Volati AB

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

Thank you, and also thank you everyone for listening in today. Let's get into the presentation. We'll start with, let's see. Just a sec. Ah, here we are. so uh yeah so let's start with the presentation so looking at this slide sales increased by six percent in the quarter uh to 2.3 um billion uh sick uh it's uh we do see a trend shift a slight trend shift in the quarter with organic sales growth of minus one percent and uh The graph on the right, we've shown you the last couple of quarters. We did see a trend shift late last year with organic growth. However, we've had a slight setback with regards to that in this quarter. It's driven by a slowdown in organic growth in solids, but we do still show positive numbers, even though low in solids. So the main reason for the negative number is some of the platforms within the business area industry. However, I want to point out that we do see a totally other market environment now compared to a year ago. If you look at this slide, you know, we have had minus 15 and minus 11% in Q1 and Q2 2024. So, yes, it was a slight slowdown in the first quarter this year, second quarter this year, but still the market demand is significantly better and improved. EBITDA came in last year, and two of the business areas, Solix and Etiquette, they're showing a strong growth, 20%, around 20% EBITDA growth, while the reason for... us just meeting last year is the industry. And it's two platforms within the industry that are lagging. It's Corventa and it's simply tough comparables for them. They had a really good last year while we still see a challenging market in Tornum. And they're also meeting somewhat tougher comparables compared to last year in the second quarter. 2024 was decently good for them. If you take a step back, or if we take a step back, I think the first half of the year of 2025 is still okay. We've had a sales increase of 10%. We do see an organic growth in the first half of the year, and EBITDA growth is 13%, so close to our financial target. I want to talk a bit about the structural measures that we've done and that we're now really seeing effect of what we've done the last couple of years. And we can see that in platforms such as SOLIX, Sancterix and communication, where we have stronger margins, even when we see low or negative organic growth. And for me, that's a strength, proof of strength that we really also now see in the numbers that we've had good actions in the platforms. We've had some additional structural improvements in the quarter, and we had, because of that, negative EU extraordinary costs of roughly seven million crowns. And what does this mean? This means that we see a good opportunity for further modern improvements, and especially once we see the organic growth coming back, I think that will be accelerated. Also, when we came into the last year's more challenging market environment, we had a low net debt to EBITDA. I think we were also even slightly below our financial target with regards to that. And that has enabled us to continue making acquisitions. And that has, of course, led to increased debt levels. In the last quarter, Solix did the acquisition of Hans Egge Strand. But if we look into the last 12 months, we've now acquired a little more than 750 million of annual sales. That puts us in a net debt to EBITDA position of 3.0. So that's within our targets. And it's very much expected because of the cash flow profiles that we have over the year and the acquisition that we did in Q2. And also during the second half of the year, that's where we have our strong cash flow. Historically, we've showed that every year. So that provides a solid basis for continue doing acquisitions. That's going to give us acquisition room also for the rest of the year. And if we find the need to do the leverage, we also have the possibility to that. So basically what this means with the strong margins that we see and the structural measures that were taken and the accelerated organic growth that we expect once the market returns, that means we will also gradually be able to reduce the net debt going forward and still maintain you very good acquisition pace. So looking a bit into the numbers, net sales up 6%, as I already said, a bit down in line with last year, and that do then include some EU costs linked to structural measures. Operating cash flow strong in the quarter, 27% up compared to the same quarter last year, and net debt at 3.0, as I already mentioned. Taking a step back and looking at the annualized numbers, we're now at 8.2 billion Swedish grams of net sales and 700 billion of EBITDA. As said, that implies a 10% net sales growth the first half of the year and a 13% EBITDA growth the first half of the year. Also, looking at the long-term profile, we're still ahead of our financial goals. That basically means that we've doubled the last five years. However, as everyone can see on this slide, the growth pace went down from 2021 going forward. And that has created a growth gap, meaning that we do see that we will close that growth gap once the market returns. With that, I leave the word to Mark.

