Volati AB

Good morning everyone, and welcome to today's webcast presentation with Volati. With us presenting today, we have the CEO, Andreas Stenbäck, and CFO, Martin Aronsson. We'll open up for a Q&A after the presentation, and you can type in your question using the form that is located to the right. Or, if you're calling in and would like to ask a question, please press star 9 to raise your hand, and then star 6 to mute yourself when you get the word. And with that said, please go ahead with your presentation.

Thank you. And thank you everyone for listening in today. I thought we would start directly at page three, summarizing our Q4 result. Firstly, I'm very happy about our sales development in this quarter. I feel we really see some signs of recovery after many years of tough market conditions. So sales growth grew with 11%, and we also actually returned to organic sales growth of 3%. And this is the first quarter since Q1 2022 that we also see organic sales growth in all of our three business areas. I'm generally happy with the margins that we show across the platforms. That is much thanks to the structure measures that we've taken throughout these three last years, meaning that we are now able to perform good margins overall. However, as described here in our Q4 report, we have one platform within business area industry, and that's Tunum Group, where we haven't showed the results that we should. It's mainly because of two reasons. One is that we're still facing a tough market in Tudum and secondly that we've had some low margins projects that we've had to handle in this last quarter. And that, you know, in a fairly small quarter for Volati as a group, that has a greater effect than it should, meaning that our EBITDA came in line with last year. Positively, it's also that our earnings per share increased 30% in the quarter, and that If we turn to the next slide, that the cash flow was very strong. And it's actually, you know, the Q4 cash flow was strong in itself. It also summarizes very good cash flow for the full year of 2024. And it's actually the second year now in a row when we have cash conversion in excess of 100%. And that also enabled us to continue doing acquisitions. We've done two very nice acquisitions since the end of last quarter. Solix Group acquired Timberman in Denmark, and then we had Etiketto Group that acquired Clever Etiketten in Germany. So both of these two adding approximately 700 million of yearly revenue. And if I just allow myself to summarize a bit, so we've had now three years of challenging market conditions, which means that we also created ourselves a growth gap. Our financial goal is to grow at least 15% annually. That means that we should double every fifth year. We haven't been able to do that the last three years, and that's been purely market-driven, I would say. We've been facing some market headwinds in a number of our platforms. However, we have also taken the opportunity to work with long-term structural measures in this platform, meaning that we have prepared ourselves for the market recovery when it comes. We also, thanks to two things. Firstly, we went into this period with a fairly low net debt to EBITDA levels, but we've also been able to generate really good cash flow. So these two in combination have enabled us to continue making acquisitions. So we've done 15 acquisitions totaling 2.2 billion of yearly revenue throughout these three years. So, of course, what does this mean? The long-term structural measures that has placed our platform in a really good position in combination with the acquired growth that we've been able to achieve the last couple of years puts us in a position that when the market starts normalizing, I expect to see an accelerated growth, meaning that we will also be able to close that growth gap that we have created. Looking at some details on some numbers, and I already said that, so net sales up 11%, and even more better than the organic growth is back 3%. EBITDA in line with last year, and as said, operating cash flow really strong. And it's also summarized a really good year in terms of cash flow, which also enabled us to reduce the net debt to adjusted EBITDA from 2.8 to 2.6, despite that we actually did acquisitions also. Zooming out a bit, looking at the long-term development, I think these slides tell me two things. One thing is that we have been able to actually outperform our long-term financial growth target or our financial growth target. If you look at it over a period of time, we have been able to achieve it. From 2018, the annual growth has been 17%. But it also tells me that when you look at this, that from 2021 and the last three years, we haven't achieved the 50% growth target. And that is the growth gap that I've been talking about earlier. So with that, I leave the word to Martin.

