Nederman Holding AB (publ)

Good morning, everyone, and thank you for joining us today, taking the time not sitting in the fabulous sunshine in this, at least in this part of Sweden. The second quarter was encouraging for Nerman and our owners. We saw a clear increase in customer activity and a strong order intake across all four divisions. This confirms a positive trend we saw at the end of the first quarter. You remember the first part of the first quarter wasn't that great. Market uncertainty persists, but we continue to see customers investing in areas that are important for their operations. It's also encouraging that the investments we have made in innovation and operations over the recent years are creating results. This is strengthening our competitiveness and it's also helping us gain market share in traditional and new industries. During Q2, orders received increased in all four divisions. Extraction and filtration technology, which is the biggest division, had record order intake. Monitoring control technology and duct and filter technology had the highest quarterly order intake since Q1 last year. We also see continued growth in our service business. It's a focus area and it's very important for recurring revenue and long-term value creation. We continue to advance our innovation agenda through new product development and releases that address our customers' need for cleaner production, improved productivity and safer work environments. At our Helsingborg Innovation Center, we are building unique dust analysis capabilities, which will improve both our products and our customer safety. This initiative is generating interest in the market and has also been highlighted on Swedish national television and radio. As part of our agenda for market leadership and focus on Australia, we acquired the business of our distributor of human dust control. We now have a clear presence in Queensland and this acquisition confirms our ambition to grow in a market with significant future potential. Profitability in QT was affected negatively by the lower order intake at the start of the year, as mentioned before. But our operational focus remains strong. We have continued to improve efficiency throughout the organization and maintained a high level of cash generation. Overall, the quarter reinforces our confidence in the direction of the company. We are well positioned to elevate our market leading position and continue creating value for the shareholders. With that, I hand over to Matthew, who will take you through the financial performance in more details.

