NOTE AB (publ)

Good morning and very welcome to Note's second quarter presentation. As always, when we have the current president in the US, we see some disturbances during the weekend. So how do we cope with those changes and so on? But we will only touch upon that topic and focus more on Note's performance. Let's start with this. When we presented Q1, we were quite, how should I say, nervous about how the global factors would affect us. We were cautious in our guidance. We saw some slowdowns. We were seeing and expecting that the turbulence on the financial market would be bigger than it actually became. So we were quite... pessimistic. We were expecting customers to move out of their orders more in time than we have seen. So if I look at this quarter, it came in, as we see it, fairly much in line with what we said. 980 million in sales with roughly 35 million in negative effect from coming from currency. So sales were as we were expected. Our profitability, 9.6% underlying. were at 10 in the first quarter then we also we we knowing that are doing this we see that there are some what do you call it some vip build up that were stronger in the first quarter that means that we produced some products we stored them over the q1 and and then we sold them out in second quarter and that has some effect so i would say the first and second quarter is Even if we reported 10% in Q1 and 9.6 in this, it's two very similar quarters. It's more of a movement between those two factors. And then that is things you have in all quarters that you have some effects of this. Earnings per share, 2.65, up with 7%, if I made my calculations correct from last year. Cash flow, I will come back to that on the next slide. But we think that it's very important that we continue to generate good cash flows. Net debt, 117 million, also a very strong number. We were down to neutral after Q1, then we did the dividend and now we're back to some marginal debt as we see it. Going into numbers, what we can see is that we are continuing to invest for a growing future. I get some questions about that. How can we be so optimistic when we are reporting flat sales or even reduced sales in the last three, four quarters? But we still believe and we still see that our customers forecast and what they are telling us is that they are expecting growth. We know that the first half year is affected by some negative stock reductions and we are expecting that maybe in the fourth quarter in going into 2026 we will start to see stock build up again and that will of course come as a positive effect on our numbers. So our expectations from Q1 with the negative effects, they have not materialized. We are also seeing that the outlook for the second half of the year remains strong. We adjusted that a little bit on the top end. That is more of an adjustment to the lower or the stronger Swedish currency, where we expect that that will have an effect, the stronger currency will have an effect of roughly 100 million Swedish in lower sales for the year. In this quarter, it was 35 million. But what we see also important is that we see a very strong financial situation. We are continuing to report an equity that is roughly 50%, 49% in this quarter. And our cash position is 634 million. That is higher than we reported in the fourth quarter in 2024. The dividend that we gave out, we earned that back with some margin in the first two quarters. And I think that is a big strength in our current operations that not only are we keeping our margins high, we're also generating a cash flow that is significantly stronger than our earnings. And as I said in Q1, we still expect that we have maybe 100 million more to go until we are neutral, if I call it like that. So we can expect the cash flows to continue to be stronger than our profit of the tax. I think that is also important to know that some of the questions i got after after the q1 and after we we announced the the big dividend or are we stepping out of acquisitions and i would say that that is quite the opposite we are we are continuing to generate cash and we are expecting to have a cash position that during the year will become even stronger than it was in Q1. So this is the second best cash position we have had in forever in notes history. So our room to maneuver is significant and there are quite a few discussions ongoing now on the M&A area. There is nothing that I can report on at this point, but the landscape has improved significantly during this year. I also said last year that there were some discussions of how to view 2024, that was a really weak year, today that is something that is part of the valuation. So I see much better possibilities to agree on price and so on going forward. So this is an area where myself and our CFO Frida is putting a lot of energy into to ensure that we do good and and acquisitions and that we that we closed them we are as i said before we are we are expecting to have at least one acquisition per year and in 24 we did we didn't do any one so we are we are we are we're one year behind if i put it like that so this is very important also Something that I'm very proud of, our delivery performance is now back on track. We are showing numbers that are back to where we were in 2020 and 2021 before the component crisis came in and we went down a bit on performance. It has taken a long time. It is more tricky than it sounds to keep and deliver performance above 95%. So that's very pleasing to see and we know that when we are hitting that number we have very few discussions with