Thank you, Andreas. So let's start with looking at our performance in relation to our three financial targets. And let's start with the EBITDA growth last 12 months for the ordinary per common share. As Andreas mentioned, we do at the moment have a bit of a headwind in a few of our platforms, affecting the growth negatively. And despite that we did see a small EBITDA growth in the quarter, we are now at minus 11% EBITDA growth during full year 2024, and our target is 15%. But it's worth noting, however, that our target is over business cycles, and our five-year average growth is 19%. Our second financial target is our return on adjusted equity, which came in at 16% versus our financial target of 20%. So it is now below our target, driven by a lower EBITDA growth. However, during the past five years, we have delivered on average a 32% return on adjusted equity. And last financial target is our capital structure, where our net FTA ratio came in at 2.6, which is an improvement from the 2.8 times that we had in Q3. And it's now then also in the middle range of our financial target ratio of between two and three times. So as Andreas mentioned, this is a good development driven by strong cash flow and also considering that we acquired Timberman at an enterprise value of 3 and 10 million during the quarter. So with our current leverage, we feel that we have the financial capacity left when the right acquisition target comes our way. So let's move into our business areas and see how they are performing. And let's start with Solix Group, who saw a sales increase of 17% in the quarter, which was mainly acquisition driven. But we're also very happy to see that they had an organic growth for the first time since Q2 2022. However, they're continuing to see a challenging market, but they do see some early green sprouts, for example, within the building hardware store customers. If we allow ourselves to zoom out a bit to full year numbers, we saw a 5% sales growth in Salix Group and then EBITDA in nominal terms increasing with 4 million SEK. Margins for Salis Group came in almost in line with last year, despite significantly lower organic volumes compared to one year back, which really shows that the hard work that they've done during the past two plus years, working with cost control and coordination benefits and working with synergies in acquiring businesses is really paying off. Regarding the market, of course, everybody else is looking at external sources and they are predicting a construction market growth in 2025, although that is from quite low levels. But we feel that with the actions that we've taken in Salix Group, we are well positioned to capture that growth. We're also happy to see that in the quarter, the Salix Group acquired Timberman, which adds flooring products predominantly to the Danish market to the Salix product portfolio. So let's move over to Etiketter Group, who continues to deliver another strong quarter. Organic sales increased with 16% in the quarter and 9% during the last 12 months. And this is driven by a good demand and the solid order intake, especially in the Swedish business, where Etiketter Group is now expanding production capacity to meet this demand, both through investing in new machines, but also through increasing the efficiency in the current setup. The APT margin increased further in the quarter and is now at 21.4% during the last 12 months, which is three percentage points higher than last year. And this now marks the ninth quarter in a row with increasing in the last 12 months margins for the business area etiquette group. And to us this shows that the strategy of acquiring companies with a lower margin and then working with synergies and operation improvements is really working. And the EBITDA since they started the acquisition journey has quadrupled, increasing from 52 million in 2019 to about 200 million in 2024. During Q1 2025, Etikettigroup established a new platform in Central Europe through the acquisition of Cleveretiketten. Andreas will say a few more words about this acquisition in a minute. And let's move over to our last business area, which is business area industry. And the quarter four marks another tough quarter for industry. Although revenues increased with about 4% where half organic, the EBITDA margin declined to 7% versus 10% in quarter four last year. The performance of the platform varies in business area industry, but the drop in EBITDA in the quarter is explained by Tonu Group, who is facing a low demand in the agricultural segment across Europe. At the moment, farmers are quite reluctant to new investments, given that the grain prices are unfavorable and that there are some delays in the year contributions. And also for Tonen Group, they had in the quarter, they were also negatively affected by a few products with lower profitability in the Spanish part of the business. And moving over to St. Eriks, they continue to face a challenging market situation in the construction segment, while the demand in the infrastructure segment is stable. And communications, they had another good quarter, performing well, increasing EBITDA, both due to improved demand, but also to some extent due to soft comparables in the quarter. Lastly, Corventa is performing well in the quarter, both through strong performance in the core business, but also driven by floodings in Europe, which is driving the demand for Corventa's products for water damage remediation. However, all in all, this concludes another tough quarter for industry, with a few platforms performing below what we expect in the normalized market. But with the actions that we've taken, we're very confident that we are well positioned to take the growth when the market returns. With that, I'll leave the word to you, Andreas.

