Nolato AB (publ)

Hello and welcome to today's call with our laptop or CEO Christofor Christens if I power will have some present report for the third quarter of 2024. After presentation there will be a Q&A. So if you're calling in and want to ask a question please press star nine raise your hand and then star six unmute yourself when you're given the word. It's also okay to send in questions to the forum to the right and with that said I hand over the word to you guys.

Thank you and welcome to the presentation of the third quarter of the laptop room. This is Christofor we speak. If we start on page two with the summary of the third quarter we saw on a quarter with an increase in sales approximately five percent and the growth was across both business areas. We saw an increase EBITDA that rose to 22 rose by 22 percent ending up at two hundred and thirty five millions. That of course corresponds to an increased margin ended up at nine point eight and we saw this situation in both our business areas. The strong financial position with relation EBITDA towards liability financial liabilities ended up at 0.6 times. This is enabling us to act together with customers and continue to build our global offering to the market. Turning to page three summarizing the two business areas that we saw the good growth and focusing on offering on two different markets but with the same offering across and enabling and creating synergies between the business areas. Jumping into the medical solutions business area on this slide you will see the long term growth continuous growth over the 20 years shown on the graph building strong footprint together with customers on a long term basis by continuous growth together with these customers across. On page five we are showing our focus products areas within the medical solutions business area. If we start on the top right corner in vitro diagnostics this area saw growth in the quarter after some sluggish volumes or low volumes after COVID. This area has been affected by COVID with strong growth early on in the COVID situation and then some supply reduction or stock reductions across the full scope and now we see growth again. The second one cardiology has been affected also by the COVID and we've seen first slow volumes in the early days and then some supply chain buildups and now some reductions in the supply chain. Pharmac packaging it's a stable market it contains of drug containers for liquid and solid drugs based on an offering to big pharmaceutical companies. Then continence care it's of course a high volume market with the high usages of these products for people that have some difficulties with the continence situation. Endoscopy and general surgery it's an interesting market with some changes coming with more optimization of the surgical business. This business area has also had some sluggish volumes during COVID and after COVID with buildup and long supply chain disruptions. The drug delivery market long term growth market stable and continuous not affected by COVID at all not in any directions so it's more of a home care business you get your drugs and continue to use these drug deliveries. We see a long term potential in this. Looking into the financials of the third quarter we saw an adjusted currency adjusted growth of 5% and within that situation we saw a good growth for the IBD business. We saw healthy volumes within the drug delivery. We saw on the other hand lower volumes in other category and we've been communicating about the customer product recall affecting this year. We saw within the pharmaceutical packaging some lower volumes there were some customer inventory adjustments and also some geopolitical effects in this quarter. This total sales ended up at 1.355 million and an operating profit of 145 millions creating a margin of .7% percentages. If we look on the pie chart on the right corner down we see some movements between different segments we saw of course in vitro diagnostic growth growing as a total percentage of our sales. We also saw drug delivery growing. Then on the other hand we saw some decline in the percentages for pharmaceutical packaging also on the other segments in this quarter. If we then jump to page 7 focusing on engineered solutions. On this 20 year graph we see some heavy growth over some years and then a downturn with a phase out of our VHP business. We are building a solid and strong footprint within multiple areas so that's what we are doing at the moment with this business. If we look on the focus product areas within the engineered solutions starting at the right upper corner on the consumer electronics this consists of different variables smart home connected wifi systems and different types of products. Then we have our automotive area where we focus on very technology advanced products but mostly based on the Scandinavian automotive market. Hygiene products are different kind of devices and such things that are around the hygiene area. On the other area we see some household appliances furniture and some clean tech products. Then we have the materials selections which consist of electromagnetic shielding products of communicating devices and thermal management product protecting electronics. This area is a little bit different in the business setup than the rest. It's more our own platform products that are applied in different areas. Jumping into the third quarter of engineered and the financial side of the business we saw an increase in the quarter 4% if we adjust for currency. We saw during the quarter temporary rise within the hygiene segment. We saw also signs of the decline in volumes within the automotive based on a lower end customer demand and we think this will negatively impact the fourth quarter as well. Within the materials we have generated increased volumes and a growth of 17% adjusted for currency. We saw growth across but also have healthy growth for the telecom in comparison with the slow quarter last year. So the margin ended up at .8% of course based on our cost adjustments in our Asian operations but also a favorable product mix. If we look on the sales per customer area chart we saw a decline of the automotive. Other area was growing good and of course materials were growing good in the quarter.

