later phases of the construction project. The long-term demand for energy efficient ventilation is, however, strong. There are several factors working in our favor. Energy efficient ventilation is reducing the cost while improving the indoor climate. Also, new legislation and EU directives are beneficial for Linda. However, in the short term, we need to plan for continued weak demand during the first half of 2025. After that, we believe in gradually increasing volumes from the second half of 2025. And thereafter, our assessment is that the ventilation market will enter into a multi-year growth phase. We now conclude the presentation and we open up for questions.