Thank you. So let's talk a bit about acquisitions. So firstly, we can see on this slide that we've done 26 acquisitions since 2020, adding four billions of annual sales. Looking at the last three years, the same figure is 15 acquisitions and 2.2 billion in annual sales, meaning that we've been able to maintain our acquisition pace throughout these last couple of years. And the last 12 months then, we've done three acquisitions, Beslag Design, Tin Brumma, and Clever Etiquette. And I will get into Clever Etiquette in a bit later on. As said, we've been able to maintain the acquisition pace the last couple of years. We had a drop in Q2 and Q3 2023, but the pace has picked up again. And we are in a financial position and have the processes and the platforms in place to continue keeping this pace. So, before rounding up, I would like to spend a few words on our latest acquisitions. That was the acquisition of Clever Etiquette in Germany done by Etiquetto. But before getting into talking a bit about Clever, I just want to stop at this slide and see what Etiquette Group has achieved the last couple of years. So basically, in 2019, we had a Swedish very successful label manufacturer with market leading margins that showed 250 million Swedish crowns of revenue and roughly 50 million, five zero million of EBITDA. We did five acquisitions in quite a short time. And basically, when we acquire companies, they always show more or less always show lower margins than we do, meaning that the margins get diluted. And that is the trend that could be seen from 2019 to 2022. Basically, adding volumes, adding acquisitions, but then also diluting the margins. Then from 2022 and up until 2024, we actually haven't done any add-on acquisitions of any size to Etiquette Group. But we have worked on realizing these synergies that came throughout the acquisitions. So we now back actually exceeded the margins that we had before starting the acquisition journey, for us proving that the model really works. And what we've now done, we've said now for a couple of quarters or I believe more than a year that we are looking outside of the Nordics, we want to acquire outside of the Nordics. We've looked at Central Europe and in February then we did the acquisition of Clever Etiketten in Germany. And this is a very good acquisition for us. It's around 300 million of annual sales, meaning that the size is good for us. Also taking into account that this is something that we consider being a platform for a continuing expansion on the central European market. And then keeping in mind that the group in 2019 was 250 million. This is slightly bigger, but it's a good platform for us to start growing with in Central Europe. Also, We still have the operational or the way of working within Etiketter Group, which means that we could also apply that to Clever, meaning that we expect the operational improvements and synergy realization. Also, even though this is kind of a new platform into a new geographic market, we expect to increase the profitability of Clever along the way. So for us, this is a very important add-on acquisition to our platform and business area, Etiquette Group. Some words about the cash flow. We touched upon it several times already, but the cash flow, that's what we rely on to continue doing acquisitions and investing in our platforms. And it's just to be said that the cash flow the last two years has been very good. And we've also been able to then decrease the net debt to EBITDA. over the quarter. Once the organic growth returns, that will also mean that we will have an expanded room for acquisitions and we expect the NET-ETA to go down even more. And then finally, to just sum it up, yes, we're returning to organic sales growth in Q4. And again, it's the first time since Q1 2022 that we actually showed an organic growth in all three business areas. We've had very strong cash flow, enabled us to continue doing acquisitions, and we've done two very good acquisitions, both one for SOLIX and one for Etiketto, which I think are extremely nice acquisitions that we've added to those two platforms. And we are in a good position to show accelerated growth once the markets start returning towards normal levels. And we do see the first signs of that happening now. But it's from a very low level, and it's going to take time. But even though I think the organic growth that we've shown shows that the signs are starting to come here. So with that, I leave the word for any questions.

