Nilörngruppen AB

Good morning, good morning everybody. Welcome to this Q1 report from Elan. Time is flying and it's already passing the first quarter 2024 and it's happening a lot in the world and it's happening a lot in Elan as well. So we will have here give an update of the numbers but also what's going on within the group. With me today is Maria Fogelström, our CFO in Nylangruppen. She will help me with any difficult questions that I cannot work out. And also for your information, we will record this presentation. So we will share this later on on the internet, on our webpage. And as usual, if any questions, you're welcome to add them in the Q&A here. And Maria will then later on read them and present them for us. And we will try to answer them here. Good. So once again, welcome. And I will share my screen here with you. Starting here, as we used to do, starting with the financial performance. And as I said, the Q1 2024, the order income was up 5% in the quarter. And taken into consideration here is that the order income was quite strong in Q4. We had a plus 12% in Q4. And also the comparison number last year, the order intake in Q1 2023 was was a plus 21 percent so we have quite tough comparison numbers so I think this order income is quite strong actually so even though it sounds only five percent but I think it's we are satisfied with that number here looking at the sales plus 10 percent in the quarter and looking what happens in the quarter a big impact on the Chinese due years As you probably know, the Chinese New Year's appears in different months each year. And this year, the Chinese New Year's was in February. So looking what happened in the quarter was January numbers was strong. February was a little bit weaker. And then March again was quite strong. And now what's happened in April here, we had Easter in March this year and in April last year. So a lot of calendar effects and so on. But overall, I think it's a positive trend in the Q1. We've also seen, as presented in the report, continued strong development in the luxury segment. We see that also in the luxury segment there are some hesitations. Not that we see that from our order intake and sales, but in general terms, when listening to the client, they don't see the same... a strong trend as in the previous quarters. But I think that is natural. And I think for us, we have won quite good ground here in the luxury segment. So we will continue with that. And the outdoor segment, we see a recovery in the outdoor segment, but it's going slowly. And as we presented in the report, we think that the outdoor segment will be in full swing, up and running in the Q3 segment. Positively is that in general, talking about all brands and clients we have, it's more activity, more discussions and more easy for our salespeople to get appointment with the brands, which is generally positive. And we can also say in general, it's different in different markets. Some markets is stronger, some markets is more hesitating. Not sure why in different countries when I say different countries. And that probably depends on what effect in the different markets like in Holland and so on. We feel that we are not that strong, but in other areas we are much stronger. Almost no currency effect this quarter. The Swedish krona has been a little bit stronger again, which is good. More stabilized, I think. Operating profit is up here to 22.5 million Swedish and an operating margin of 9.3%.

Here is the... Just a second.

Here is these quarterly reports and the numbers. And as you can see here, the gross margin is slightly stronger than last year, even though the packaging was quite big in this quarter. Also, the personal cost has gone up. We are building a group, a big foundation, and make that strong in the group. So it takes a big effort, all this CSR and compliance and all that. But I'm coming back to that a little bit later in the presentation. Operating profit 9.3%, as I said. And also an operating... Sorry, the tax here is around the 21.3%. Looking forward for the tax, I think we will be around here 22, 25% for the full year. Quarterly, and as you can see here, Q1 is exactly the same turnover as it was in Q1 2022. And the margin here, if you compare to Q1 last year, is slightly stronger, not much, but slightly. Operating costs, we are up here to 78 million Swedish. Here is also an impact of, if you compare this quarter with this quarter, here we also have a currency effect between 22 and 24, so the turnover has been boosted slightly with the currency effect, but so has also the cost. So the cost here is operating cost is up 17 million, but also boosted by the currency effect. Operating margin 9.3%, as I mentioned earlier, it is back on track again. But also, I will show you on the next graph here, what happens in 21 and 22 was extremely strong. And for you who has been with us for quite some time now know that in an operating profit of between 10% and 12% is normalized within Elon. And 21% and 22% was extremely strong numbers. And as you can see here, we have had an extremely strong drop in Q4 at 22%. and here was especially as I mentioned earlier the outdoor segment that has been a tough period and with that we now see coming back again and this is the same but in a graph where you will see that when the first quarter here in turnover wise is the same as this 2022 so this is the strongest Quarter, if you also take 32 into consideration, stronger quarter first, quarter one we ever had in the group. And also looking at the profitability, this is, if you don't take 21 and 22 into consideration, this is the strongest Q1 profit-wise we ever had.

Yeah.

