Ratos AB (publ)

Good morning and welcome to this presentation covering the second quarter and the first half of 2024 in Ratos. I am joined by our CFO Jonas Ågrupp and our CEO Jonas Wiström here in the studio and they will guide us through the results shortly. In the end of the presentation you will be able to raise questions in our Q&A session and this webcast is also recorded so you will find it afterwards at ratos.com. Without further ado I'll leave over to you Jonas Wiström.

Thank you so much, Josefin, and thank you all for joining us this very, very busy reporting day. We start off with a rehearsal for if there are any new viewers here. We have three business areas, but we have five segments and that is industrial services, product solutions, critical infrastructure, construction and consumer. And we will go deeper into this area. All in all, I'm satisfied with this quarter where the demand in markets really have been varied. We had an EBITDA increase in spite of a very weak quarter in Plantagen. Our profitability or EBITDA margins increased in spite of the fact that net sales declined with 10% organically actually. But we had very strong order intake. in general or strong order intake in general and very strong order intake in construction actually 72%. We also are happy for the strong development in our technical consultancy companies and in industry product solutions also have developed very well. Our cash flows were strong. I think the cash conversion is like 128% or something. We have improved the return on capital and our other result numbers than EBITDA is increasing more actually than 2%. So all in all, I'm quite happy with the quarter. Let's look at the financials here. Again, sales are down and this is to a large majority or proportion is the construction market. We have also lost sales in plantation in consumer. But EBITDA is up and EBITDA margin is up. So then we go into our business areas and segments, starting with industry that the sales actually decreased. I'm coming back to that when I talk about the segments, both organic, inorganic growth and structural had we 2.1%. The low net sales in industry is mainly due to the wind market but also the CRO market which I will come back to. Industry business area is up and EBITDA margin is also up both compared to the previous quarter or Q2 2023 and the last 12 months. And a very strong development in HL displays. And again, the technical consulting companies has developed well in this quarter. Also, if you take consideration that this quarter was actually one day longer, but even adjusted for that, they developed well. so starting up with them here we had net sales that was down a little bit and EBITDA was flat more or less EBITDA margin grow a little bit if we look if we take a little bit deeper dive here I've already talked about the technical consulting companies But we also have our CRO company, TFS. The CRO market, especially for biotech companies, has been weak since a year. And we have sort of lived on older orders. Now the market shows signs of improvement since a couple of months actually, but TFS as a company took down the result in industrial services. Their EBITDA was down significantly. They're still profitable and so on, but that affected the result in industrial services. Product solutions up 11% in EBITDA. Sales are more or less flat and again sales are flat due to the wind market here. And the beta margin continues also to increase so a really strong yet another very strong quarter for product solutions and a strong quarter for the entire business area. Now let's have a look at construction and services. Net sales are down 12% organically and also the total growth. And construction is of course a very weak market right now and has been and will continue to be for a while more. In spite of that, we actually increased our EBITDA with 21%. And our beta margin also increased significantly. And again, here also both compared to the comparable quarter and the last 12 months. And the order intake was actually extremely strong in construction, but also strong in the business segments infrastructure. So let's take a look here. Sales in construction is down 17%. EBITDA is up. Jonas, how many percent? Many percent. I think we increased in construction 18% EBITDA or so. And EBITDA margin is close to 6%. The order intake here, I think, was 72% in construction. And the order backlog was strong already before in the previous quarter, and now it's even stronger with its high order intake. So all in all, construction have all prerequisites to be able to continue to surprise the market with very strong numbers. Critical infrastructure also a very strong quarter in Norway. Order intake was good and order backlog is also strong. In Sweden with XPIN, We now have delivered all our demands for different stakeholders here and our work now is focused on making X-PIN group profitable and also focused to electrification of rail infrastructure. Last but not least, consumer We are very transparent here, you can see the numbers for both KVD and Plantagen. But this drop in Plantagen, that was in spite of the fact that we actually saved 78 millions in the quarter and still we lose 65 million NOK or 63 million SEK. This affects our group results. I mean, we would have been over 8% or so if it wasn't for plantation. Yes, the weather was bad, especially in June in Norway, which was one of the rainiest months since 1900, I have learned. But these results are not acceptable and we will take further actions to earn money on the bottom line, not just EBITDA in Plantagen. With that, Jonas, I hand over to you and go deep digger in the financials. Thank you, Jonas.

So if we look at net sales, we had a drop of 9% in net sales totally, organically 10%. And I usually also talk about the LTM numbers. So we have LTM net sales now in Q2 of 32.9 billion. If we look at EBITDA, adjusted EBITDA growth was 2% in the quarter. And this is despite the drop that we had in net sales. And I will come back and look more into those details later on. And also I will get back when we look at the EBITDA bridges or the bridge I will just explain a little bit more what happened to the EBITDA. And adjusted EBITDA LTM 2.3 billion as of Q2. If we look at the cash flow, we had a good cash flow in the quarter as you can see. Cash conversion was 127%, which is a good number. Usually Q2 is a strong quarter for Atos because we have high sales and high profits, but also decline normally in networking capital. And also if you look at the second quarter last year, we had an extremely good cash flow, which was actually affected by some positive one-time effects in construction mainly. But if we look at Q2 2022, you can see that we are a little bit more than 30% above that level now in Q2 this year.