Systemair AB (publ)

Ladies and gentlemen, welcome to System Air 23-24, entering quarter three report. Together with me, I have here our CFO, Mr. Anders Ulf, and my name is Roland Kaspar, CEO. Let's go right into the report and start with our slide number two. To structure our quarter three report, we have divided it up in some agenda points. We will start up with a brief System Air short, followed by a third quarter quick summary, and then a small strategy update. Directly after, we look into the quarter three financials and the third quarter order highlights. We will then, of course, conclude with the common Q&A. So let's jump into it and change to slide number three. System error brief. The company was established in Queen's Cathedral in 1974 by our chairman and founder, Mr. Jarl Engström. In our last fiscal year, we achieved a total turnover of around 1.1 billion euros. System error has been listed on the Nasdaq Nordic Stock Exchange Market in October 2007. and today we proudly operate our own sales companies in 51 countries, together with 26 factories in 18 countries. We are today about 6,600 employees in Systemair, and we are present in sales to more than 135 countries all around the world. Next slide. The markets of Systemair. A short breakdown of our presence all around the world. As you see, starting from the left, the Nordic region is today about 17% of our total turnover, This is a slight decrease from 19% same period year before. Western Europe is stable at 45% share of our volume, while Eastern Europe represents 12% of our total today. North America is continuing on the growth path and has grown to be 12% of our sales from previous level of 11. And other markets, which covers Africa, Turkey, Middle East, and Asia, have expanded to 14%. Next slide. And normalized quarter three, systemized third quarter, which covers November, December, and January, is normally our weakest quarter, with the exception for the previous year, which was unusually strong. We therefore see achieving an organic growth of 0.1% as a statement of strength. The adjusted operating profit for the period amounted to 198 million Swedish kronors, and we're very satisfied that we, during the period, have signed a number of strategic and large orders in different parts of the world. This shows the growth potential that lies ahead. Following the strategic update, we also want to share that the ongoing integration of SCS Group in the UK and Satya Corp in Italy is proceeding very positively, as also the investments in the new manufacturing capacity in both Lithuania and Germany, which is going according to plan and will be able to deliver its capacity upgrades in September and October 2024. This will secure our continued growth and developments towards and beyond our 10% profit level. The Managa factory relocation is announced in November 2023, where we relocate the production of Menarga to Maribor in Slovenia, is going according to plan. We are proud also to announce that we have strengthened our management team. We're happy to welcome Mr. Martin Dahlgren as the Vice President of Progress in Technology, and in the beginning of this new year, finally also Ulrike Hellman as our Vice President of M&A Activities. Before handing over to Anders, I want to take the opportunity to announce also our 50-year celebration. This year, 2024, Systemair is celebrating its 50th anniversary, and this is, of course, something that we really want to share with our customers and colleagues at several occasions throughout the year. Now I hand over to Anders Ulf, our CFO, for the Q3 financials. Please, next slide.

