Volati AB

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

Thank you. Very happy to have all of you listening in today. So let's get into the presentation of the Q1 result. So Melotti, we're a growing group of well-managed companies with strong earnings. I would like to remind you about that we are operating with six platforms. We have Solix Group, Etiquette Group and the four platforms within business area industry. We've had an average annual growth of 17% since 2019, so more or less the last five years, and that's despite the recent year's market headwinds. Looking at Q1, one could see that the trend from last quarter remains. It's the second quarter in a row where we see some signs of recovery in the market after many years of tough conditions. Sales growth was 15%, but I'm even more happy about looking at the organic sales growth, which was 4%. We've also, thanks to improved margins, seen the effect in the EBITDA growth, which was 48%, we're off 33% organic. And all platforms except for Coraventa contribute to that profit growth. We will get into Coraventa a bit later on, but to just say one sentence about it, it's mainly because of Coraventa having a really strong quarter last year. So tough comparables for that platform. As I said before, we do see some signs of recovery in the market, in particular when it comes to the construction related segment, which everyone knows is important for us at Volati. But I have to remind everyone that it's from low levels. It takes time and we expect it to take time. And this market still varies a lot between months. So It's not that we've seen any dramatic shift, but we've seen some kind of stabilization and slight improvement in the market, which is very promising. And that's what shows in the organic growth. Tuna Group within business area industry still facing headwinds. We've said that now for a few quarters. It's a slow market in large parts of Europe, but we still have the Landmannen project, which somewhat compensate for that market trend. Trade tariffs, it has limited direct impact on Volati. We see it in communication and in particular to the North American volume that they deliver. But other than that, it's not that much direct effects that we see within Volati. And we've done two acquisitions so far this year, adding a little more than 300 million of annual revenue. One could also take the acquisition that we did in December into account. And then we're up at 750 million of annual turnover that we have acquired the last four or five months. We have expanded the credit facilities during the quarter and that's just to be on top of things and make sure that we have the liquidity needed to continue growing with acquisitions. And as you've heard me say before, we haven't delivered on our financial growth targets for the last two years. And we're supposed to grow 15% annually on EBITDA. And that means doubling the EBITDA every five years. So that's something that we haven't delivered on the last couple of years, which have created a growth gap. We have, however, taken several long-term structure measures during the last years, and our platforms are very well prepared to monetize on the market recovery once we see it. And I think already in Q1, we see some small signs of that. In addition, we have continued acquiring companies and thanks to that we have companies with strong cash flows and we also went into this period with a low net debt to EBTA levels. We have been able to continue acquiring companies and this will also help us closing the growth gap once we see that the market will get back to more normal levels. A little bit more on the actual numbers then. So these are the Q1 numbers. I already touched upon the net sales and EBITDA. Operating cash flow. Q1 is typically, because of seasonality, negative operating cash flow quarter for us. And that also means that if you take that into account, and also that we did the acquisition of Kleber, our net debt to EBITDA has increased to 2.9. So it's now in the upper part of our financial goal, but that's very much expected. And I would also like to remind you, I do that every time this part of the year, that we have the strong cash generating quarters ahead of us, in particular in the second half of the year. If you look at the numbers of the last 12 months basis, which I actually think is better when it comes to Bellotti, more or less everything points in the right direction. Sales margins in EBITDA increased in Q1 compared to Q4. And as I said in the introduction, when we look at the last five years, we have grown our EBITDA on an annual basis. average base of 17%. So looking at this, Q1 was the first step to compensate for the last year's slower growth rates in relation to our financial goals. And with that, I leave to Martin to give you a bit more information about the financial targets.