Good morning, Per-Ola Hornström commenting group financial highlights on page 10. Net sales was a growth quarter by 5% and sales was 2.4 billion compared to 2 billion 340 millions. Operating profit rose 22% to 235 millions compared to 193. Totalling an EBITDA margin of 9.8%. The effective tax rate was .8% very similar to the Q2 number. Cash flow from operating activities increased to a strong 327 millions compared to 280. However, net investments increased to 136 millions which is higher than the previous quarters this year as the medical expansion in Hungary for the new project has started and we are paying out money for that equipment. For the full year 2024 we expect around 700 millions in capex. Adjusted earnings per share rose to 0.61 sec compared to 0.48 in the quarter. Return on capital employed increased to .5% as a combination of the improved profitability and a more slim balance sheet.

Turning to page 11 focusing on the current situation per business area. On the medical solutions business area the maintained growth strategy but we see some temporary sluggish market activity. We focus on margin, cost adjustment, pricing strategy and efficiency. Our offering is of course based on innovation and sustainability. We have a very broad customer base with long standing close customer relationships focusing on the large pharma and med tech companies. The new Singni customer contract within our drug delivery is validating our old strategy and we are looking forward to that large program. On the engineered solutions we have phased out the VHP from this quarter. We of course have advanced our market positioning and establishing positions in new product areas. We are successful in the automotive area that are positive for our materials business. So that's sort of the current situation and we now open up for questions.

Thank you so much for the presentation here and as you mentioned we will move straight ahead to the questions. So if you're calling in and want to ask a question please press star 9 to raise your hand and then star 6 to unmute your microphone when you are given the word. And the first question here is Karl Lagnarsson from Nordea. You're more than welcome.

Hello it's Karl here from Nordea can you hear me? Yes. Yes very good thank you. A couple of questions from my side here. You mentioned that you had one customer who had inventory build ups in the surgical segment. Is it of any magnitude or is it more that you wanted for probably under a good phase just mention it?

It's not a large effect. We had 5% growth in the quarter and this effect is estimated to be less than 1% units of these 5% units growth.

And this effect is it just related to Q3 or will it linger into Q4 and Q1?

As we see it this is a one time thing which is positive in Q3 and it will be negative in Q4 and then it's

gone. Ok very clear. It's because we're

changing the ERP system and that's the reason this time.

Ok got it very clear. Looking at the page 6 in your presentation sales by customer area I'm just trying to square the mixes here one and you had surgical volumes being quite good which I guess is a little bit negative mix wise but IVD growing which is mix creative. So if you look at those changes and you try to aggregate it would you say that you had a positive mix nonetheless?

It's a positive mix slightly I would say.

Would you by then say that the absolute majority of the -to-year delta in margins is still perhaps pricing and efficiency initiatives rather than the mix effect in the quarter?

Yes.

Ok

very clear. You also mentioned that networks grew seemingly for the first time in a while if I remember correctly. In EMC is it a sustainable trend you say or is it more hard to determine or hard to speculate in currently?

I think it's been very low for a period of time and it's a little bit of some of that coming back. How long term it is it's difficult to say.

But do you see the same trends so far in Q4 as well or is it volatile between the quarters?

I think it's a small uptick from the low volumes we are comparing to and in that sense it will be a little bit stronger than Paris and quarter in Q4 as well.

Ok very clear and the final one from my side is maybe the auto market. Did you experience that it was tough throughout Q3 or was it more of the latter part of Q3 and how do you see volumes play out over the coming few quarters here? Also if you could a little bit squarely I guess the positive mix effect in EMC with auto and also their telecom networks coming in that might at least on any bit the level of set the auto dropper. How should we look at those dynamics?

