speaker
Palle
Senior Finance Executive

So there it's 10 o'clock Swedish time. So welcome everybody to this WebEx following the Nordic waterproofing third quarter interim report. We're gonna go through this presentation and after that there will be time for questions to be asked. I'll let you know the details about how to do that when we get there. But let me start with the presentation and introducing our president and CEO, Martin Ellis. So Martin, please go ahead and take us through the slides here.

speaker
Martin Ellis
President & CEO

Yeah, thank you very much, buddy. Welcome all, thank you very much for participating. So we're happy to report on our third quarter which showed improved profitability compared to last year on stable

speaker
Morten
Financial/Investor Relations Executive

turnover. Next. We have obviously, as you're aware,

speaker
Martin Ellis
President & CEO

had a recent change in ownership. Late last week, Kingspan announced the acquisition of a further .5% of the shares of our company. And with previously owned shares, Kingspan now has .6% at this point in time. I would like to say that we as management, we are very happy about this step because it obviously clarifies the situation and we very much look forward to being part of the Kingspan family in the hopefully near future. And we believe that this is very good news for Nordic Waterproofing and that there's a number of synergies which we both Kingspan and ourselves can benefit from. The increased ownership by Kingspan at this point doesn't bring any obligation to make a mandatory public offer since that's been already done earlier this year. The change in ownership structure also doesn't affect our listing on NASDAQ Stockholm at this point. And we will continue to be listed on the mid cap list. You can also see on the right hand side, the present situation of the minority shareholders. And I think we won't go into the details of each line, but it is clear that there's a number of minority shareholders still remaining

speaker
Morten
Financial/Investor Relations Executive

in

speaker
Operator
WebEx Moderator / Technical Facilitator

our share ownership. Next. So back to our

speaker
Martin Ellis
President & CEO

third quarter, net sales slightly down, minus 2% organic development and also a currency, negative currency effect and a slight effect from acquisitions, but basically stable. EBITDA increased to 177 million from 159 last year. EBIT increased by slightly high amount to 140 million sec compared to 115 last year. Cashflow from operating activities was 101 million compared to 149. I may remind you that last year we had a very significant inventory decrease, which explains the difference. Net debt stands at 815 million. It was a year ago, 985 and at the end of the last year, it was 749. So in all likelihood, we would expect to have a significantly lower debt level at the end

speaker
Morten
Financial/Investor Relations Executive

of this year. Next.

speaker
Martin Ellis
President & CEO

A few comments on the Q3 demand. Obviously one of the key drivers of our results and it is impacted by a slowdown in commercial new build, which is nothing new, but it persists. Renovation, we see a stable while residential new build continued weak in most of our geography. B2M based waterproofing operations are stable in Sweden and Denmark with obviously good profitability. And the market situation is significantly more challenging in Finland and also to some extent in Norway. Sales for IPDM products, synthetic rubber, are slightly below last year, but margins are slightly higher. Pre-fed elements, wood-based, which has an exposure, bigger exposure to residential new build than the rest of our business. Nevertheless, positive development in sales on the Danish market while it was negative in Norway. Profitability remains unsatisfactory, but we have accelerated our restructuring programs and we do believe that we might reach a break-even situation next year. Our green infrastructure business had a flat development in sales, but operating results clearly improved over last year. And installation services, last but not least, we had an unchanged sales level in Finland with a weaker margin, quite aggressive competition in the face of weaker demand. And the operating results from our franchise units in Denmark improved. So all in all, the result of this sector was at the same level as last year. All the books for business units within installation services are generally weaker compared to the same time last year. Obviously Finland being

speaker
Morten
Financial/Investor Relations Executive

the main driver here. Next.

speaker
Unknown
Not identified

There

speaker
Morten
Financial/Investor Relations Executive

we go.

speaker
Martin Ellis
President & CEO

So we continue to see flat or slightly deflated cost development for most of our input materials. We have a continued focus on our debt level as I already mentioned, of course. And in a somewhat soft interest environment, we expect opportunities to emerge to further expand the group in accordance with our strategic plan through our new development. We have a lot of new acquisitions. Our expectations for demand in commercial new build and renovation remain on current level for the rest of this year. And I could say for the beginning of next year. Residential new builds will remain depressed in the very near future. Obviously somewhat low interest rates might help in that respect. And we also have an exception in Denmark where we see a normal demand. In 25, we expect more federal market conditions on our main markets with again, the exception of Finland where all our market conditions are expected to change. So over to you, Palle.