Yeah, thank you, Andreas. So let's look at our performance in relation to our three financial targets. And let's start with the EBITDA growth during the last 12 months. And as Andreas mentioned, we have a strong EBITDA growth in the quarter, which is then also resulting in that our EBITDA growth per ordinary share during the last 12 months over 5% now in the quarter. which is an improvement from minus 11% in full year 2024. This is still below our target, but it's also worth noting that our target is over business cycles, and our five-year average performance on EBITDA growth is 17%. Our second financial target is our return on adjusted equity, which came in at 17% versus our financial target of 20%. It's below our target now, driven by a lower EBITDA growth. But during the last five years, we have delivered on average 33% return on adjusted equity. And lastly, our capital structure, which is where our net debt ratio came in at 2.9, which is in the higher range of our financial target ratio between two and three times. But as Andreas mentioned, the development in the quarter was expected as Q1 is the quarter with the seasonally lowest cash flow. And we also completed the acquisition of Clever during this quarter. So let's look at how our business areas are performing, and let's start with Salix Group, who saw net sales growth of 25%, of which roughly two-thirds was acquired, and roughly one-third was organic growth. And at the same time, EBITDA almost doubled compared to last year, and the margin in the quarter increased with three percentage points in the quarter. And thus, this is really showcasing the great work that the Solix Group has done, working with cost control and then also extracting synergies from acquisitions and working with coordination benefits. And Salix Group saw a cautious market improvement in the quarter. However, it was at a slow pace and still there are quite some uncertainties regarding the future development. And regarding currency, we saw a positive currency effect for Salix Group since they do a lot of purchasing in foreign currency, while the majority of the sales is in Swedish kronos. We're also happy to see that Salix completed the acquisition of Hans Eggestrand after the quarter. We also see significant potential to grow further through acquisitions in this business area. Let's move over to Etiketter Group, who continues to deliver another strong quarter. Sales increased with 32% in the quarter, driven by the acquisition of Clever, but also through a strong organic growth. And IPT-A in nominal terms increased with 35% and margins increased slightly, which to us is quite impressive given that the newly acquired Clever Etiquette has significantly lower margins compared to the rest of Etiquette Group. And speaking about Clever, the integration of Clever is progressing well and the work with extracting synergies and operational improvement has started. And as mentioned before, there was a good organic growth for Etikett Group during the quarter, and they also saw solid order intake, especially in the Swedish business, and that is putting the completed capacity expansions in good use. And also with Clever's new home market platform to grow from, we see significant potential to grow further through acquisitions. So let's look at our last business area industry who saw a slight revenue decline of 2% in the quarter. So it's a slight revenue decline of 2% in the quarter and a decline of roughly 2 million to 22 million SEK in the quarter. But this is the smallest quarter in the EFO industry. And also, as Andreas mentioned, three out of our four platforms in the industry is improving data contribution from last year. Communications performed well in the quarter, increasing the EBITDA contribution despite the lower deliveries to the U.S. market. And Torne Group is still facing a weak market, however, increases the result from last year, partly driven by the Lantmann and Propecta. And then St. Eriks continued to face a challenging market situation in the construction segment, while the demand in the infrastructure segment is stable. And lastly, Coruventa, who in this quarter did not see any significant effects from floodings and was also facing strong comparables from the last first quarter in 2024, who did see quite significant effects from floodings. And that sums up the industry. And with that, I leave the word to you, Andreas.

Okay, so let's talk a bit about acquisitions. This is a slide that I was looking at. It shows that our strategy with doing add-on acquisitions to existing platforms really worked. 27 acquisitions since 2020 in five out of six of our platforms. And we've done three acquisitions since December 2024, and two of them done this year. And looking at this slide, the 710 million of annualized turnover that we have acquired, the two acquisitions in the last 12 months, that do not include Eggestrand. So including that, we're up at 750 million Swedish crowns of acquired annual growth. I would just like to spend one or two minutes on the acquisition that we didn't queue on, Clever Etiketten. And as you all know by now, Etiketto have done quite an impressive journey for the last five years or so, quadrupled or in size. And during that time, also being able to acquire them. And it's been driven by six acquisitions, one of them this quarter. And after having done all the work with operational improvement and the synergy realization, also being able to maintain the mornings that we have prior to starting this journey. And now we did the acquisition of Klever in Germany. And I think the case with that acquisition is twofold. As we pointed out, they operate under or significantly under the margins that Etiquetto have proven to be able to operate under, which means that we see significant operational improvements and synergy realization. Secondly, we now have a platform in Central Europe where we can continue doing a similar acquisition driven journey as we've done in the Nordics for the last couple of years. So basically using that as a platform to continue doing acquisitions in Central Europe. So this is a very strategic acquisition for Etiquette Group, but also for Volatil. And then in order to continue doing acquisitions, we have to have a look at the financing and our liquidity. And what we've already touched upon is the operational cash flow, which is as expected negative in Q1. And basically what I want to point out with this slide is that the last bullet is there. Once the market normalizes, once we see that the organic growth, that trend continues, we would have a positive effect of net FDBTA ratio. Because what's the problem that we've had the last couple of years because of the negative organic market-driven organic growth? We haven't had the EBITDA expansion required or that we need. But in this quarter, we had quite a significant such and we expect once the market continues to recover, we expect that trend to continue. To summarize, I'm very happy about the first quarter. It's a solid performance. The numbers are very good and it's laying a strong foundation for the rest of the years, of course. But I want to remind you and we remind ourselves that we are best evaluated over time. So individuals' quarters may vary over time. We still feel that market conditions are uncertain, but we also see that positive trend and we've seen it now at least in two quarters and we've talked about the positive organic sales growth. And if we continue to have that organic sales growth and if the market continues to recover, then we're also going to see an accelerated organic growth when it comes to Volati overall. And our platforms, they are in great shape. They are very well prepared to capitalize on the organic growth but also to continue doing actually acquisitive growth. So we're looking forward to continue doing this. With that I leave for any potential questions.