customers where we are failing to deliver. So this is a focus area for me, it's a focus area for the group and it's a focus area for everyone in all our factories to ensure that our customers get the products that they are ordering on time and in full. So that's very pleasing. Our quality remains strong. We are still delivering a quality that I think is world class. When I look at what the demands are from the automotive industry, we are exceeding those requirements. And those are the toughest, they have the toughest demands in the market. So really pleasing to see. Order backlog, this has been a topic that we have talked a lot about and we're seeing that our backlog increased with 6% compared to end of first quarter. I think that is a better indicator compared to where we were a year ago. order backlog one year ago we are down one percent but if i look at where where we are heading so to say we are we are seeing that the order backlog currently is increasing and that is really pleasing to see i i said that in my comments after the first quarter that this was the number that i was hoping to to get up to this number and this this reflects a bit of how our customers is viewing us at the moment so really pleasing to see moving on um with our bullets. I think operating profit is something that we're very proud of and that we're pleased to see. We are delivering 9.6 underlying and we are at 9.8 year-to-date. And as I said before, I think that that number is more reflecting how we are performing. We will have some swings up and down, but as long as we remain in our guidance, I think that is a very strong message that we're continuing to deliver good profitability even though we are not growing. So this is really pleasing to see. I think also that one thing is to deliver on the EBIT level. We're also seeing that our financial costs are going down. We see that our profit after taxes is improving quite significantly and our profit per share went up with a very strong number. And I think this is also something that we are proud of and that is something that we are focusing on, not only to have a good EBIT margin, we also focus on delivering good result of the tax. And I think that is something that we will pay off over time because that is the cash we can use for all our investments and so on. But as I said, our cash flow, 260 million year-to-date operational, 214 after investments. And that is a number that is higher than what we paid out in dividends. And that was my expectation, just to be clear, that we were expecting to generate cash flows that were really strong in the first half of this year. And that was part of the decision to make this quite substantial dividend payout. But our financial situation remains really strong. We are expecting to close at least one acquisition this year, if we can agree on the pricing. So that is where we stand. Moving on, looking at our segments. Western Europe remains where we are expecting, 10.1% this year. What is also good to see is that the rest of the world is improving. 8% of underlying EBIT level is really strong. I think we have been higher than this one year before, but this is also getting to a number that we are expecting and where we want to be. Now we see that what is lacking is our growth, and we can see that When we look at our countries, we see that we see growth in basically all countries and we have a negative number in Finland that is after currency. And I think they were growing four or five percent underlying before we did in Euro and then in SEC. That means that we are declining a bit. The same goes for China, where we're also reporting negative growth, but it's positive growth in local currency. But UK is where we are struggling, and minus 34% is a really high number. And as I said before, we see that our largest customer, UK, has zeroed out the first three quarters of this year. So we will have one more quarter with low or no sales to that customer. After that, we are starting up the production again. And that customer stands for maybe 12% to 15% of the UK sales, so it's significant. But what we should take with us here is that we are, after the reduction that we saw in 2024, we have adjusted our cost base in especially the rest of the world to better meet our current run rate and that is reflecting in the numbers where we see that. I think 8 percent in what you can call our low-cost countries, that is very strong. We know that the price pressure is higher on those entities. So, if we can maintain on 8 percent, I'm really pleased in this region. Moving on to our customer segments, and I was a bit afraid that the growth in green tech that we saw in the first quarter would end, but now we see 15%. We also see that the order backlog in the green tech area is improving. So I'm expecting that the segment will continue to show positive numbers in the same range as we're seeing now. 15 to 20% is my expectation. The second segment that we see strong growth in is security and defense, 18 percent year-to-date. We should know that last year we had 100% growth in this segment. So 18% over a year with 100%, that is really strong. I think that would equal to maybe 60% CAGR in last year and this year combined. So growth with some customers are going in steps, if you put it like that, that some quarters or some years is really strong and then they flat out and then they can continue to grow. And especially in defense, for those that work in it, it's a lot related to which orders do you have in the quarters. Some orders are really high, and then you can have