President and Chief Executive Officer, NKT
NKT: Vi står foran en enestående vækstrejse #spons
Sponsoreret indhold: Danske NKT har gennem det seneste år oplevet mere end en fordobling i selskabets ordrebøger. NKT's kabelløsninger er blevet kritiske, ikke blot for den vigtige grønne omstilling, men også for at sikre europæisk uafhængighed af den russiske gas. Derfor rejser NKT i disse uger ny kapital, der skal sikre finansieringen af de mange ordre der allerede er landet, og samtidig skabe fundamentet for et markant løft i selskabets indtjening.
Se interviewet med selskabets CEO, Claes Westerlind og CFO Line Andrea Fandrup, der har mødt Mikael Bak, direktør i Dansk Aktionærforening, ti...
About Claes Westerlind
Claes Westerlind, who became CEO of NKT about a month before the interview, stated that the company's order backlog had grown from 1.4 billion in 2019 to nearly 7 billion in the first quarter of 2023. He attributed this growth to the company's ability to deliver and to customer trust, and said the backlog provides the foundation for a major new investment. Westerlind noted that NKT's cable solutions have become critical for the green transition and for European independence from Russian gas, and that the company was raising capital to finance existing orders and support a significant increase in earnings. Westerlind described NKT as a fundamentally different company than it was five to ten years ago, having proven its ability to execute large projects and keep its promises. He said the company aims to continue its growth trajectory and requires additional capital to do so. He also acknowledged that cables involve risks related to time, safety, and quality, but stated that NKT's strength lies in its ability to manage and mitigate those risks.
Transcript (47 segments)
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Interviewer1:10
We'll do this in English. But Claes, welcome first of all. How many years have you been at NKT?
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Claes Westerlind1:17
I have been at NKT since 2017. NKT bought ABB Cables back then, and I moved over to NKT.
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Interviewer1:26
How long have you worked in the cable industry?
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Claes Westerlind1:28
I have worked in the transmission industry for 15 years, of which approximately ten years have been in the cable industry.
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Interviewer1:34
Okay, and now you have recently become CEO?
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Claes Westerlind1:37
And now, after 3½ years as director of the Karlskrona plant, I have become CEO of NKT about a month ago.
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Interviewer2:59
And Claes, you have promised the viewers and me a presentation about NKT.
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Claes Westerlind3:07
NKT – Nordic Cable and Wire – is a company that many investors have been familiar with for many years. Also a company that has been 'flat' for many years, but that is changing now.
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Interviewer3:24
But give us a brief introduction.
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Claes Westerlind3:26
We have some slides. With pleasure.
The company is completely different from what it was just a few years ago. Looking at this slide, NKT is exclusively a player in cables today. We have a division that deals exclusively with high-voltage cables. We typically connect countries and wind farms. We call that part 'Solutions'. It is about half of the company. Then we have the 'Applications' part, which deals with medium- and low-voltage cables. There, cables are delivered to solar farms, but also building cables for construction projects. That is about 40% of the company. And last but not least, we have 'Service & Accessories'. 'Accessories' are the parts we use to build the cable system. And the 'Service' part helps the customer maintain the cables for the rest of their lifetime. These are the three pillars of the company.
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Interviewer4:27
Before we move on, do you have some background information about your growth journey? You have had some busy years. Tell us a bit about the last five years.
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Claes Westerlind4:42
We are very proud of how far we have come today – and to understand why, you have to see it in light of our background. Back in 2017, when I also became part of NKT, NKT decided to buy ABB's cable business, and that became a fundamental part of NKT and the green transition. It was the high-voltage DC technology for cables. We also made some other mergers and divestments, which have led us to the current structural setup. From there, we had some challenging market conditions. We had a low utilization rate for a few years. But then the market took off. We got some orders and made some larger investments in our plants in Karlskrona and Cologne. We received more orders, and recently our order intake has been massive. And it has placed us where we are today, in the perfect storm between the green transition, the general electrification, and last but not least the current geopolitical situation. These things have put focus on our power grid and its sustainability and stability. And that is why there is a need for you as CEO to drive the company, but there is also a need for funds to run the company. And those are the two things we need to focus on.
So here we have a strong outlook and a clear path forward. We are at a place now where we want to grow, considering everything that has been mentioned, our record-high order backlog and the market ahead of us. We have been on a growth journey for the past few years. We have proven that we can do it, and we have kept our promises. And now we want to take the growth a step further, and for that we naturally need additional capital.
As a small aside, I should mention Photonics, which came to market but was not approved for sale.
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Interviewer6:22
As I understand it, it is not part of your core story, but it will be sold sooner or later?
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Claes Westerlind6:32
Correct, it is an ongoing process that we monitor and assume will be completed within a short time.
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Interviewer6:41
Good, so let's continue looking at the market. Tell us what NKT does in the market and what your position is.
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Claes Westerlind6:51
As I mentioned, NKT is currently in a bit of a perfect storm. We deliver critical parts to our power grids so they can function properly. And our power grids are currently in the middle of a huge transition. We are adding a massive amount of renewable energy. We all know about the green transition, solar and wind energy. And it is all coming onto the scene now. As a technology provider, we can make those things happen. We deliver the lifelines to offshore wind farms and between countries so they can exchange energy. It is absolutely fundamental for our society to function.