Thank you very much for that presentation. And now we'll open up for a Q&A. If you're calling in, please press star nine to raise your hand and then star six to mute yourself when you get the word. And we got a question from Albin Nordmark from Nordea. Please go ahead. You have the word.

Yes. Hello, Andreas and Martin. Thank you for taking my question. So start off with the Lantmannan project. uh that should be ongoing as for now if i understand it correctly okay tell us something about the expected size and profitability for 25 and 26 and also if you already have started to see this in your q1 numbers and then also for fortuna if you expect further spanish projects with low margins to impact q1 as well or if it was specifically for q4

I'll try to answer as many of these questions as I can. So we haven't given any information externally about the volumes or the models in the landfinding project. However, what we have said is that we started delivering already in 2024 but the main deliveries and most of the product delivery is during this current fiscal year and that will happen then yes in q q1 and q2 and onwards and then the whole project actually ends in 2026. uh but it you know i said it's it's uh i What we've seen in Tunum is that on the agricultural side and mainly farmers, they are a lot more hesitant today than they were a couple of years ago. So the volumes have really gone down there. The industrial side has kept up better. And I think the Lantmann endpoint is a really good example of that. And then with regards to the Spanish situation, no, we don't expect to have that kind of effects going forward. We have handled that in Q4 with regards to the profitability in a number of projects. So that's been handled and addressed. So I hope that I answered as much as I could.

Yes, thank you very much. And if we look at the CAPEX ahead, you mentioned Etiquette Order Book that might need some more machinery, etc. And also if you see any increased CAPEX need for either for Tornum to deliver on Lantmannen or maybe the acquisition of Clever Etiquette or Timberman. Yeah.

Yes, so I'll try to answer that question. So on Etikettos side, they have actually already invested in quite a few of these machines. So they have or are coming online during last quarter. And there are still some investments going forward. But it will not be impacting the overall capex in a way that is significantly negative. And also, if you look at the demand increase that they have, they are filling up those machines extremely quickly, so the payoff on that is also very quick. And with regards to Lantmann, there are no significant capex that are planned to deliver on that product.

All right, and then maybe one last just to check if you can comment on the contribution for Timberman for the last 20 days of December. Did you get anything at all there?

We don't publish that, but it was consolidated in December. So, of course, the numbers were affecting us in December.

All right, that's all for me, thank you.

And we got a person calling in with a phone number ending with 8904 with a question. Please go ahead, you have the word.

Yes, hello, Andreas and Martin, it's Carl here from Carnegie. Just a couple of questions from my side. Etiketto, again, obviously, is a very strong quarter. Could you perhaps elaborate a little bit more on the underlying drivers driving the 16% organic growth over the years? Thank you.

Firstly, good to have Carnegie calling in, so thank you for the question. Yes, Etiketto has shown and a strong development throughout the latter part of 2024. And I would say that's mainly two drivers. One is a general kind of market recovery. I know we've said that, generally speaking, the label industry is not that sensitive to the overall market environment. However, The market actually saw in 2023 that even volumes went down and that also affected Etiquette partly as we described back then. So part of it I would consider now is a market recovery. And then secondly, we do provide both label labeling machines and then labels to the uh white nicotine white snuff uh industry which is uh a faster growing uh so that's uh that's an example of a of a specific segment within etiquette the group that is that is uh showing a strong growth uh and that's expected to continue for yet some time

Yeah, that's very clear. And if we look at the margins here in Etiquette, still obviously very strong, but down a bit here sequentially despite some sequential growth. Could you just help me bridge that? Why are not the margins trending upwards here when we see some growth sequentially?

You mentioned Etiketto, right? Because the margins are up sequentially in Etiketto. So two percentage points in the quarter and three percentage points during the last 12 months.

All right, yeah. Maybe I have some wrong figures.

Just double check and get back to us if you... Yeah, we will.