Starting with the first part of your question with the automotive market we saw a gradual decrease during the quarter and we estimated it will continue to be slow so that was that part. It's mostly affecting the non materials part of the business more on the other part of our business.

Is the mix effect from EMC perhaps offsetting the auto or is it difficult to answer over the coming quarters here?

Well I would assume that there is a positive mix effect coming from that. As you know we have higher margins within materials and that will support the mix effect you are asking about.

Okay very clear thank you. Thank you.

Thank you so much for the questions and we will now go ahead and give the word to Adrian Gilani from ABG CERN Alcolier.

You're welcome. Hello can you hear me okay?

Yes.

Perfect. I'd just like to start with a follow up question on the auto market. You said you expect continued weakness in Q4 but was that sort of an increased deterioration compared to the Q3 levels or similar levels and I guess also if you expect that engineered solutions in general can defend the current margin levels if we see a further deterioration.

Due to the fact that we saw a gradual decrease of volumes during the third quarter it will most likely be a little bit slower in the Q4 compared to Q3.

Okay understood and then on medical it sounds like de-stocking among customers with a tailwind in several of the product areas. Is that something that's expected to persist as well or are we now on more normalized inventory levels and should we expect that you will now see sales in line with the actual market demand?

I think within some of the areas within medical there are very long supply chain situations downstream so I think there are some more to come of the adjustments.

Could you elaborate on which product areas those are?

We see a long supply chain within the endoscopy and general surgery. I think that's probably the longest but also in some of the cardiology.

Okay understood and then on EMC or materials as they're now called listening to players in the telecom space it seems like there's an expectation of better market conditions next year. Are you getting similar signals from your customers on that front? Do you expect an improvement in 2025?

We are into most of these customers and well then of course we are part of that situation and if they are sort of seeing an increased market situation we will be part of that as well but of course remembering we are coming from very low volumes last year.

Okay I understand and the final one from me just on the 700 million capex figure for the full year can you just remind us how much if any of that was tied to the Novonotis deal and whether that will come more in 2025 and 2026?

The situation with the big project you are referring to we estimated 600 millions in capex in that project and we are starting to see the effects of that in this quarter and we estimated that we will have a bit more than 100 millions in 2024 and then even more in 2025 and a small part of it in 2026 so that is the situation for capex in that project.

Okay that was helpful thank you and in that case that was all for me so thank you for taking my questions.

Thank you. Thank you so much for the question here and we want the last question here is Karl Norian from SCB you have the word.

Hello can you hear me? Yes. Yes good. Mr. Day today missed some parts of the call here but I have one question on the group cost just I know that they are up a little bit here to like 12-13 million here in Q2 and Q3 versus before where they were a bit lower is there any specific reason for that? Did it come up?

I wouldn't say it's a very big change it's as you say a bit higher numbers these quarters they might be a bit on the high side and the previous comparison you did might be a bit on the low side so yeah that's how I see it.

And then just a clarification question on automotive I didn't really hear you there but it looks like automotive was down some 15% -over-year here in Q3 did you say that we expect a slight or similar decrease -over-year in Q4 slightly higher?

Can you repeat the question?

Yeah I mean if you look on automotive sales I think it appears they were down 15% -over-year and I'm just wondering if you see the similar level in Q4 in the -over-year decline so to say?

I don't really think it is that high effect as you're saying in this quarter it's more a few percentages below that point there might be some roundings but we do see a similar situation maybe slightly more than that in Q4 as we didn't see the full effect in the beginning of the quarter.

Okay

I

understand

so

not that dramatic then itself. That's good I think that was it for me fun with the strong numbers here so congrats for that and have a good day. Thank you. Thank you

for the questions and that was all the questions we had for today so I want to thank you for presenting here and answer all the questions and thank you all for tuning in I wish you a great weekend.

Thank you all and have a great day and weekend.