Nolato AB (publ)

Good morning and welcome to today's presentation with Nolato. With us presenting today, we have the CEO, Christer Walkvist, and CFO, Per-Olo Holmström. If you're calling in and would like to ask a question, please press star 9 to raise your hand and star 6 to mute yourself when you get to work. You can also use the form located to the right. And with that said, please go ahead with your presentation.

Okay, good morning everybody and welcome to the presentation of the second quarter for Nolato Group. Turning to page two in the presentation and the summary of Nolato Group. We had during this quarter sales that amounted to just shy of 2.4 billions, which then gives a currency adjusted organic growth of 4%. We saw growth in both business area. We saw growth a sharp increase of our EBIT A margin, increasing 1.6 percentage points to 11.6, and creating an increase of our operating profit by 13% to 277 millions, despite a strong currency headwind. Turning to page three. summarizing up the Nalato group and the two business areas. So the group is built up based on two distinct business areas, with the medical solution being the largest portion, and then engineered just close by in size. If we turn to page four, focusing on our medical solutions business areas, here you can see a graph of 20 years consecutive growth. And of course, we are focusing on continuous growth and global expansion with this business area. Turning to page five, summarizing up our focus products areas within medical solution, starting in vitro diagnostics. It's a high volume market with good growth potential going forward. Then we have our cardiology part with lifetime implants and very high demand products. Third, pharma packaging, which is consistent of containers for solid and liquid drugs. We have our continence care part of the business. It's a very high volume market. Then we have endoscopy and general surgery, which is an area in some change with more focus on robotic surgery going forward. Good growth potential. Then drug delivery systems with strong growth potential with based on large molecules that needs to be injected into your body. Turning to page six, focusing on second quarter for medical solutions. So during this quarter, we are proud that we have increased our operating profit to 170 millions, which is a good growth of that, even though we have had strong currency headwinds. Within the business area, the sales amounted to 1.350 million Swedish. which is an increase of 5% if we adjust for currency. We are continuing our expansion and the expansion in Hungary linked to a significant customer contract is proceeding according to plan. And we have also recently decided to establish operations in Malaysia to enable our continued expansion in Asia. Turning to page seven, focusing on engineered solutions. This business area is focusing on advanced technology and high productivity manufacturing on a global scale. So you can see a graph of our sales during 20 years as well here. This business area corresponds to approximately 44% of group sales. Turning to page eight, focusing on the different product areas within engineered solutions, starting with consumer electronics, which is then, of course, different type of surveillance systems, connected Wi-Fi systems, and those kind of things for home use and professional use. Second is the automotive market. We are, as expected, seeing some weaker market conditions if we look on a little bit long period. The third one is then hygienic, which is in a good growth situation, focusing on a different type of hygienic products for the engineered solutions market. Then we have materials, which is a little bit different in the setup. And in this area, we see we have very premium margins corresponding to the rest of the business area. Turning to page nine. focusing on second quarter for engineered solutions. We had an increase of sales, approximately 1% if we adjust for currency, but we also had a strong increase of our operating profits, 8% increase still with the strong currency headwinds. Below the surface or continued positive performance for the hygienic market, we saw an increase in the consumer electronics, mainly through our investments in Asia. And as expected, volumes for the automotive are contracted. The EBITDA margin ended up at 11.2%, a strong increase with 1.2 percentage points. Turning to page 10.

Good morning, Per-Ulla Holmström, Commenting Group, Financial Highlights. Net sales amounted to almost 2.4 billion in the quarter, representing a 4% growth adjusted for currency, despite heavy headwinds from the currency situation. The EBITDA margin for the group improved by 1.6 percentage points to 11.6%. The margin improved strongly in both business areas. The effective tax rate decreased to 20.3% and we expect to be around 20% for the full year. Net investments was 188 millions Again, a quarter with high capex for the expansion in Hungary as planned. We expect around 850 millions for the full year. Cash flow after investments was 128 millions compared to 336 millions because of the high capex investments. Earnings per share increased to 0.79 sex compared to 0.63 last year. Return on capital employed increased this quarter following the trend in the recent quarters to 13.4%, mainly driven by the margin improvement. Strong net financial liabilities in relation to EVTA after paid out dividends of 404 millions in the quarter. and was 0.7 times, enabling expansion and acquisitions. Turning to page 11.

Focusing on the current situation per business area and starting with the medical solutions, we have maintained our growth strategy, focus on margin, implemented cost adjustment and increased efficiency. We have in the base a broad customer base and long-standing close customer relations and then of course focusing on innovation and sustainability. We have established our operations in Malaysia and continuing expansion in Poland. If we then jump into engineered solutions, we are advancing our market position. We have established a position in new product areas and lot of focus on innovative and sustainable solutions and we see success in new market approaches within for the materials we are also expanding our operations in malaysia for engineered solutions we are now opening up for questions thank you very much for that presentation and if you're calling in and i have a question

please press star nine to raise your hand and star six to mute yourself when you get the word. And we've got the first person calling in. We have a call from Nordea. Please go ahead. You have the word.

