Lindab International AB (publ)

Good morning and welcome to this call. I'm Ola Ringdahl, president and CEO of Lindab Group. And next to me, I have our CFO Lars Inne. On this call, we will present our results for Q4 and the full year 2024. We will also look at our focus areas for 2025 before we are ready to take your questions. Now, let's start with the fourth quarter. As presented in a financial update in January, low market activity in the fourth quarter weakened the demand for Lindab's products, affecting both sales and profitability in a negative way. The month of December was especially affected by low sales. Nevertheless, we ended the year with the highest fourth quarter sales ever at 3.3 billion SEK, and this was driven by acquisitions. Organic growth was negative at minus 5% due to the current market situation. This was, however, balanced by the acquired growth of plus 6%. Business area ventilation systems, which now accounts for 77% of Lindab's total business, reported its highest sales ever for a fourth quarter, driven by acquired growth. The cash flow was record strong in Q4. Let's move on to the full year highlight on the next slide. Lindab ended the year with the highest sales ever for a full year, 2% up on the previous year, also this thanks to acquisitions. As a result of our European expansion, our region, Western Europe, is now the largest region in terms of sales for the first time, while the Nordics is our second largest region. This demonstrates Lindab's transformation into a leading European ventilation company. The market situation was challenging throughout the year, which affected both the organic sales and adjusted profit. The adjusted operating margin amounted to 7.8% for the year. Ventilation systems reported an adjusted operating margin of 9.1% for the full year and profile systems a disappointing 5.4%. Cash flow from operating activities was very strong during 2024. And as you can see in the table, it was also very strong in 2023. In the fourth quarter, we have announced strong measures to strengthen profitability, which have entailed one-time costs. Let's take a closer look on the next slide. During 2024, one-time and restructuring costs of 308 million were reported. The largest financial effects relate to our decision to divest and close the profile business in Eastern Europe, which all in all incurred one-time costs of 400 million SEK, of which 250 million was related to impairment of goodwill. Structural measures to reduce our fixed costs incurred one-time costs of 74 million SEK, and another 24 million SEK were related to other structural measures primarily related to the costs for moving our sandwich panel factory in northern Sweden to a new location. Finally, as a consequence of the tough market situation in Germany, our acquisition Airmaster did not reach the ambitious earn-out targets for 2024. This resulted in a release of earn-out provisions to the amount of €220 million. Now let's take a closer look at the revenue development. Ventilation systems increased sales by 4% in the fourth quarter. Acquisitions continued to make a strong contribution to our sales growth, adding 8% to our sales. Organic sales growth was however negative at minus 5% due to low market demand. Here I want to underline that Lindab defends its market shares in a challenging market. For profile systems, total sales decreased by 8% in Q4. The business area reported negative organic sales growth, which is explained by clearly lower demand in the construction market, mainly relating to new construction. If we disregard the profile business in Eastern Europe that we are now discontinuing, the negative organic growth was limited to minus 3% in the Scandinavian market. Let's not turn to operating profits. During Q4, ventilation systems reported an adjusted operating margin of 7%. Actions to reduce our cost base have been implemented during Q4 and will gain momentum during the first half of 2025 so that we can increase the margin for ventilation systems. Over the past two years, profile systems have been negatively impacted by reduced construction activity in the Nordics, and a very challenging situation in Eastern Europe. In the fourth quarter, the adjusted operating margin was 3.3%. This low level of profitability is not acceptable for us, and we will come back to this topic. I will now hand over to Lars Yllner, our CFO, to take a look at our financial position.

Thank you, Ola. Yllner had a continuous strong cash flow during the fourth quarter, as cash flow from operating activities amounted to 629 million SEK. As you can see on the graph to the right, our net debt increased in Q1 2024 due to acquisitions. Net debt has remained stable since then and is well under control. We have a strong underlying cash flow and have initiated cost saving programs that will improve performance at EBITDA level. We have also come to the end of our extensive investment program. Let's now go to dividend. In the light of the strong cash flow and healthy financial position, the board of directors proposes a dividend of 5.4 SEK per share, which is unchanged compared to last year. This is in accordance with the dividend policy of minimum 40% of Lindab's net profit, considering the group's financial position acquisition opportunities and long-term financial needs. The dividend is proposed to be distributed on two occasions, one during the spring and one during the autumn. I'm now giving the word back to you.