speaker
Palle
Senior Finance Executive

Yes, thank you very much, Martin. And let's look a bit more into the numbers here. So as we said, the net sales decreased to 1,167 million secure, organic development minus two. We had a bit of acquisitions with 1% and currency had a negative impact with the minus 2%. We had a record third quarter on EBITJ. It's actually the highest EBITJ we had in a third quarter at 177 million compared to 159 last year. And the EBITJ margin increased in the quarter with two percentage points to 15.1 and on a rolling 12 basis, we're at now 10.7 percentage points here. Looking a bit more at the income statement here, I think you recognize the net sales, but gross margin for the quarter was at 28% versus 25.3 last year. Net financial items at minus 18 in the quarter where most of that is of course interest cost that we expect to continue to see go down. It was 2 million lower this quarter than it was last year, but both interest rates come down and our interest bearing net debt as well is decreasing here. And EBITJ margin for the quarter was then of course as well up to 12% and on a rolling 12 basis, we're at 7% now. We continue to have a strong balance sheet when we look at this, and it allows us to do selective acquisitions of course, the interest bearing net debt at 788 million it is the third quarter is typically a seasonally strong quarter for us when it comes to cashflow as well what we expect in the fourth quarter here. We have an equity asset ratio of almost spot on 50% and the net debt EBITJ ratio is at 1.8 currently, well below the confidence we have in our financing agreement. Moving on to look at a rose improved one percentage point in the quarter from 9.7 to 10.7 now, and also higher than it was when the year started at 10.2. And then the improvement actually comes from both capital employed coming down as well profitability increasing here. Cashflow from operations on a rolling 12 basis at 399 million and with a cash conversion at a high 89%, I would say, so we continue to see the normal seasonal changes in working capital, but as Martin said last year, we had throughout the year, a very good decrease in inventory that we of course, cannot repeat this year. And considering the business climate generally for the construction industry, we of course continue to closely monitor our operating receivables very much. Good looking into our two business areas and starting with products and solutions where we saw a decrease of net sales of 2% all related to currency with no acquisitions in this area in the most recent 12 months here. Positive development for sales in Finland and Denmark, Sweden on par with last year where one we see a tougher development in Norway with negative sales and on a rolling 12 basis with just about 3.1 billion SEC. EBTA continues to develop positively as it's done for a bit more than a year here. And we have an EBTA margin of .2% in the quarter for this business area compared to 515.6 last year. And generally, I would say all the different businesses have maintained or improved their margins. We still have some areas for improvement still and in particular the Tosni Group where we continue to see unsatisfactory profitability level and the restructuring initiatives we mentioned before are being accelerated as we speak basically. For the latest 12 months, the EBTA margin at 14.4%. And then installation services where net sales decreased 8%, therefore minus 8% organically as well where impact from acquisitions was plus 3% and balance by currency being minus 3%. EBTA in EBIT, I think we can say is basically on the same level as last year. Whereas EBTA margin increased slightly and for the latest 12 months we're at .4% EBTA margin. We do see a tougher development in Finland, tougher market and reduced profit levels generally in that market. While that is balanced with improved results from the Danish franchise network where we have a minority stake and only consolidate our share of the net result. Yeah, then moving over to the financial part and handing back to you, Morten.

speaker
Martin Ellis
President & CEO

Yeah, thank you very much, Pelle. So as you can see in terms of sales growth, we believe we have achieved our target since we're faced basically with a slower demand and actually probably very slightly increased our market shares. In terms of profitability, we are still lagging our threshold of 13% in Rosi. We are approaching 11, so not very far, but obviously we would like to return to the 13 as fast as we can. And the capital structure you've seen that our debt level is at not historic lows, but certainly at a relatively low level, so a very solid balance sheet. Thank you, and I guess we can now take questions, please. Yes, let's open

speaker
Palle
Senior Finance Executive

up for questions. Thank you very much, Morten. So if you want to ask a question, you can raise your hand in the meeting here, or you can send a question in the Q&A feed in the meeting, or yeah, send me an email and I'll pick it up here. If you're on the phone, you need to press star five to raise your hand for a question. So let me... Just shift the