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Interviewer7:27
So you help deliver the electricity to me from the power plants?
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Claes Westerlind7:27
Exactly.
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Interviewer7:40
Can you tell more...
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Claes Westerlind7:40
Yes.
I think I covered the first part. The second part is that we are a technology provider. We live off our technology. And that enables our customers (and society) to achieve the green transition in a sustainable way. We also have a record-high order backlog, we have grown as a company, and now we have the opportunity to continue executing on those orders. We also have other growth opportunities within, for example, Applications, which are not part of the capital increase, but also have growth potential. We have tailwinds and are working a lot on our internal teams, and there seem to be good progress. And last but not least, NKT as an organization is a very different company than it was five to ten years ago. We have proven that we can execute on the large projects and keep our promises, which is fundamental for our future growth. That is among other things the capital that is being invested in the future, which Line will tell us more about.
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Interviewer8:46
And we will also hear a bit about the market...
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Claes Westerlind8:49
Yes, here we can see a reflection of the high-voltage power cable market. You mentioned yourself that it has been slow in terms of revenue the last few years. It has increased from 2 billion euros to 8 billion and is expected to increase further. Looking at the orders on the left, you can see that NKT is able to win the large projects. We get projects on applications, interconnectors, offshore wind, across countries, and our customers come back. We are convincing in our delivery to customers, that makes them come back, and we are able to secure new customers. That makes us confident that we are able to grow further.
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Interviewer9:37
That is also reflected in the stock, which has been rising over the years. And very briefly, who are the competitors?
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Claes Westerlind9:49
Our two largest competitors, if you look at the high-voltage cable segment, are Nexans and Prysmian. We see them as worthy competitors, and we need competitors in our field. We are not afraid of that. Of course, we believe that NKT has significant advantages that can make us a top player, which these slides will also show.
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Interviewer10:14
On the next slide, we get some information about the concrete order backlog. As I understand it, there has been significant growth in recent months, and you have announced good news to the market. Can you say a few words about that?
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Claes Westerlind10:33
Yes. Our order book is growing, and as you can see, it has not only happened over the last few months, but over several years. But recently, there has been massive growth. We have gone from 1.4 billion in order backlog in 2019 and now up to about 7 billion in Q1. That shows that we can deliver and that customers trust us. It also lays the foundation we need to carry out our next big investment, which we will talk about today.
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Interviewer11:06
You deliver several years into the future, so we are not talking about a few months. How long does it take with an order backlog of 7 billion?
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Claes Westerlind11:17
A project will typically take 3-5 years. If you take Solutions, which holds about 800 million euros, then you have the annual revenue capacity that you can compare with the order backlog. So it is a significant backlog.
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Interviewer11:36
That is also why we are here. You want to execute, but for that you need more funds, and therefore you have turned to investors.
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Claes Westerlind11:47
Yes.
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Interviewer11:48
So let's hear more about that. You have brought slides that show where you are today and your plans for the future. It is actually a case on your plant in Karlskrona, Sweden. And that is where you want to expand.
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Claes Westerlind12:03
Yes, that is correct. On the left you can see our current footprint. We have a high-voltage plant in Karlskrona and Cologne. We also have one laying vessel in Victoria. Part of the funds for our 1 billion investment will come from investors, the rest we finance ourselves. We want to add a third factory in Karlskrona next to the existing factory, so we can use our competent workforce from there. We will also add a new laying vessel, which will help us achieve more success in the current market. She will be better and have more capacity than any existing vessel on the market. These two things together will make us more competitive in the market.
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Interviewer12:53
That will be your starting point in Q3-Q4. And of course, some time will pass, but it will be your focus going forward?
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Claes Westerlind13:03
Correct. We will focus on executing it according to the schedule, the budget, and with the aim of executing the orders we have received based on the investment.
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Interviewer13:11
And you have brought a slide about the development?
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Claes Westerlind13:15
Yes, and I also think the slide shows something that I would consider important if I were a potential investor. We have shown with the Karlskrona factory and elsewhere that we can invest and grow in a responsible way. When you look at costs, time, safety, quality, and the ability to recruit and retain people. Because this massive investment means we need to bring more than 500 people into the organization to bear it. And over the last three years, we have shown that we can recruit the amount of workforce necessary for our work.
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Interviewer13:57
So you are actually aiming to reach a higher level in the industry.
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Claes Westerlind14:08
And then we can move on to you, Line.
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Interviewer22:33
And Claes, we will finish by looking at the future, risks and opportunities. I usually also keep that in mind. Tell the investors what the risks are here on a five-year horizon? What can they expect?
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Claes Westerlind22:53
I think we have gone through the opportunities: there is huge growth in the market, we have the technology, experience and capabilities. But we also acknowledge that cables are associated with risks. But that is also what we work with. That is what our customers pay us for. That is what they entrust us with. And the fact that we have handled these risks over time is also the reason we stand here today with a record order backlog. There are always risks associated with time, safety, quality, as is the case with all companies. But I think our strength is that we can handle, mitigate and work with risks. And therefore I feel comfortable about the coming years.
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Interviewer23:36
If you look at the last 3-4 years, where you have also been part of the company, you have shown that you are able to create growth – and that you want to continue creating even greater growth.
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Claes Westerlind23:45
Yes.
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Interviewer23:52
With that in mind, I would like to thank you both for coming.