Nolato AB (publ)

Hello and welcome to today's webcast with Nolato, where CEO Kristoffer Wahlqvist and CFO Per-Ola Holmström will present the company's report for the third quarter of 2023. After the report there will be a Q&A, so if you have any questions press star 9 and you will be handed the world. And with that said I hand over the word to you Krister.

Okay, thank you, and good afternoon or good morning to all listeners. This is Christof Wallquist presenting the third quarter of 2023 for Nolato. On page two in the presentation deck, we summarize up the third quarter for the group. And our sales totaled to 2.3 billion Swedish kronor. And that is a 15% decrease if we adjusted for currency and acquisition. We saw an increased sale for medical and industrial solutions, but markedly lower volumes within the integrated solutions business area. Operating profit amounted to 193 million, excluding a non-recurring item of 60 million, corresponding to our changes in our Chinese operations. That will give a margin of 8.2% if we exclude a non-recurring item. 20 million in electrical subsidies from Swedish authorities is included. The cash flow during the quarter after our investments rose to 188 million, excluding acquisitions. We sustained a strong financial position, giving us the freedom to create further acquisitions. Turning to page three, summarizing the three business areas and the group. So the first, the medical solutions business area is now close to 60% of our total sales and more than 60% of our profit amounted then to a little bit more than 1.3 billion Swedish. Integrated solutions, we saw a dramatic decrease in sales, ending up at 330 million in the quarter with a low profit. Industrial solutions ended up at close to 700 million in third quarter with an EBITDA of 64. If we then start digging into the medical solutions business area, On this page, we can see a graph of the last 20 years development of sales for the business area. And it's of course growth and global expansions behind the scenes. If we look into our focus product areas within the business area medical solutions, we have the in vitro diagnostic, approximately 15% of total sales. This is a long-term growth market, but in a situation right now after COVID with some adjustments. Cardiology, it's a long-term, it's mostly implant business, stable and a high-profile market to be in. Then we have our pharma packaging side, which consists of containers for liquid and solid drugs, approximately 13% of the business area. Continence care, approximately 11% of the total market. This is a high volume market with huge quantities. Endoscopy and general surgery, approximately 22% of the business area sales. It's a market that we've been fluctuating a little bit after COVID with the supply chain variations. And then drug delivery systems at 14% consisting of auto injectors, delivery devices for long-term injection of drugs into your system. The third quarter for medical solutions, we saw a 6% increase in sales, but if we adjust that for currency, it ended up at 1% increase. We saw continued inventory adjustment and a change in the customer mix within IVD sector. We saw somewhat lower volumes in the surgical area, but that is due to the variations of the supply chain after the COVID situation. We ended up at an EBITDA margin of 9.5 in the quarter and we had approximately 10 million in electrical subsidies within Sweden. So sales ended up at 1.3 billion operating profit 126 millions in the quarter. Looking into the integrated solutions business area, here we saw a dramatic decrease, as you can see on the graph of the sales. We are expanding ourselves into new market segments. And on this page eight, we can see those areas. So the heavy decrease in sales was within the BHP sector listed here on the left. But we are focusing our activities to grow the other five areas, which are then complex modules, different kinds of speakers, in, on, over earphones, wearables and handheld well-being devices, and then, of course, smart home and home security. On the right-hand side, we see different types of products and applications of our EMC and thermal business. If we then turn to page nine, looking into the integrated solutions third quarter, we saw a 56% decrease in sales during the quarter. Of course, it was low volumes and this change in sourcing strategy at the previously significant customer had a strongly negative impact. The EMC ended up at 170 million in comparison to 185 last year. And we saw that the automotive area increased significantly while the telecom areas had lower volumes across the board due to the less of investments in new telecom infrastructure. The EBITDA margin ended up at 3%, of course, affected by the lower volumes. So the quarter, 330 million, an operating profit of 10 million during the quarter. The adjustments of the Chinese is going according to plan within integrated solutions. If we then look at industrial solutions, where we are on the technology and geographical expansion journey, and look into the different product areas that we are focusing on. We are focusing on domestic appliances, different type of hygiene products, furniture sectors, automotive, gardening, forestry and packaging. On page two, we summarized the third quarter for industrial solutions. During the quarter, we saw after currency, an increase of 2% of the sales. We saw that volumes within automotive horizon and supply chain disruptions have led to less of an impact than previously. We also saw that demand for product and consumer discretionary sector slightly lower due to a weaker economy condition. The quarter ended up just shy of 700 million, with an operating profit of 64 million, giving us an EBITDA margin of 9.3.

Good afternoon. Per-Ola Holmström commenting on Group Financial Highlights on page 13. Net sales decreased by 15% adjusted for currency to 2.3 billion. Operating profit EBITDA excluding a non-recurring item was 193 millions compared to 214 millions last year. The non-recurring item of 60 million SEK is for concentrating the Chinese operations and was announced 24th of August. The EBITDA margin excluding the non-recurring item was 8.2%, similar to last year. The EBITDA and the EBITDA margin includes 20 millions in electricity subsidies from Swedish authorities. That was received in Q3. We had good cash flow in Q3. It was 188 millions, excluding acquisitions. We had favorable change in working capital and comparatively low investments in the quarter. The fourth quarter this year is expected to have lower cash flow as a big part of the non-recurring item will be paid out in that quarter. We have a sustained strong financial position. The equity assets ratio is 54% and net financial liabilities was about 1 billion compared to 1.2 billions end of June. We expect capex to be between 450 millions to 500 millions for the full year 2023.