OK, thank you. So moving on to the key financials and starting with orders received. Orders received, as we mentioned, picked up at the end of Q1, and this has continued throughout the second quarter. Strong flow of orders across all divisions, particularly small and mid-sized orders. No huge mega orders in process technology division, but growth in all four divisions nonetheless. Total order intake for the quarter was 1.48 billion krona, up from 1.425 billion last year. That's currency neutral and organic growth of 6.3%. What more can we say there? The currency effects are becoming less now. We've seen at least at the moment a relative stabilization of the US dollar and the euro against the Swedish krona. I did say relative there. Orders received, if you see on the presentation, the chart in the middle, you can see that this is the second best order intake quarter. since Q1 of 2024, and that's at prevailing rates. I was playing around a little yesterday with looking at currency neutral, and this is the best quarter of order intake since this chart started back earlier in 2023. So very pleasing with that order intake level. If we move on to the next slide and look at sales, of course, we have the weaker order intake, particularly in January and February, and this has affected sales in this quarter we're lacking some volume and it's sales of a 3.7 percent down currency neutral it's it's uh 77 million lower than the same quarter last year so that does impact a bit on profitability so uh on the profitability side we um ended up with a uh and adjusted a beta of 114 million kroner which is 8.3 percent earnings per share for the course of 1.54 kroner versus £197 last year. More positively, it was cash flow. We had a good operating cash flow in the quarter, £69 million positive in Q2 versus £59 million in the same quarter last year. We see on the net debt that we have an increase in Q2 versus Q1. That's typical in their demand when we pay our dividend in during the second quarter. It's paid right at the end of April this time. So that that was one hundred and forty million kroner alone. And that does make some difference on the net debt. We expect this positive cash flow to continue into Q3 and Q4 now. Little bit on the divisions, then I'll keep this a bit more brief than we have traditionally shown so we can. Sven's already told us a lot about the key activities. But if we take extraction and filtration technology first, the largest division record order intake, as Sven already mentioned, the highest quarterly order intake ever. Profitability, on the other hand, was lower. Lower sales volumes related to the order intake. That has the knock-on effect that capacity utilization in our factories is down. We have got very efficient factories and that's something that we ought to see an increase in utilization going forwards, given the excess of orders over sales that we saw in this quarter. Basically, we've grown backlog in all three regions, which is pleasing as well. Orders received 716 million is over 100 million more than the sales of 611. Adjusted ABITA is only 11% in this division. You can yourselves do the maths. If we have a sales of 715 million, I think we can see a rapid pickup in the ABITA margin going forwards. The key activities for ENFT were the acquisition of human dust control in Australia, We're continuing to invest in, it's in North America actually, the major investments now in the facility in Charlotte, North Carolina. We also held a partner royale event here in Helsingborg. We had over 50 European partners visiting us there. Process technology. development in the quarter some currency neutral growth in order intake and process technology that's uh it's one percent there are some markets now that are showing signs of stabilization if we take the fiber and textile market we actually saw growth in the quarter which was pleasing If we take India, for example, we also, on the foundry and smelter side, see the Indian business growing there. We've invested a bit of time and money in that, and that's starting to reap rewards. The service business continues to grow as well, which is very, very important for this division. It has the better margins there. Some larger orders were booked, but it was still on a relatively modest level. Orders 380 million Kroner, sales 390 million Kroner, which is 10 million lower than last year in sales. But despite that, we actually had a slightly higher margin. A beta margin is 8.9%. This shows the importance of continuing to grow the service business. The mixed effect of having more service in there is clearly positive for profitability. Key activities in process technology, still focusing on product development. We're upgrading a test center at the moment, and the digital range is fundamental for this, not least in order to connect it to the service side of things where we see this good profitability development. Moving on to duct and filter technology. Extremely strong order intake in the second quarter here. The order intake picked up in March continued throughout the quarter. Sales increased marginally, but it's not really a backlog business. But despite that, there is a bit of a backlog build up. Very good profitability, good operational efficiency. These investments that we've made in, for example, in Thomasville in the US and also the plant in Assens in Denmark are seeing increases in margins in the factories. If we talk about the numbers, external orders received 194 million, total sales 203 million, and then the beta margin is 19%, which is very pleasing. WHAT MUST BE POINTED OUT THIS IS THAT THIS DIVISION ALSO HAVE BUILT BACKLOG IN THEM IN THE QUARTER THE EXTERNAL ORDERS RECEIVED 194 MILLION ON TOP OF THAT THEY TYPICALLY SELL FOR AROUND 20 TO 25 MILLION TO THEIR UM TO THE OTHER DIVISIONS IN THE NEAR DEMAND GROUP SO UH WE OUGHT TO SEE A SAY A PICK UP IN SALES IN THE IN THE THIRD QUARTER AS WELL HERE UM KEY ACTIVITIES BIM Toolbar has been launched in Europe. It's been very successful in helping us get larger orders in the US, and we're aiming for the same here. Marketing activities have been quite important right now. We've tripled the production capacity for our heavy-gauge ducting in the US, and that business is developing well. It also brings in regular ducting business, and we're highlighting that. We also have now a remote warehouse in Dallas as part of our ambition to improve the fast, friendly, reliable North AB NOW concept a little bit further west in the US. an interesting thing here as well. The solar panel system in Thomasville, which we've expanded further, is now exceeding one gigawatt of electricity production annually, which is actually helping with some decimal points on the ABITA margin. It's a very good business case with solar panels in that part of the world. Monitoring control technology. The positive here was a significant pickup in order intake in the second quarter, particularly in APAC. Both gas, methane, and neon monitors performed strongly in APAC there. As is probably expected, the sales did decline following the low order intake in Q1. Order backlog has therefore increased, which bodes well for the upcoming quarters. We see some clear indications that the market is stabilizing. Nevertheless, orders received were 192 million, which is very good. That's 17% growth. Sales were down at 178 million from 190 last year. The EBITDA margin is then 7.2%, which is a big drop from 14.9 last year. As well as a drop in sales, we had a somewhat negative mixed effect here with gas met portable units. We had fewer of those in the sales mix in the quarter. Which leads nicely on to key activities, actually, because we've GASMET have launched a new GT 7000 TELUS and we've received the first orders for that one that that will help margins once we start getting that up to significant volumes. The Insight Digital platform is being continued to be is continuing to be developed, willing to have a new commercial release later coming later in the year. And we continue in this division to develop in product development is extremely important to do so includes digital solutions we even opened up as well something that's positive a modernized service workshop in houston texas serving the us market we've improved that further there which should help the aftermarket business what we've done it also in in that's not actually mentioned on this on this slide monitoring control technology now have launched their offices in both Korea and Singapore, which will continue to support this growth that we're seeing in the APAC region. There is definite potential for this division over there. Sven might talk about that a little later. So that's a crash course through what the divisions have been doing in the quarter. The financial calendar Next time we speak to you in this forum will be on the 21st of October when we'll talk about Q3 and the year end report is released on the 12th of February. But with that, I think we can open up for any questions that listeners may have for us.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from August Flinning from Handelsbanken. Please go ahead.