Thank you very much for that presentation. Now we'll open up for the Q&A here. If you're calling in and have a question, please press star nine to raise your hand and then star six to unmute yourself when you get the word. You can also type in your questions using the form. And we have Carl from Carnegie with a question. Please go ahead. You have the word.

Hi Carl.

Hello, Andreas and Martin, can you hear me?

Yes, we can.

Yes, hi. Yeah, so, I mean, obviously, a very strong profit development here in Salix. I'm just curious to hear, perhaps, if you could add a bit of color here on what caused the beat in terms of margins here over a year, and if you could perhaps split that up roughly, how much of this delta is due to M&A and how much that is due to organic initiatives?

So Solix, yes, very strong profit development. And if you look at it, they're actually now at the margins that they were in Q1 2022, I think. So we're well done. And as I said, it's two factors driving that margin development. One is that We now see an organic growth in that business area for the second quarter in a row. But before that, we had several quarters where we had negative organic growth. And at that point in time, it was much about protecting the margins, which I think they've done in a very, very good way. And now when we see the organic growth, it also has the effect that we're actually expanding and improving the margins. So that's thanks to all the good work that they've done the last couple of years. So that's one part of it. And the second part of it is acquisition driven. And we've had some of the acquisitions that have been done in SOLIX the last year that strengthen the average margin, strengthen margin overall. So that's also contributing to that development.

Got it. Very clear. And if we could perhaps just split up Salix into the DIY versus the professional side of the business, could you provide any color there on how those two have developed respectively here in the quarter? And if you see any change in dynamics compared to last quarter in any of those sub-segments?

I'm a bit on thin ice here, but as far as I know, and the trend at least that we've seen over time now, is that the consumer-related market came into the slowed down six to 12 months before the professional segment did. And that was a couple of years back. We have similarly seen that they also have come out earlier. So we've actually seen positive numbers from the consumer related parts for a couple of quarters now and it's been the professional side that's been slower and up until i think if you look at market numbers up until q4 2024 the overall market was down and then we had a slight growth in Q4. And that was thanks to the professional side improving slightly. I think we've seen the same pattern in Q1, meaning that the consumer is slightly stronger and the professional side is lagging a bit.

Got it. And if we just shift the focus to Tornum here, could you say anything there on how the sort of underlying business has developed in the quarter versus last year, if you would perhaps adjust for the contribution from the Lantmann project, just to get a sense for how the underlying agricultural market is developing here and how it looks throughout Europe?

So the underlying agricultural market is slower Q1 this year compared to last year, I would say, because the slowdown was more in Q2 and the rest of the year, even though it was slow also in the first quarter last year. But overall, the market... hasn't improved during the last six to 12 months. And it's still very tough, hesitant out there. But as you know, yes, we have the land planning project. We're going to deliver on that for the whole year, you know, 2025 and a bit into 2026. So that's helped us to compensate for some of that slow markets. But it's not that it's, you know, it's also that we still have some markets that are delivering okay. We have the Spanish markets that we said before that are okay. We have the UK markets that's okay. So it's not that all European countries are doing very bad, but overall it's still a slow market and we expect it to be for yet some time. But I said that the profit-wise, we still improved in Tudum in Q1 this year compared to last year. So we're doing a very good job protecting margins and protecting profit in the slow market in Tudum.

Perfect, thank you. And just looking at the business area industry here overall, Just so I understood you correctly, is it fair to assume that all platforms in that business area saw profit growth year over year besides St. Eric's?

Yes, besides Corventa. So Corventa, they didn't improve their profit. There were some good floodings last year, so they had tough comparables. But Tournum, St. Eric's and Volati Communication had better profits this year compared to last year. But one thing that you need to keep in mind is also that for industry, Q1 is really small.

Yep, got it. And just final from my side, if we look at the net financials here in the quarter, these were a bit higher than at least I had expected. I think it's up about 70% Q or Q or so. Could you perhaps share some extra light there on what is driving that and if there are perhaps any extraordinary items or revaluation effects here that is included in the numbers?

Absolutely. Let me share some light on that. And I think you can also look in the cash flow statement if you're interested in knowing what the interest expenses were. But the majority of... Or compared to last year, the majority of the difference is that we get the currency effects on internal loans, which is actually not affecting our cash position. So we give loans to our foreign subsidiaries and the translation effects on those also end up in cash. in the net financials, which is this quarter a substantial amount. But you can, if you dig into the cash flow statements, you will get some more information about that.

Perfect. That's very clear. And that was all my question. Thank you very much.

Okay, and that's a wrap of the Q&A section here. Andreas, do you have any concluding remarks before we wrap up this presentation?

So I think my wrap up is very happy to see a continuous positive trend. It's not a dramatic shift, but we're showing slight positive organic sales numbers and the profitability and the profit increased quite a lot. So I'm very happy to to see that but i also keep in mind that there are still a lot of market uncertainty out there and we are we are expecting that the market recovery will take time and we're very well prepared for that and yeah thank you for listening in today