And as normally Q2 and Q4, normally historically used to be the strongest quarter. But what has happened the last few years is that it's even out much more. Also, depending on we are much more expanding much more south of Europe. And also that we're going into other product segments that has different trends than the other ones. So it's even out much more during the year now, which is good. Balance sheet. Yeah, we have a strong balance sheet where we have started... Now to be ready for doing the investments we talked about earlier, both in Bangladesh, where we will build a new factory, but also in Portugal, where we will expand or build a new factory. Both these are on the project phases at the moment. And also, as you already seen, that the dividend this year will be one Swedish krona per share versus five last year. So we will pay out like 11.4 million Swedish kronor. and save some cash for this expansion. It's also proven that our own factories has been a really success factor at the moment. We see volumes moving out from China and Hong Kong. going into Vietnam, where we're now setting up our own operation, into Bangladesh, Pakistan, where we see a good, strong trend, but also to Europe, where we have our factory outside Porto. So that has been really strong factors for Neelan in our advantage. The key finance indicators will not go through them in detail. See that the number of employees is starting to go up slightly again. It's mainly in Bangladesh where we have seen this strong development. But also we are employing some sales people in Europe. Also, when I talked about the balance sheet, we have seen the stock value has gone down. It was stable since the year end. And we think now when this order income starts to take off again, that we will not see a decrease in stock level as we have seen in the past. We've made a good job on that in 2023 where We managed to decrease the stock level around 50 million almost. But now when we see the order income start to take off again, we will for sure see some increase in stock value. Though we will monitor that and make sure that it will not increase as much as it did in 2022. Split product groups, here you can see the shift we've seen in the Q1 2024 is the increase in packaging, where it now stands for 23% of the group turnover versus 16% last year. And here is the mixture. It's for the luxury industry and also for some event here that we have seen now. And this is also where you can see the shift. If you compare Q1 2023, there you can see that there's some decrease in the labels, increase in packaging, and increase in what we call retail information services, which is all of the variable data, QR codes, NFC, RFID, and so on.

It's in here. So in short, organic growth is back to 10%.

Trend from previous quarter continues. Still quite demanding stock of finished goods for the outdoor segment. And the outdoor segment for nylon is especially in Scandinavia, UK, and Germany. Mainly Germany and Scandinavia, I would say. Possibly development in the luxury segment. And then we mean Italy and France for us. But we also noticed some slowdown in not for near and such in the numbers, but when talking to the clients. And in general, more activity among our clients. But as you know, there's still a lot of uncertainties around in the world. So we are very much depending on what happens in the retail sector. People continue to buy garments and how that goes. Yeah, we expect normalization in the outdoor, as I mentioned. We have also now more focusing on our market department. In the past, the marketing and design department was in one unit. Now we separate that to have more focusing on the marketing, to be seen more in the market, supporting sales. And we are doing so much good things, so we need to make much more noise in the market. So that's what we are working with now. So hopefully you will see that more of nylon in the future. Yeah, our distribution units, especially Bangladesh, Pakistan and Portugal, goes really good. Turkey, though, even though it's more stabilized, we see still weak market due to high inflation. So not back on track, not yet. Our establishment in Vietnam goes as planned, and we expect it to have this up and running in the middle of the year fully. I mean, the company is established, we employ people and so on, but it takes time to get the business license and everything. Bangladesh and Portugal, as I mentioned earlier, that is in the project phase at the moment. Yeah, stock level is down, as you can see here, these 36 million versus the same Q1 2023. But also I mentioned, I don't think we will see so much lower stock level. I think this is a good level we have reached at the moment. And presented the last quarter, we have a cooperation now with WorldFavor. What's going on here at the moment is we're doing a lot of presentations for clients in all countries, I would say. So it's a big interest for Nealon Connect. And this is a way for us to... to connect our clients for our core product the core will still be labeling and and so on and as a president will present later is that the label here is a really good information carrier with the qr code and so on yeah and a little bit about nail and connect Nilo Connect is our name for how we operate in the market. Here is the cooperation we will favor and also the whole labeling with the QR codes and where you as an end consumer can scan your product and get information.

And why and how we are doing this is

starting with the Y here. It's very much a legal aspect coming from the European's legislations and our client, the brand owners, they are facing a lot of challenges both in the local regulations, EU Fiber Directive and Digital Product Passport, DPP, that they need to fulfill. And through our cooperation with World Favor, we have a system to support our clients in this, where they can now get information from their suppliers, and not only from their suppliers, but from their supplier's supplier, and their supplier's supplier's supplier, because this is what they need to fulfill and have information about towards the legislation. Yeah, and actually there's no excuse for not knowing according to the EU's legislation any longer. So this is a big headache for our client. And through this... And through the cooperation with WorldFavor, we can support them in this. And through our labeling, we can support our clients with a good information carrier. So you as an end consumer can scan and get the information that our client, the brand owners, want to perform to give you. We also see that enable circular solutions for our clients. It's a lot of talking about repair, recycle and resell for the brands and to be more circular economy and to be more sustainable. much more customer engagement for you as a customer and for the brand owner to have good cooperation and they can create loyalty programs and so on and acquire new customers through this. So this will be... Yeah, I think this is really good. For us, this has been... a strong concept we now through the cooperation in with world favor and all that we need to connect will have a complete solution and this will be we have launched that so already but it will be much more now in the coming months with joining fairs etc And here is just a summarize of this with Nealon Connect with unique QR codes and you have a data carrier that the client can scan and we can provide information to them, consumers, about the digital product passport, cable footprint, Ecotex certificates and so on. Product history where you can see where the garment has been sold, if it has been repaired, etc. Production country, but it's very much up to the brand owners to provide information and we will guide them and support them in this. The financial targets, and this has been for many years now, and we still have them. Revenue growth in excess of 7%, an operating margin of 10%, and net debt through EBITDA of two times. And as you remember, now we have an operating margin of 9.3%, but we're aiming for this range. Good.

That was a presentation.