Good morning. It's Carl here from Nordea. A couple of questions from my side, maybe starting off here a bit in medical terms. I mean, in the report, I mean, you grew 5% organically, IVD, as you maybe said, negative, seemingly your year-to-year chart is stable, but you're still growing, right? So you mentioned, obviously, the kind of I-business, right, the growing. What portion is it of groups? How important is it to sort of fuel the the organic growth in the quarter here, and also if you could touch upon the profitability for that business.

Yes, we see potential in the AI area, and it's not a significant part of the group at all. And on the profitability, it's very similar to our target for the business area.

Is it a new business that you're ramping or is it a business that you had for a while but that you for some reason mentioned in this quarter?

Yes, we have had that business for a while but it's been a good growth in the quarter and we have expanded our relationship in that area.

And how come you had good growth in the quarter?

Is it new contracts you're ramping up or is it... Yeah. It's additional business to existing customers.

Okay, sounds fair. On Malaysia, could you mention a bit what the size it is of the plant production? A little bit, you mentioned obviously second half, but if you could give more details around the ramp would be helpful and also if it's If it's supposed to replace parts of the Chinese production for either medical or engineered and also what products you're planning to manufacture there, especially for the engineer side.

Especially for engineered or okay. So the expansion is around 3,500 square meters additional to what we have. and the type of product is consumer electronics for the engineer and for the medical is more drug delivery related products.

And will it be an addition or do you plan to move part of China to Malaysia?

This is an addition for new growth opportunities.

And that is as usually I mean the contract you already have received or is it more of a speculation that you invest in the new facility? Because you did the same right in Switzerland, you hope for production volumes, but then we ended up in obviously quite unfortunate situation with underutilization. So what conviction do you have in volumes coming in the sort of near term?

It's a new taken business that are supposed to be ramping after we have built our factory and started to install and then the traditional ramp ups afterwards.

Okay, that is very clear. And the final one, if I may. Obviously quite impressive margins in medical in the quarter. Also the sequential ramp of the margin. I mean, you mentioned pricing, you mentioned cost outs. I cannot see a mixed tailwind of the quarter, though. But can you help us bridge it a bit more in detail and especially also where you are in the U.S. today compared to where you want to be? I guess U.S. is one important building block to the margin coming back to, I guess, somewhere at 13% or something.

Yeah, I think, as we say in the report, the answer to the margin improvement is very much a broad improvement in all areas. It's our long-term work with the margins efficiency, different kind of pricing activities, and also some support from the growth in the quarter, of course. So all of these measures taken are bearing fruit right now and improving the margin. Then about the U.S., it's also part of this, but the answer is really a broad improvement. And that is really what we did see in this quarter. And we have seen the journey of the improved margin for some time now.

Very clear. Thank you.

Thank you. And now we'll give the word to Adrian from ABG. Please go ahead. You have the word.

Yes. Hello. A couple of questions from my end. I guess, first of all, on the medical margins, can you give some indication on give it plastics and how much below the sort of average for the segment that it still is? Is it sort of starting to close in on the rest of the segment now?

Yeah, we... Many things have changed since the acquisition, which now is almost five years ago. And it's not really relevant to do these comparisons. But we do still see some improvement possibilities in the US when it comes to the margin. So the rest of the world is performing well. better when it comes to margins. But it's improving and we do continue to do a lot of work with that in all areas.

Understood. And in engineered solutions regarding the margin lift, you said it was a broad-based effort. What about the overcapacity issue you had in China? Is that to a large extent resolved or is that

are still running on lower utilization It's improving and that is one reason for the margin improvement this quarter as well and has been for some quarters and I wouldn't say it's it has reached the business area target yet

still room for some improvement but it's part of the margin improvement compared to previous quarters okay understood and i guess just the more broad-based questions on on the margin uh you raised the target not that long ago to 12 percent and you're sort of already closing in on on the new higher target uh i mean are you would you say that the opportunities to further increase margin from the current levels are becoming more limited or or Can we expect a similar progression as we've seen in the last few quarters as well?

I think the speed has been quite high in the recent quarters. We indicated a midterm target, the 12% for the group. And as you said, we are moving into that target and the speed has been good. So maybe not that high speed going forward, but we feel confident that we can reach our target as we explained during the capital market day.

I agree. And then a final one for me with the various different expansionary investments ongoing. I know you've issued the CapEx guidance for 2025 already, but Can you sort of mention which of the investments are also going to spill over into 2026? Because it sounds, when you add these together, like we should perhaps expect above average capex in 2026 as well. Is that a fair assumption?

Yeah, I think it's a bit too early to focus that number. Of course, we have targeted high growth going forward, and that will mean additional investment capex, and we have mentioned some extensions of group facilities during the year, and that will continue. However, it has been high capex during 2025 and will be still. So we do see a decline compared to 2025 going forward, but it will be on a higher level than previous levels.

Okay, I understood. That's helpful. In that case, that's all for me. So thank you. Thank you.

And that concludes our Q&A session here. Thank you very much, Krister and Per-Ola for presenting today and answering all of our questions. And I wish you all great rest of the summer. Thank you very much.

Thank you all and have a great summer.