Nordic Waterproofing Holding AB (publ)

Good morning and welcome everyone to the Nordic Waterproofing WebEx presentation after the first quarter here. Let me start with reminding everybody that this presentation is being recorded and the names are visible for the participants. And let me then start with introducing our CEO and President Martin Ellis and I'll hand over to you Martin for the presentation here.

Thank you very much Palle. Welcome all. Thank you for participating. We have seen in our report we had a subdued quarter due to harsh weather, unusually hot weather, and somewhat weaker demand in both Finland and Norway. Moving on to page two. Our net sales decreased to 804 sec compared to 911 in the quarter last year. Plus 1% comes from acquisitions. There were no currency effects from the SEC. And it boils down to a 13% reduction in organic development. EBITDA decreased to 17 million SEC compared to 13. Last year, operating profit also decreased. to a 21 million loss compared to 11 million loss last year. Let me remind you that the first quarter is always a small quarter and usually translates into a loss at the EBIT level. In the 21 million loss, there is included a 6.4 million charge for costs related to the mandatory bid by Kingspan. The cash flow from operating activities was minus 83 million compared to minus 58 million last year. The reason for that being mainly an increase of our working capital from an extremely low level at the end of December last year. net debt now stands at 861 million which is down compared to the same period last year it was a billion 58 million then and slightly up compared to the same 49 million we had at the end of last year moving on to page three Demand was impacted, obviously, first of all, by the harsh weather, but also by a slowdown in commercial new build. We have seen renovations still remaining stable, and residential new build continued quite deeply depressed in all of our geography, obviously linked to the high level of interest rates. Bitumen based waterproofing operations were, as I said, heavily impacted by the weather and the market situation in terms of underlying demand is most challenging in Finland and Norway, whereas Denmark and Sweden are relatively stable. Sales for our EPDM products, the synthetic rubber, unpowered last year, and especially our Belgian subsidiary DistriPont, who had a bit of a slow end of the year, last year had a positive development. Prefab wood-based elements has a higher exposure to residential new build than our other businesses. and managed to have a flat development in sales in Denmark, but had a negative development in Norway. Overall profitability level of this business unit improved, but obviously still at an unsatisfactory level. Our green infrastructure business unit had a decrease in sales due to less roof park projects this year, but it's a seasonally extremely low quarter for that business. Installation services, there we had a major effect in terms of our roofing business in Finland having lower sales, lower general demand, and also a drop in margins due to the inefficiency which harsh winter generates. The flooring for cruise ships continues to show excellent performance. All the books for installation services continue to be on par with previous year in Finland and Denmark and are slightly weaker in Norway. Moving on to page four. Faced with the generally somewhat lower demand, we have started implementing and negotiating contingency measures. And this definitely after a bit of a time lag will have obviously a positive effect on our bottom line. We continue to see flat, slightly deflated, in some cases also slightly increasing costs for most of our input materials. But I would say the general picture is flat. In the high interest environment I mentioned, we have sharpened the focus on our debt level and adjusted multiples where we are prepared to pay for acquisitions. Our largest shareholder, Kingspan, completed their mandatory offer of 160 SEK per share with an acceptance of 4.8% of the total share capital. Over to you, Palle, for some more detailed figures.