Thank you, Andreas. So let's look at our performance in relation to our SE financial targets. And let's start with the EBITDA growth for ordinary share during the last 12 months, which is now at 6%, which is an improvement from the last quarter, so quarter one. However, this is still below our financial target, but it's worth noting that our target is over business cycles, and our five-year average growth, IPTA growth per ordinary share, is 15%. So moving over to our second financial target, our return on adjusted equity, which came in at roughly 17% versus our financial target of 20%. So it's below our financial targets, but it's driven by a lower EBITDA growth. However, during the past five years, we have delivered on average 33% return on adjusted equity. And our last financial target is our capital structure, where our net EBITDA ratio came in at 3.0, which is within the range of our financial target ratio between two and three times. And we now also put half year one behind us, which is seasonally the lowest regarding cash flow for Volati. And we now have quarter three and quarter four in front of us where Volati normally generates a strong cash flow. And this, as Andreas mentioned, gives us the potential to do further acquisitions and also a potential to deliver if need be. So let's also talk a bit about our business areas and let's start with the Solix Group. And Solix Group saw a total net sales growth of roughly 10%, which mainly came through acquisitions, but also through organic growth. EBITDA increased with 20% compared to last year and the margin increased with roughly one percentage point in the quarter. And this is really showcasing the great work that Solid Group has done with working with cost control and synergies on the coordination benefits. And we also saw some market improvement in the quarter. However, at a slower pace compared to previous quarter, showing that the improvement rarely is linear. But we're confident that Salix Group is well positioned to capture the growth once the market returns. We completed the acquisition of Hans Eggestrand in the quarter, and we also see significant potential to grow further through acquisitions in the business area of Salix Group. So let's move over to Etiketto Group, who continues to deliver another strong quarter. Sales increased with 36% in the quarter, mainly through the effects of the acquisition of Clever, but also through the continued trend of strong organic growth. EBITDA in nominal terms increased with 19%, which is mainly driven by organic improvements. Jone Peter Reistadler, But that said, the modern decline in the quarter and with two percentage points, but this is as expected, as the newly acquired they care at the captain contributes with roughly 20% 25% of the total let's get the group says. but at the low margin. An integration of Clever is progressing well, and the work with extracting synergies and operational improvements has started. And the ambition long term is to lift the margins to the same level as the rest of the Etiquette Group. And also with Clever as a new home market platform to grow from in Central Europe, we see a significant potential to continue acquiring labeling companies in several geographies. And lastly, business area industry, who concludes a tough quarter. Revenue declined with a 7% in the quarter, and the EBITDA margin declined with one percentage point, where the development is mainly explained by Toner Group and Coroventa. And as previous quarters, Toner Group is still facing a historically weak market, but is meeting softer comparables in the second half of 2025. And our platform Coruventa did not see any significant effects from floodings in the quarter and was also facing strong comparables from last year's second quarter. St. Eric's faces a similar market situation as previous quarters with a weak demand in the construction segment, while the demand in the infrastructure segment is stable. And lastly, communications who performed well in the quarter, increasing the pay compared to last year. And that said, this is despite the lower deliveries to the US market. With that, I leave the word to you Andreas.

Okay, and then we'll get into acquisitions. This slide you've seen before, so since 2020, we've now done 27 acquisitions, adding 4.2 billion of annual sales to Volati. And the last 12 months, we've done two add-on acquisitions to Solix Group and one add-on acquisition to Etiquette Group. Looking at how we've been pacing our acquisitions the last five years or four and a half years, one can see that we had a drop in 2023, but have since been fairly stable at roughly 700 million SEK of annual sales that we've added. Then looking into the last acquisition that we did and the Solix Group. To start with Hoss Eggestrand that we added to Solix Group. It was an add-on acquisition we did in Q2. Sales of roughly 45 million SEK. It's complementing SOLIX Group's consumables trade and agriculture unit very well, and in particular the consumables trade unit of businesses. And it does broaden the overall offering of the unit, but it's also an example of an acquisition where we have large potential synergies, not the least in the logistics flows and optimizing that. So this is a very good example of a good add-on acquisition to Salix Group. Looking at the graph to the right, I think you recognize the sales and EBITDA margin from previous, but we also added the number of acquisitions and the accumulated acquired sales that we've shown since 2020 in SOLID's group. And what this says to me is that we've been able to maintain the acquisition pace in Solid Group despite that Solid Group have faced quite a tough market environment at least the last three years. And of course, you know, these tougher market environment also create good acquisition opportunities. And we've been able to take advantage of these. So we've done roughly, you know, one to three acquisitions a year. And over the course of this period, we've added 1.8 billion of annual sales to Solis Group. So I mentioned it previously, but looking at this and seeing how SolidScoop have been able to protect and even improve their margins, despite the tough market environment the last years and not least the last quarter, and still being able to add acquisition. Once the market returns and we start seeing organic growth, it's going to be a real nice journey to follow. And in order to make acquisitions, you need cash flow and you need a decent net debt to EBITDA ratio. So looking at this slide then, the operational cash flow increased with 27% in Q2, which was good, much in line with what we expected. We have a cash conversion in the last 12 months of 85%, which is now, I would say, very much in line with where we want to be. So very much as expected. We had a debt increase in Q2 and as said, firstly, the cash profile of Q2 is not as strong as the operational cash flow profile is not as strong as the second half of the year. But also we have the dividend outflow in Q2, which affects the overall cash position. But again, we expect a strong cash flow the second half, and that means that we will still get some acquisition room to take care of for the rest of the year. Summarizing this quarterly report, so slightly negative organic sales trend sequentially, but we need to remind ourselves that we've gotten still significantly better off compared to a year ago. So there is still an underlying positive trend or momentum. Jone Peter Reistadler, Q2 EBITDA in line with the last year, but in particularly satisfied with the growth that we see in Solix Metacapital, 20% roughly EBITDA growth in those two business area. Jone Peter Reistadler, We do see the effects of the long term structure measures in platforms, such as Solix, Anteriorix and communication, where we have low or even negative organic growth is still strengthening the overall market margins. And we've been able to maintain the acquisition pace. The last 12 months has been roughly 750 million that we've added, but that's very much in line with the growth pace to acquisitions that we've had the last years. And we have a strong foundation to continue doing acquisitions and very much thank you to the cashflow profile of the second half of the year. And we are really waiting for that accelerated organic growth, which we know will come once the market starts to recover. And now this quarter has been somewhat delayed, but once we see that, it's going to be real fun for us. So with that, I leave for any potential questions.