Good morning, Sam and Matthew, and thanks for taking my questions. Two questions from my side, basically. If we start with orders and projects, basically. You mentioned discussions around slightly larger projects, particularly in process technology, which you hope to to realize in the coming quarter. Are these mainly delayed customer decisions from earlier quarters or more like new opportunities entering the pipeline?

Hello, Sven here. I don't think, I know that it's both. We have a very strong pipeline. We have a growing interest for our solutions. We are proving over and over again that we are technology leaders here. the interest in the to get the lower usage of energy etc is of course of importance but we have and we've said that now for a year or more than a year that we it is with disappointing that we the very very strong pipeline we have and that our near sort of decision within our customers they are still hesitating and of course everybody knows the reason for that and that is the macroeconomic the uncertainties and that's a situation we have but there is a lot of potential where we see an increase and are moving forward from from small or low numbers in the sense of foundries and smelters that we have introduced local manufacturing local sourcing and we have had significant success here and that continues so yes we are reasonably positive that that we will get these orders the question is when will the decisions be taken and it's also so that we have to remember our portion of these big projects are fairly small so it's a bigger decisions that we are waiting for when it comes to new where we have a growing interest and some success is of course of refurbishment and of other existing units.

Which, incidentally, usually has higher margins as well. So it's business that we very much like to get.

All right. Thank you. We're sorry.

No, that was it. You had the second question, I believe. That was it.

Thanks. And on to margins, Dan. I know, Matti, you talked about this a little bit before on monitoring control specifically. I mean, margins came in clearly weak if we look at a year-over-year basis. But would you say you see this mainly as recovering with high volumes, or should we expect mixed and Asia investment to continue going forward?

The biggest problem, we can't get away from the biggest single problem is the volume, or was the volume in the quarter. I mean, £177 million in sales versus £192 million in orders that you've got £15 million. If we'd had £15 million more in sales, the margins on these are very good. So you would see a very quick uptick in the EBITDA. That is the bigger issue. We also did take more, we had better order intake for these, for example, portable units in gas net. Also, Auburn in the U.S. as part of this division had a good quarter for order intake. And that's stronger than average margins for that division, too. This is a weak margin in the quarter. It's the weakest one for some time, I think. But going forwards, we expect them to pick up quite clearly.

We also, I think it's fair to mention, we're also taking the investment of setting up sales and service organizations, both in Singapore and in Korea. And that is an important area. We have been quite focused on the Chinese market historically with offices in Hong Kong and in Suzhou. We also see now due to some of the Americans who want us definitely to be outside the Chinese hemisphere. And that's the one reason. The other reason is that we are getting now permits to sell in especially the Korean market for Semiconductors. Semiconductors market, which is an add-on to our existing. So that's the reason we have this disappointing low margin. We expect to be able to, during the year, increase that. All right. That was all from me.

Thank you very much. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Anna Woodstrom from DNB Carnegie. Please go ahead.

Good morning, Sam, and good morning, Matthew.

Good morning.

So, firstly, I just want to clarify, because it sounds like the pace of order activity gradually improves during the quarter. Is that your view as well, or was it rather stable at the solid level throughout?

It was rather good throughout. It was a bit higher in June. It is quite often in our business the case that the third month of the quarter is a little bit higher anyway, but it did pick up a little bit in June, but it was solid throughout. So we've It's been a much more comfortable quarter for me sitting here analyzing the numbers than Q1 was, where we saw the big pickup in the third month.

I think it's fair to say we saw it in the latter part of Q1, the last weeks in March, and then it continued through Q2.

Okay, perfect. Given that the order intake seems to be mainly related to small and mid-sized orders, Should we think about it as a majority of these will be converted to invoicing quicker than usual, so a majority seen already in Q3?

Inside this year, there's definitely more short-term visibility, but a Q3, Q4, it's a rare...

with deliveries into Europe a lot of Europe sort of half closes down so I think you could it will stretch into Q4 and also the the problem transportation problem is delaying some of us going to Australia Asia and so on which is actually a couple of weeks so I think it's fair common to say during this year

Okay, perfect. And then just a follow-up question on the MCT division. With sort of the improving orders, is that then a recovery towards some of the prior customer segments that have been weak for the last couple of quarters, or are you getting traction towards new customer segments?

I would say that we get new customer segments as well. Where you have an issue still and we will see that GASMET especially have a big portion to official governmental universities, customs, police, etc. And that has been very weak, especially on the North American side of it. But you could say, Sven, geographically, we've done much better in Asia now, and we've seen orders coming in in India as well.

We're focusing a bit there.