Yeah, okay. Thank you, Martin. So as we said, net sales decreased about 100 million SEK from 9-11 to 8-4. On a rolling 12 basis, we continue to be close to 4.5 billion SEK. Organic development minus 13, and basically all that is volume. Price impact in the quarter was pretty close to zero. And then, yeah, acquisitions 1% and currency had no impact. EBITDA decreased from 30 to 17 and EBIT from minus 11 to minus 21 here. On a rolling 12 basis, EBITDA stands at 10.4%. And as Martin said, the advisory cost related to the mandatory offer was a bit more than 6 million in the quarter having that impact. If I move on to slide six, we can see that gross margin for the quarter was actually up from last year, from 22.1 to 23.7. This is mainly driven by the areas within products and solutions. Net financial items were unchanged at minus 14, whereof interest costs now stands at minus 13 million in the quarter. And EBIT margin for the quarter was then negative minus 2.6. And during the last 12 months, we stand at 6.5% EBIT margin. Moving on to slide seven, I would say that we continue to have a solid balance sheet that allows us to do selective acquisitions whenever something interesting comes up. The interest bearing net debt increased to 834 million from 724 at the beginning of the year. And it's worth remembering the first quarter is seasonally weak for our cash flow. However, we are well below the value where we were a year ago at 997. The equity asset ratio is strong at 50.2%, above 50%, and the net debt EBITDA ratio at 1.9. It remains well below the covenant for our financing agreement here. Moving on to slide eight, ROSE is pretty much flat in the quarter, stands at 10.0 now. started the year at 10.2 and capital employed development has flattened out as you can see in the recent quarters here and the change in rows is basically driven by operating result. Cash flow from operations has been at a good level at 478 on the rolling 12 last 12 months here versus 317 for the 12 months before that and Cash conversion continued to be above 100%, which is not necessarily the long-term level we will be at, but it's been there as well last year. And of course, going forward, we closely monitor our operating receivables in all our businesses, considering the business climate that we see on most of our markets. Moving on to slide nine and looking into products and solutions where net sales decreased 11% from 701 to 627. All the development is organic, no impact from currency or acquisitions. Some of the areas within products and solutions managed to keep a flat development of sales in this environment like Seleco and Helsinki Denmark and the membrane business in Sweden. Net sales for products and solutions on a rolling 12 basis currently stands at 3.2 billion SEK. EBITDA increased for the area from 52 to 61, as did operating profit EBIT from 22 to 31. And the EBITDA margin increased and now stands at 9.7% versus 7.5 in the first quarter last year. Generally, the different businesses here maintained or even improved their margins in the quarter here. We see an improved EBTA for the Tösinge Group, but there was also an impact of the one of last year in the first quarter that is a large part of that increase. And for the latest 12 months for this area, we are at 13.7% EBTA margin. Then moving on to slide 10 where we can see installation services where we had a net sales of 202 million decreased with 16%. Organic development minus 21 and impact from acquisition 5%. EBTA decreased to minus 24 versus minus 12 and EBIT to minus 32 versus minus 22. The EBITDA margin was obviously negative in the quarter as well with minus 11.8% and at the latest 12 months the margin now stands at 5.2% with the unroofing activities in Finland so reduced profit levels due to the operational efficiency from the harsh weather but as well as a weaker market. The result from our Norwegian entity was on par with last year and We saw a good result in the Danish franchise network, however, not on the level with a strong first quarter last year. Then moving on to slide 11, I pass it back to you, Martin. Yes, thank you very much, Palle.

So just a summary of our main target sales growth. Obviously, there hasn't been a sales growth in this quarter, but we believe that in terms of our share of markets and given the downturn in general demands, we are certainly holding our positions in terms of market share. In terms of profitability, we have missed our 13% ROSI threshold also in this quarter, but we retain a really strong capital structure. where we are well below our three times debt on EBITDA target ratio. In terms of dividend policy, we have also a situation where the board proposed a five SEC per share dividend to the General Assembly today, and that would be in excess clearly of the 50% of net profit, which is our target.

so now looking very much forward to your questions yes okay thank you very much Martin then let me say I will open up for questions and I ask the participants either raise your hand in the meeting here or send a question in the Q&A feed you can also mail me and if you're on the phone you need to press star five to raise your hand for a question Yes, then the first question here comes from Sofia Sörling at Carnegie and Sofia I've unmuted you and you need to unmute yourself.

OK, thank you. Can you hear me?

Yes, loud and clear.

Thank you for your presentation. So my first question is related to the market demand in Finland. You mentioned that we should expect a continued downturn in Finland, but you also mentioned that your order books were on par with last year. So could you like give us more details on where you see the weaker demand in Finland is it in any particular customer segment is it mainly due to the new construction market or more related to both new construction and renovation market in Finland that's my first question

Thank you very much, Sophia. The order book, I would say, is a good indicator, of course, but it's not absolutely what reflects the general market situation. We do expect a very slow six months to come in Finland. There are some indications that after that, there could be a pickup. If you look at people who are very upstream in the construction process, they seem to see a slight positive effect recently. But we are clearly preparing for a relatively low level of activity, very much focused on residential new build and to some extent, commercial new build. So this is the situation we see and it's I would say it's a general it concerns all of our segments.

Yeah okay and the renovation market in Finland is that something that you see is more stable as in the other Nordic regions or do you see that as a weaker renovation market than the other Nordic regions?

Yes, I think overall, renovation remains fairly stable throughout. But Finland right now seems to be the weakest spot and we do see a reduction in demand. There are also people trying to push forward projects because of the higher financing cost.

All right. Okay. And what do you expect in terms of price increases ahead within your different product segments? Do you expect to be able to increase prices at least a low point or do you expect to decrease prices?

Yeah, we do not expect to be able to increase prices right now in the foreseeable future. And we're obviously fighting very hard to keep our price level where it is. We might see a slight erosion in sales prices going forward. And that obviously will depend very much on the demand level. If demand levels remain stable, then obviously, We'll probably be able to avoid that if demand reduces further in volume. It's difficult to say how much prices come down, but they probably will come down slightly.

All right, OK, thank you. Thank you very much, Sofia.

If there are further questions, please either raise your hand or

send that to me in an email I'm just gonna check that okay if there are no further questions I think we'll wrap up the meeting so we want to send some last words Martin yeah well thank you all for participating and I look forward to being with you in three months time cheers okay thank you very much