Nordic Waterproofing Holding AB (publ)

Good morning everybody and welcome to the Nordic Waterproofing earnings conference call for the fourth quarter 2024 here. Let me start by pointing out that this meeting is being recorded and that the participants names are visible for everyone. But having said that, let me then introduce our CEO and President Martin Ellis to start the presentation. Welcome Martin.

Yeah, thank you very much Palle. Can you hear me OK?

Yes, I hear it loud and clear. Very good. Thanks.

So welcome all. Thanks for participating. Maybe our last quarterly conference call, but who knows. So the headline is soft markets continue basically. And we've had a bit of a profit erosion as a consequence of that. But we have also managed to keep our return on capital employed stable. So, moving on to the next page, we can see that, as you probably noticed, Kingspan this morning announced the cash offer to the shareholders of our company, and the price is 182.5 SEG per share. Our board has evaluated the offer and unanimously recommends that shareholders accept the offer. We have, the board has also obtained a fairness opinion from Evely, according to which the offer from a financial perspective is fair to the shareholders of Nordic Port, approving that's obviously the reason the Port recommends accepting it. The offer period ends on March 6, and presently Kingspan holds 87.4% of our shares already. Moving on, talking about our quarterly results and business development. Net sales decreased by 12% compared to the previous year in the quarter, and all of that is organic, no exchange effect, no acquisition effect. EBITDA decreased also to 71 million compared to 89 million last year. Operating profit, a similar decrease. Cash flow from operating activities was positive as is quite normal in the quarter, but less so than last year. Last year, we had a very aggressive reduction of our working capital, which we obviously can't repeat every year. And the result of that is that we reduced net debt again to 716 million SEG compared to 749 previously. And the board will propose a four SEG per share dividend. Moving on, a few comments on our business environment. Demand is still impacted by a slowdown in commercial new building to higher interest rates. Renovation remains stable and residential new build continues a week in almost the entire geography we cover. Bitumen-based waterproofing solutions are stable in Sweden, Norway and Denmark. And the market situation continues to remain more challenging in Finland compared to the other countries. Sales of our EPDM products, which is basically the European market, are slightly below last year, but we've been able to improve our margins there. Prefab Elements, which has a high exposure to residential new build, obviously is badly impacted by the demand situation and had a negative development in sales. Profitability is still unsatisfactory, but we've put into place a number of turnaround options and plans, which are, I would say, starting to show results, especially in our Norwegian operation, and which we are confident will improve the situation throughout the year 25. Green infrastructure had a somewhat negative development in sales and operating results, but We don't believe that we've lost any market share, so this is really demand-related. Installation services, especially in roofing in Finland, has decreased sales and weaker margins as a consequence. But our operating results from the franchise units in Denmark, where we usually own about 40%, are on the same level, so very, very strong results there. and also a good outlook. All the books for business units with installation are generally weaker compared to the same time last year. And again, Finland is the bigger factor in that business. A few more comments. We have had a good control of the cost situation and we have slightly deflated cost price developments in most of our input materials. We have focus on our debt level and as you've seen, we've been able to improve that. We obviously expect acquisition opportunities, especially now in partnership with Kingspan in the future. The expectation for demand remain at the current level for the beginning of the year. And we don't see any significant pickup in residential new build with the exception of Denmark. We think that 25 might see an improvement in our main markets. But in Finland, there are so far no signs of any improvement. So the situation will probably remain unchanged in that country. With that, Palle, I turn it over to you.