one or two quarters that are a bit slower. And then at the moment, we are expecting this segment to continue to grow. But it will be a bit, it will not be linear. It will be a bit, how shall I say, changing between the quarters. If I look at the other segments, we see communication minus 7%. This is a segment that we see quite low activity in. So I am expecting that this segment will start to be growing already from Q3. If that means that we're year-to-date after Q3, we'll be positive. It's hard to say, but quarter over quarter, I would expect communication to grow. For those of you that remember, this was one of the segments that were really weak in the third quarter last year, and that was, so to say, one of the reasons why we did not meet our guidance for Q3, that the communication came in really weak. So therefore, we will be meeting quite low quarter in the third and fourth quarter in this area. Mentec, fairly flat. We are expecting that to continue to be a few percentage down for the year, but the run rate we have is roughly the run rate we are expecting. Then we have our large industrial segment and here we have some customers that are still performing quite low. We see that the order intake and that their forecasts are getting up to a higher pace. So we also expect the industrial to start to grow year over year when we look quarter over quarter to Q3 and Q4. So if I look at this thing, Greentech to remain at quarter over quarter, roughly the same security and defense, some growth. Industrial, we will start to come back to neutral or a few percentage up. And communication, especially in Q3, we are expecting that to grow. And then Medtech will remain where it is. Yeah, green tech, security and defense, very positive. The rest, flattish, if you put it like that for the rest of the year with some ups and downs. Moving on. I think that what is important when we look at our business is that if you look at this trend, if you take 2020 as a starting year, we doubled the sales in two years from 2020 to 2022. Then we continued to grow in 2023 and then we had a reduction in 2024 and now we're guiding for a marginal growth, 0 to 5% up for the full year. We should also know that the sales that we are expecting in local currency will be 2-3% up to 8-9% when we summarize this. So the reason why we are guiding down is mainly due to that the Swedish currency is stronger and that means that the sales we do in other currencies will affect us quite significantly. We are expecting to keep our margin in the 9.5% to 10.5%. If I would guess, I would say that Q3 will be lower and Q4 will be higher. If both of those will be within this estimate or if Q3 will be slightly below and Q4 slightly above, I think we did 10.7% in Q4 last year. And Q4 is naturally our strongest year when it comes to profitability. We are expecting the second half to be fairly aligned with the first half in margin, but we are expecting to start to see growth in the second half. The guidance that we put in front there is roughly 5 to 10 percent positive growth for the second half of this year. So even if we reduce the upper end of the estimate, we're still expecting quite good growth in the in the in the second half our order backlog is indicating six so that would mean that we are in in this that we have orders to support this if i look forward what do what will happen into 2026 we talked about this one customer in uk that will come back that will mean a few percent we are also seeing that especially the industrial segment is starting to show some positive signals we are expecting security and defense to continue to grow in the 20 plus percent range year over year and we also expected that the that the green tech will show quite good growth in the coming year so we are we are seeing quite a few positive signals when we move into the second half of this year and the fur and and in 2026 but that we will come back to later on um so with this said um i can i can comment a bit on on acquisitions i think that is one one area where we have been seeing that we are are lagging i we talked a lot about it last year that many of the sellers were expecting that we would pay or evaluate the companies on 22 and 23 that was boosted with the inventory build up and that we should not look at 24. currently we're seeing that that that the expectations of the valuation is coming down and that 24 is naturally part of the valuation. That means that we have much easier to meet our sellers on price because the market is quite, how should I say, the expectations is quite fair. So we have a few very constructive dialogues and we are expecting to close one or two of those during this year. Hopefully we will close more than one, but as you know, that is quite a lot of work to do that. But we are quite active in this area at the moment, which is very pleasing. So with that said, I will hand over to the audience for some Q&A. And this time, since we're not having this with an audience, we will open the floor for questions from telephone questions or voice questions from the web.

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 Thomas Blikstad from Pareto Securities. Please go ahead.

Good morning, Janice. Thomas there from Pareto. If we look at the guidance for 2025, we see Q3 is facing much easier comps and you also have the new Torchbee plant being operational from Q4 and onwards. The first question is if you could give some color on the expected contribution from the new capacity in Q4 and also what sort of volumes you need in order to sustain the margin.