If we look at the industry business area here, you mentioned, of course, that Tonum had a negative impact, but I was wondering if you could give some extra color on the year-over-year decline in industry margins here besides Tonum. Do I read your statement correctly that both Corventa and St. Eriks should have a negative impact on year-over-year margins, but that communication should be up?

Yes, that's right. So just in summary, so communication up. Also, compared to last year, Q4, communication had somewhat easier comparables, but communication is up. When it comes to Corventa, I must say that they are doing very good, but they also had very tough comparables. But they are, year over year, having a negative contribution, but it's not of any significance, I would say. I mentioned that we have taken the long-term structural measures within basically all of our platforms. Still, Sankt-Eriks is operating in a tough market. Their construction exposure is So it's somewhat compensated by the infrastructure exposure as well, but they still have the construction exposure, meaning that they are operating in a tough market. But I think with taking that into account, they're doing what's expected. But year over year, they are still operating in a negatively developing market. But then the main reason is Tudum Group. That's where we had it. And in particular, when it comes to these project-related or margin-related projects, Issues that we've had to address in this quarter, that's what has the main impact to the overall year-over-year development in industry.

All right, got it. And we've looked at the tonem here. So we will obviously see an impact here from the Lantmannen project during 2025. And I guess you had some deliveries from that also here in Q4. But if we look at the underlying market sentiment currently within European agriculture, would you say that it has changed anyhow compared to Q3? Is it a fairly similar sentiment out there, would you say?

I would say it's a fairly similar sentiment. Industry is generally going better than the farmers and the agricultural market. We have some regions going better, Spain as an example, than the Eastern European markets. But the sentiment, I would say, is more or less in... in line with what we saw in 2024.

Yeah, all right. And just lastly, from my side, if you look at Salix, obviously very nice to see them returning to some slight organic growth here in the quarter. And also that you mentioned that the consumer side has started to pick up. But it would be interesting to hear your view or what you are seeing on the professional side of the market. Would you say the sentiment there is unchanged from Q3 or are you observing any uptick on that side of the market?

So I think if you're We tend to talk about an index called Big Material Index, which is publicly available, which we follow and we believe is a good indication for Solix Group. So that is available for everyone. And if I remember it correctly, that... That data shows that the consumer went into the tougher market before the professional side. So the basically consumer side came into that 69 months before. And what we've seen now is that the consumer part is also... has kind of improved more the last six to nine months than the industry. So you're right about us being about the industry because that's now what's kind of keeping the growth pace down. Looking at that specifically, that's also... I think it's kind of bottomed out, at least when you look at the external sources that we turn to. So they are still, I think, grown negatively in Q4, if I remember it correctly, but much lower negative numbers. They're showing a positive trend, so to say. So we're seeing signs of recovery there as well. We do.

All right, Katja. And just a follow-up to my previous question, because I'm looking at the quarter reports now. So just if we look at Q4 here in Etiquetto, EBITDA margins 20%, right? And in Q3, 25%. That was my question on the sequential decline.

I was going to mention that now also, because now I understood what you meant. So that is correct, but it's difficult to compare different quarters to each other. So I think they do have some season variations and it's mainly due to how much vacation you have. So quarter four is a smaller quarter for them. And therefore, it's more difficult to... It's not comparable. So when you compare to one year back in time, quarter four is two percentage points higher. And also then if you include the last 12 months in that comparison, then we're three percentage points higher. So to us, they're continuing to deliver on the...

on the on the margin increase also in this quarter all right got you thank you so much that was all my questions thank you and that's the end of the Q&A session here Andreas do you have any concluding remarks

I think my concluding remark is just that it's good to see some signs of recovery. It's good to see some organic growth. And I think we put ourselves in a position with the long-term structural measures that we've done and with the acquisition pace that we've upheld and acquisitions that we've done. So really looking forward to the 2025 and start delivering some results.

Thank you very much for that presentation. And thank you to everyone who followed this presentation with Volati. Have a good day.