Yes, thank you very much, Martin. Then let me go through some of the numbers here where we, as we said, the net sales decreased in the quarter from 1 billion 48 to 925 with an organic development of minus 12%, no impact from acquisitions or currency. On a yearly basis, we stand at 4.1 billion in turnover here. EBITDA decreased to 71 million from 89 and operating profit from 47 to 28%. The EBTA margin decreased to 7.6% from 8.5% and the full year EBTA margin is now at 10.6% versus 10.4% a year ago. Moving on to the next slide here and looking at the income statement, we can see the gross margin for the quarter was 24.2% versus 24.6% a year ago. mainly impacted, I think, with the decrease from structural changes within the prefabricated elements business. Net financial items were minus one, where interest was minus 12. And then we had a positive impact from revaluation of outstanding options for buying remaining shares in acquisitions. And our EBIT margin for the quarter was 3.1% versus 4.5% a year ago. And on the full year, we are at 6.8% currently. Looking then at the balance sheet on the next slide, we have a continued solid balance sheet that allows us to do selective acquisitions. The interest-bearing net debt decreased from 724 million to 695, and the equity asset ratio now stands at almost 54%. Net debt, the BTA ratio at 1.7 is well below the covenants we have in our financing agreement. And as you can see on the interest bearing net debt graph at the bottom right here, we have a seasonal pattern here, of course, on our net debt and cash flow. Moving then on to the next slide with ROSE. ROSE stands now at 10.1%, so that's been basically unchanged since a year ago. Excuse me. And we can see the capital employee development has decreased in recent quarters here. Cash flow from operations on a rolling 12 basis was at 288 million versus 503 a year ago. And as Martin said, we had very good changes in the working capital last year. Among others, a significant decrease in our inventories. That's hard to repeat. Cash conversion at 67% versus 108% a year ago. And then we have our normal seasonal changes, as we mentioned, where we can see how the capital moves between the different quarters here. Again, in the environment we have, we, of course, closely monitor our operating receivables. Then looking a bit deeper into our segment products and solutions, where we can see a decrease of 8% in sales from 718 million to 662. It's all related to organic development. No currency or acquisition impact. We can see in Denmark that the sales increased while we saw a decrease in the other three Nordic markets here. And on a rolling 12 basis or full year basis, we are at just above 3 billion currently on sales. EBITDA decreased to 57 from 78 and operating profit from 47 to 26. As well did the margins then decrease the EBITDA margin from 10.9 to 8.7. So generally the business is maintained or improved margins with the exception of the prefabricated elements business where the restructuring initiatives had a significant impact in the quarter. For full year, EBITDA margin stands at 14% versus 13.1% a year ago. Installation services, we saw a decrease in net sales of 20%, and this is mainly related to Finland, where the largest chunk of this business is located. No impact from acquisitions or currency here either. And then EBTA decreased from 25 to 18 and operating profit from 16 to 9. And you can say for the full year, the margin is 4.1% on EBTA level versus 6% a year ago. Challenging for the Finnish operations and somewhat improvement from the Norwegian entity, however, still unsatisfactory. And in Denmark, where we consolidate our share of the net result in our franchise network, we don't consolidate sales there. They maintain the result on a good level. Having said that, I mean, for the financial targets, I move it back to you, Martin.

Yeah, thank you very much, Palle. And that basically wraps up our presentation. So we think that we've definitely kept our market share. So in terms of sales growth, we don't have any regrets. Profitability, as you have seen, is below, albeit stable, but below our 13% ROSI threshold. in a challenging market situation. Capital structure is solid, as Palle described, and the dividend policy with a four SEC proposal obviously is above 50% of net profit as usual. So now we're looking forward to any questions.

Yes, thank you, Martin. So for you in the meeting, if you want to ask a question here, Please raise your hand in the meeting or you can send a question into the Q&A feed here or you can actually also email it to me directly. If you're on the phone, press star five to raise your hand for a question. And then I will unmute you.

So yes, if you're in the meeting, so please raise your hand if you want to ask a question.

Okay, it seems that there are no questions from the audience here, and I don't have any questions in my email either. So I think that's, yeah, Martin, you want to wrap up the meeting?

Thank you all for participating. And yeah, we'll see what happens. It's quite likely that this is our last call. And for those of you who've been here for a while, thank you very much for your interest.

Thank you very much, everyone, and good day.