speaker
Operator
WebEx Moderator / Technical Facilitator

screen here if we have any questions coming in here. So again, let me just repeat,

speaker
Palle
Senior Finance Executive

if you want to ask a question, please raise your hand in the WebEx Teams meeting here. Now I will unmute you so

speaker
Operator
WebEx Moderator / Technical Facilitator

you can ask your question. Yes, so Sophia,

speaker
Palle
Senior Finance Executive

you need to unmute yourself, but I've unmuted you on my side. So please, Sophia Zorling from Carnegie, please feel free to ask your questions.

speaker
Sophia Zorling
Analyst, Carnegie

Yes, thank you. Sophia here from Carnegie, can you hear me?

speaker
Palle
Senior Finance Executive

Yes, very well, thank

speaker
Sophia Zorling
Analyst, Carnegie

you. Great, okay, thank you for the presentation. So I have a first question regarding when you talk about Kingspan and the and you mentioned that you are happy about this in your acquisition and you see that you can gain quite of synergies given this. Could you please give more details on what type of synergies you see that you can gain in the near and midterm? And yeah, that's my first question.

speaker
Martin Ellis
President & CEO

Yeah, thank you very much. Important question. And I think basically, one more, all of our competitors offer package solutions where you have a one-stop shopping opportunity for our customer base. And clearly the installation material Kingspan provides in at least in some geographies will certainly be an integral part of that package. And also I would say in terms of strategic synergies, we could see the situation where with Kingspan's help, we can make further acquisitions in the Nordics where Kingspan has probably a slightly lesser presence than in most of the other geographies. So again, strategic synergies are also down the road an important factor.

speaker
Sophia Zorling
Analyst, Carnegie

Okay, and would you say this is given the current situation when they're holding roughly 60% of the shares or is this that they need to acquire more or? Yeah, that

speaker
Martin Ellis
President & CEO

would be after Kingspan takes full control because obviously for the time being, we have to deal at arm's length since there's still 38%

speaker
Morten
Financial/Investor Relations Executive

of minority shareholders.

speaker
Sophia Zorling
Analyst, Carnegie

Yeah, okay. And then I have some questions on your margin improvement. So you mentioned actually that sales has coming down in both the eco and also within the green infrastructure segment, but the margin has improved. What would you say is the main reason for the margin improvement here in both of those? In that part of the brand? If you look,

speaker
Martin Ellis
President & CEO

I mean, we are talking very slight effects. It's not sort of a brutal change, but in terms of the Sieleco EPDM, we basically benefit from lower raw material costs and we've made a number of cuts in our teams, which to sort of right size compared to the amount pictures. So those are the main factors. And in fact, I think we probably have a slightly sub normal profitability last year and we're just basically returning to normal levels. And we, I think are very active there in terms of emphasizing the high end of our offer, which is city roof gardens, which are obviously more profitable than the run of the mill, a seed them at. So I think a good repositioning going on right now.

speaker
Sophia Zorling
Analyst, Carnegie

All right. And also my last question is, of course this is a seasonally strong quarter for you, but would you say that this margin improvement and this margin in Q3 of 12% on group level, is that now more sustainable? Or would you say it's more of a hiccup, positive hiccup perhaps during this quarter or is something that we could

speaker
Martin Ellis
President & CEO

do? No, it's certainly not the hiccup. Now, if you're thinking of Q4, as you know, that's tricky quarter. So we can't make any sort of prediction on Q4, but I would say that there's no reason to believe that there should be a significant drop in

speaker
Morten
Financial/Investor Relations Executive

our results at this point in time. Yeah. Okay, thank you. Thank you very much.

speaker
Palle
Senior Finance Executive

Thank you, Sophia. So, and if there's anyone else wanting to ask a question, please raise your hand in the meeting here. Okay, that doesn't seem like there are any more questions. So Martin, you want to round it up? Yeah, no,

speaker
Martin Ellis
President & CEO

thank you all very much for listening in. It's been a pleasure.

speaker
Morten
Financial/Investor Relations Executive

Okay, thank you.

speaker
Operator
WebEx Moderator / Technical Facilitator

Thank you very much.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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