Thank you very much for that presentation. Yes, let's open up for a Q&A here. If you have a question and calling in, please press star 9 to raise your hand and star 6 to mute yourself when you get the word. You can also use the form login to the right. And we'll give the word first to Carl from Carnegie. Please go ahead. You have the word.

Hello there, Andreas and Martin, and thank you for taking my questions. If we start on SOLIX here, you mentioned that demand took a step back here after a quite strong uptick we saw here in Q1. Could you elaborate a bit more here if there were any variations across the quarter, i.e. if you would say that it was a similar demand profile throughout the quarter as a whole, or is it perhaps started or ended on a weaker or a better note?

Thank you. Thank you for the question to start with. So yes, we've seen a market slowdown in Q2 compared to Q1. I think when you turn to our other actors on the market, they've seen a similar profile. When it comes to inter-quarterly variations, There are no big variations. So I think it's not worth mentioning anything with regards to that.

Got you, thank you. And on Tonum, you mentioned they are still facing a very tough market here and that there isn't really any sign of improvement in terms of Any time soon here, could you speculate perhaps, I mean, what you would need to see for that market to start improving? Is it still like a green price issue or an aid issue, i.e. that the subsidies towards farmers are at a too low level currently? Or is it something else that you would like to highlight here that you think is hampering you?

Yes, I think with regards to Toonum, it's somewhat of a perfect storm. So we have subsidies, as you mentioned, that are... not coming out in the individual markets at the pace as they should. We have grain prices which are at the lower level or have come down in levels. We have a general market on security, much related I would say to what's going on with tolls and things like that. So there is somewhat of a, and still, you know, now interest rates are coming down, but there has been some insecurity at least in the beginning of the year with regards to that. So there is somewhat of a perfect storm with regards to Tullum. I know what we've seen in the past is things shift fairly quickly in that market. If one of these or a couple of these factors change in dynamics, our customers gain confidence, and there is investment need. And what has happened over the last couple of years is that some of those investments have been pushed. So once we see a shift, it typically goes fairly quickly. However, where we are right now, I have to be honest and say that we don't really see that. So we're waiting for it. We haven't seen that shift. But we expect when it comes, what typically happens is then that shift comes fairly quick. I think that's true for... also some of the other business areas and platforms that we have. You asked about SOLIX before. So we had a good, I would say, organic growth in Q1. Now it's slowed down a bit in Q2. It's a bit volatile right now, hard to predict. But once the growth start coming back, we know there is a big growth gap to be closed, not only for Volati, it's also for the general markets. And once as positive momentum comes, I think it could potentially go fairly quickly.

Yeah, understood. And if we could perhaps get a bit more into the Lantmännen project here, which you mentioned contributed positively to the tsunami here in the quarter, could you perhaps just help us here with regards to how much of the project that has been deliver to date and how the delivery trajectory looks throughout the remaining duration of the project.

I think what we said, what I said in the CEO letter is that we're going to continue delivering on that a bit into 2026. So we still have, what is it, like nine months to go or something like that. I think we've been going on for roughly nine months as well. And the profile is typically that you have a peak in the middle and then it's, so it's, it's, you have a start when it's gradually picks up in terms of deliveries and then it slows down towards the end. So, so I think that's the information that I can give you to go through that.

Yeah, fair enough. Thank you. And the, And just on the extraordinary items here taken in the quarter related to restructurings, could you say something regarding which platform this refers to and also if you could provide any color there on what measures have been taken?

Unfortunately, we do not give that specific information what platform it is, but I think the comment to that is that we continuously work with operational improvements and doing these more long-term structured measures. And I think we've had extraordinary items related to this maybe every third quarter or so. So now we've had some in Q2. I actually expect us to get some in Q3 as well. But this is more of, you know, it's continuous work improvement. In this particular case, it's restructuring or reorganization of an operation unit.

Thank you, fair enough. And just finally, from my side and on the etiquette here, Could you perhaps say anything on how the sort of underlying margin profile has developed here year over year if we would adjust for the acquisition of Clever? Would you say that it's still, is it up year over year excluding for Clever or is it flat or how should we think of that?

I think we don't see any shift with regards to the modern profile of the online business. So I think it's more or less in line with the Q1 or in line with what we've seen in the past. So the shift in margin profile for the overall business area etiquette is solely connected to the dilution from the acquisition.

Fair enough. Thank you. That was all my questions.

And that concludes our Q&A session here. And I'll head over to you, Andreas, for some concluding remarks.

Okay, thank you. So I thought I'd take the opportunity to this time turn a bit inwards and thank all the colleagues of Volati. You're really doing a great job. We are, or you have put us in a really good position. We are structurally very well prepared. And Now we've seen somewhat of a delay in the market recovery, at least related to what I expected or hoped for. But once that comes, we will really get the benefit or see the benefits of all the hard work that we've done. So it's going to be a very fun journey once we get there. So thank you, everyone.