Thank you, Roland, and good morning, everyone. So my job here is to run you through the financials, starting off with net sales that amounted to $2,827 million compared to 3,043 millions last year. This is a decline in sales of 7.1%. And as you see, there's currently a trend in our organic growth figures coming down from a rather high level last year. That was due to the effects of the supply chain constraints we had back then. Nevertheless, we achieved a positive 0.1% organic growth in the quarter. Slide number seven, giving a bit more analyze on the net sales. We had an organic growth in all regions except for the Nordics and Western Europe. Acquisitions and divestments contributed negatively on sales, mainly by the divesture last year of the EC segment, 28th of February. Total effect of M&A then negative, minus 3.4%. And then finally, currency effects, also negative by 3.8%, coming from several currencies converted to Swedish kronor. Going to slide number eight, and then we come to the geographic breakdown, and here I will focus on the organic growth rates. Starting off with the Nordic stamp where we saw an organic sales decline of minus 6.3%. Most countries in that region had declining sales in the quarter, but we were happy to see that the Norwegian market being robust despite its higher exposure on the residential segment. In our largest region, which is Western Europe, we also saw an organic sales decline of 7.9%. But it is a bit of a mixed message. The countries in the regions are showing both positive and negative signs. Firstly, we need to remember that we have very tough comparables with a growth of 32% last year in this quarter. So positive developments during this quarter in France, UK, Spain, but negative development in, for example, Germany. Now moving to the remaining regions that all show positive organic growth. Firstly, in Eastern Europe, the organic growth amounted to 1.0%. If we exclude Russia, then the same figure was plus 2.4%. We saw positive development in countries like Estonia, Croatia, and Slovenia during this. In North America, the organic growth rate was 2.8%, coming from U.S. being positive, while sales in Canada was declining, mainly due to its high exposure on the residential market. In Middle East, Asia, Australia, and Africa, we had very good growth of an impressive 33.7%. The reason behind that was due to good sales in, for example, Morocco, Middle East, and Southeast Asia. Then we go to slide number nine. First, on overall level, Q3 is seasonally a bit weaker quarter compared to the strongest quarter of Q2. We had quite low volumes in December, and that, of course, is not good in a month with less activity due to holidays. Our adjusted operating profit margin amounted to 7.0% compared to 9.1% in the previous year. We see this as a normalization, as I stated, if you compare it to the years of 2021 and 2022. In 2023, we had great volumes driven by recovery from disruptions in the component supply. In our Q3, we have also accounted for the restructuring cost of 125 million for moving Minerga production from Germany to Slovenia. Our gross margin in the quarter amounted to 33.9% compared to 34.2% in the previous year. The decline is mainly due to lower capacity utilization, but also a change in product mix. Selling and admin expenses increased by 32.6 million in comparable units, and we are constantly reviewing that to adjust our expenses where needed. Going to slide number 10, coming to the adjusted profit after tax, pretty much reflects the same patterns as our operating profit. We had negative effects from net financials of minus 62 millions, where the bigger parts derives from the currency effects of loans and bank balances amounting to 44.7 million, and then interest expenses amounted to 20.8 million. Then we come to the cash flow, slide number 11. Our cash flow for the quarter was good, even though profits were on a lower level as communicated. Our working capital contributed positively with 343.7 million, mainly due to decreased inventories and increased trade payables. This led to a free cash flow of 381.2 million compared to 244.9 last year. Our net debt is significantly lower than last year and amounts to 1,079 million, which is roughly 1.5 billion lower than last year due to the proceeds that were received from selling the AC segment one year ago. Our adjusted leverage amounts to the very low 0.7%. And then my final slide here, number 12, we will touch a little bit on the sustainability side where we are extra proud to see that our work related to injuries have continued to decrease. And we have, over the last year, reinforced our structure, processes, and follow-up. And this has led to LTIFR rate of 8.8 compared to 14.8% for the last year. So we are happy to see that developing in the right way. And by that, I hand over to Roland also to talk a little bit about orders received during the period.

Thank you Anders, and by that we are on slide number 13. Ladies and gentlemen, I want to present you some orders that have been awarded in the period. The first one here shown is within the application of data centers. As you know, Systemair is targeting the more standardized installations for data centers. These two orders are located in France for a total value of 3.45 million euros. One is to be delivered to Paris after summer and consists of 44 dedicated data center air handling units. And the second one will be delivered to the area in the Bretagne and includes 36 data center air handling units to be delivered between June 24 and January 25. In the next slide, number 14. In the quarter, Systema Netherlands did also receive two very impressive cruise ship orders, also the so-called world-class models. Systema will here be able to supply marine air handling units for these two cruise ships. and the deliveries are expected to occur between September 24 and September 26 for two concurrent ships with a total contract value of more than 9 million euros for Systemair. Next slide, slide number 15. Huge investments in solar panels space by big business houses in India. One of them here shown is Varee, one of the three big players in solar panel manufacturers and integrated energy companies. For one of the new plants, we have the pleasure to deliver 67 air honey units and 604 cooling modules for a total order value of 2.2 million euros. As India is aiming to become the second biggest solar panel manufacturing country by 2026, we see further huge investments coming in this application area. By this, ladies and gentlemen, I'll switch over to slide number 16 and open up for Q&A. And thank you very much for listening to our presentation.