And that is a new... opportunity. We have opened, we haven't, we are utilizing, we have put resources in our existing, as we are doing, we are having a sort of a shared service in India and we have now added sales people in that region and we see some good inroads into the market.

Okay, perfect. Are there any specific end markets that you've gotten good traction on or is it very widespread?

We could say we're quite positive about the semiconductor industry in Korea. We're not there yet, but we see some very positive signs. So that's one we're focusing on more. That has a lot of potential.

But it's also linked to different regulations that we are to be fair, the only one that can measure some of the substances to a level where it's needed, etc. So it's both traditional and new customers. We are investing a bit or quite a lot in trying to find new customers since some of the traditional businesses hasn't been that eager to buy at the same level or follow the increase that we would like it to be.

Perfect. And then a question on if you've had any, because you mentioned like delays in transport, for example, but have you also noticed some effect from cost pressure in the quarter and if you're going to do some price adjustments ahead?

The U.S. steel prices are ticking up a little bit. That's the main thing that we've seen. We've adjusted prices with induct and filter accordingly. If we take the larger contract business in process technology, for example, there are back-to-back agreements within the contracts if there's significant fluctuations in raw material prices. But we have adjusted some pricing accordingly already. But there are slight cost increases.

Okay, then the final one is how you're thinking about the net debt level. I mean, it's increasing this quarter, but as you said, it's partly related to the dividend payout. But how are you thinking about this and what will be the priorities ahead?

What we can say on net debt is that The operating cash flow is ticking along quite nicely, particularly from ENFT and duct and filter technology. But they still have more, they utilize more debt for themselves anyway. But where we've seen a difference is the process technology have had fewer larger orders in. These are these ones that are cash positive. And you could say, it depends when you start, how far you look back on this. But the difference from the absolute peak when we had a massive order backlog is up towards 200 million kroner in terms of net debt here. And we expect if or when process technologies start booking some of these larger orders that we're referring to, you could see quite a quick downturn in the debt then. So we don't, for example, see any major issues with customers delaying payments or bad debts or anything like that. And like I say, the regular ongoing business in duct and filter and ENFT in particular, that's ticking in nicely. But it's more of a process technology connected one, largely.

Okay, perfect. And the question, final question from my side is on the comments that you made on potential improvements in the textile segment in Asia and in the smelter side. Is that relating to activity in the pipeline or also in the actual orders that you've booked?

It's in the actual orders that we've booked. They had rather low comparatives, but we saw a growth of around It was around 40 to 50 million, if I remember correctly, in order intake in the quarter. So it's particularly in India that we're seeing the increase in fiber and textile at the moment.

They are picking up a little bit, whereas you have other small, difficult markets. China hasn't come back yet, but India is... then you have still weak markets, other textile markets like Turkey and some of these regions. There are no other, sometimes there are larger investments like in Egypt and some South American countries. We haven't seen that recovering yet, but there is a pipeline and fairly positive. that there will be a bounce back. How? And it's probably going to be a bumpy road, but we see that it seems like it's leveling out at least.

Definitely bottomed out. Yeah.

Yeah.

Okay, perfect.

For PT, they have some success with what we call these hot air applications, foundry smelters, and we see that textile is coming back. Where there are still issues is the really mega project in these special engineering solutions. However, there's an enormous pipeline, so we'll see if they proceed and when.

Okay, perfect. Thank you so much for answering my questions.

Thank you. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Yes, thank you for listening and for good questions. I tried to conclude this session with that we are very encouraged by the positive development during the quarter. Improvement in order intake across the group give us some confidence as we look ahead to the coming quarters. Growing service business providing recurring revenue streams and an increasingly strong digital offering continues to provide resilience and stability. We are performing well in as we control ourselves, and although it's difficult to forecast the broader market recovery, our strategic direction is clear. We have a strong balance sheet, a growing presence in attractive markets and segments, and we continue to invest in operational excellence and innovation. These investments are already strengthening our competitiveness, while also positioning us to further increase profitability as market conditions improve. I would say that most importantly, the long-term fundamentalist driving of business remain firmly in place. Awareness of the importance of clean air, resource efficiency and safe industrial environment continues to grow around the world. With our leading technology, strong market position and dedicated employees, Nerman is uniquely positioned to help customers address these challenges while creating sustainable value for all our stakeholders. We remain confident in our strategy, optimistic about our future opportunities and commit to our journey of elevating Nerman. And once again, thank you for taking the time listening to us instead of being out in the fabulous weather we have here. Thank you very much.