Thank you Lars. Now we shift the focus from these initial numbers and go to our priorities for 2025. So to summarize into three different priority areas, these focus areas are to fully implement our cost reduction program, capture the full benefits of our profitability measures as soon as possible, to divest the profile business in Eastern Europe in accordance with our plan communicated during Q4, and to continue to make value enhancing acquisitions also in 2025. Let's take a closer look at each of these areas. Lindab is entering 2025 as a leaner but stronger company. On the 28th of November last year, we announced measures to reduce fixed costs and to improve the profitability for ventilation systems at a time of weak market demand. The measures are progressing well and according to plan. They include closing 10 branches in various countries and also a reduction of our workforce with 180 full-time positions and that is corresponding to between three and four percent of our total workforce. Fixed costs are reduced by a total of 120 million SEK on an annual basis and we estimate that in Q1 we will be up at around 90 million SEK saving pace. The full effects of the program will be realized by July 2025. We continue to our actions within profile systems, and here we have some different information. As we communicated in mid-December, business area profile systems is exiting Eastern Europe due to poor performance. We will stay in the Eastern Europe region, but we will there focus purely on profitable growth for the ventilation business we have in Poland, Czech Republic and Hungary. Profile systems will have its strategic focus on the home markets in Scandinavia, where the market position is strong and where there are significant synergies with the ventilation business. If we take a quick look at where we are in this progress, the profile business in Czech Republic was closed at the end of 2024. The profile businesses in Estonia and Poland are being closed now during Q1. And this is all progressing according to plan. The divestments of our operations in Romania, Slovakia and Hungary are expected to take place soon. We are in constructive negotiations and hope to be able to give you an update shortly. The exit will have a positive impact on profitability. And as you can see at the bottom of this slide, the adjusted operating margin for profile systems would have increased from 5.4% to 7.2% for the full year. And it also makes an impact for the group as a whole, where the EBIT margin would have increased from 7.8% to 8.3% for the full year. And you can also here see the numbers for affecting the fourth quarter. Let's continue to our third focus area, acquisitions. Since 2020, Lindab has acquired 28 companies, that have added new regions, improved distribution and broadened our customer offering. We've added more than 4 billion SEC in sales to our group. The rapid pace of acquisitions continued during 2024, with six strong companies joining Lindab Group and complementing our current operation. In February, we made our first acquisition in the US, and in March we added Airmaster, European market leader in decentralized ventilation. In Q4, we added two acquisitions in France and we have a very strong position in that market today. We have many interesting acquisition prospects in the pipeline and we will continue on our acquisition path. Now let's look at the market outlook for the year. And yes, the market is difficult to predict. Recovery is on hold in the Nordic countries. Recovery for ventilation has not yet begun. And the activity in several countries in Central Europe is well below normal. And Germany is having a challenging time at the moment. Profile systems, which is earlier in the construction process than ventilation, is showing some signs of recovery in Scandinavia. And in the do-it-yourself segment of the market, we have seen some organic growth in the last months, and this has also continued in January. However, the project market is still quite challenging. We expect the market for ventilation systems to remain weak in the first half of the year, but to pick up in the second half of the year. And here I want to underline that we are monitoring the situation very closely and should the conditions for a market recovery change, we are prepared to take further measures to strengthen profitability and counteract a possible delayed recovery. While the market situation may be somewhat challenging, it's important to stress that the long-term demand for energy efficient ventilation is strong. Now we move to our last slide. Last but not least, it's important to note that there are several things in Lindab's favor. Our strategic focus is ventilation, an attractive market with a strong outlook. Ventilation accounted for 77% of sales in 2024 and will continue to grow that share. When the market recovers, we will have strong profitability leverage thanks to the significant investments we've made in capacity and automation during the last years. And while the market is slow, we have taken actions to protect and strengthen profitability through the measures described earlier in this call. We have acquired 28 ventilation companies since 2020, and we see clear synergies materializing. We will accelerate these synergies during 2025 to capture the full benefits. Last, our pipeline of attractive acquisition prospects is strong, and we aim to continue our acquisition journey. With that, we are now ready for your questions. Thank you.