Nolato - Year-end Report 2024

Good morning and welcome to today's presentation with Nolato. With us presenting today we have the CEO Christer Vist and CFO Per-ola Holmström. If you're calling in and would like to ask a question, please press star nine to raise your hand and then star six to unmute yourself when it's your turn to speak. You can also submit written questions via the form located to the right of the broadcast and we'll take that up during the Q&A. And with that said, please go ahead with your presentation.

Okay, welcome everybody to the presentation of Nolato's fourth quarter of 2024. Starting on page two, we saw a quarter with sales increase. We saw 5% if we adjust for currency across the board, organic growth for both business areas. And now we have been changing our product offering or product portfolio within the Engineered Solutions business area and start seeing growth in that area. The operating profit rose by 36% to 240 million for the fourth quarter. The margin of course is a sharp increase across both business areas and ended up above 10%. We can also happily present that we have a very strong cash flow from operations, which rose to 480 million during the quarter. And of course that was fueled by improved profit and reduced working capital requirements during the quarter. Turning to page three, looking at the full year of 2024, during 2024 we had sales of just shy of 10 billion. So we saw an increase of 1% if we adjust for currency across the board. And during this year we have of course introduced our new business area Engineered Solutions and changed the product mix within that area and now starting seeing some growth from that. The margin ended up at 9.9%, so we saw improved margins across both business areas. Earnings per share 2.44 Swedish kronor. And of course very strong financial position with net financial liabilities of 671 million and a debt ratio compared to net financial liabilities of 0.4. The board of directors proposal for dividend is unchanged at 1.5 Swedish kronor per share and that is within the policy that says about 50% of net profits, and this corresponds to 61%. So that strong balance sheet enables us to further grow and expand together with customers as well as acquisitions going forward. Turning to page four, focusing on the two business areas within the group. So we have Medical Solutions as the major part of the group, close to 1.4 billion in the quarter, and then we have Engineered Solutions, that is the newly formed business area that has been shaped up and we see good improvements in that business area as well. On page five you can see a graph of our 20 last years' development of our sales, so we've seen continuous growth across over the last at least 20 years. If we look on page six we will see the mix of different focus product areas. So we are focusing on IVD through Diagnostics, which is a growth area with high volume manufacturing, very tight tolerances, and interesting to be in for the future as well. Cardiology, which is an area we focus on with very high demands from quality standpoint, implants and so on. Pharma packaging, continence care, endoscopy, and general surgery, and then of course drug delivery. Jumping to the focus on Medical Solutions for fourth quarter on page seven, we saw 5% increase of sales, but if we adjust it for currency it's 4%. We saw within the different market areas that drug delivery showed strong growth, we saw IVD growing compared with the weak quarter last year, we saw pharma packaging had lower volumes, we saw inventory adjustments and geopolitical effects on customers in that, and also some lower sales from surgical. The margin improved to 11.2 percentage. We saw our continuous focus on improving margins are generating results and we saw the strategic price revision and cost savings affecting us. If we jump to page eight focusing on Engineered Solutions, here we have had some years of adjusting our product mix and now that is finished and we start working with our future. Here we are focusing on consumer electronics, automotive, hygiene, materials, and other areas. Jumping to page 10 summarizing the Engineered Solutions business area, we saw a good increase of sales 8%, but currency adjusted it ended up at 7%. We saw good development in all areas except the automotive where we saw some decline. Consumer electronics saw increased profit, increased growth from very low levels, and we are seeing that our investments in new areas are bearing fruit. Healthy growth within hygiene. Then of course the automotive displayed lower volumes as expected, but we also see that we expect a negative impact on the start of 2025 for the automotive. The materials business showed a sharp increase in volumes and the growth was a full 20% currency adjusted through healthy growth for the telecom side of the materials business. Good growth of margin improvement to 9.2 percentage, of course based on cost adjustments but also a favorable product mix during the quarter.

Thank you very much for that presentation and let's dip into the Q&A section here. If you're calling in and would like to ask a question, please press star nine to raise your hand and then star six to mute yourself when it's your turn to speak. And we have Call Ram from NOA, please go ahead, you have the word.

Hi, can you hear me? Yes, oh very good. Thank you so much and good morning. A couple of questions from my side. Firstly, on EMC here, as you said grew 20%, could you give some flavor on the growth development by sub segments or subdivisions, automotive versus telecom, and also when you get the 20% organic growth, what operating leverage do you get in such business, i.e., what margins did it contribute with for the segment engineered?

Okay, that is very clear. But the question was also a bit if you strip out EMC from the business, I guess all Nolato units should be able to come close to the 10% margin or even near, and I guess if you're stripping out the EMC which is creative, then the underlying business is quite far from being at satisfactory level. So what are you doing underlying to improve all operations except EMC? Is it volumes that need to come back or obviously you've done cost savings, but is something else you need to do?

Sure, that's very clear. And then you also talked about the new customer project in engineered, I assume in electronics. I think maybe that said, will that help to improve the utilization in the Chinese production and when what size and when you expect it to be fully ramped?

Okay, that's very good. And on medical you mentioned of course and we also know that you had several drivers behind the margin improvements during the year 24 here. You have had IVD and pricing for instance. But if you look into 25, how sticky would you say these effects are? I mean you raised prices quite heavily I think it was H1 24, have you done more since or will some of this effect ease in 25?

Okay, and the final one if I may. In terms of capital allocation, looking at EPS grew 50% year over year, leverage 0.4, I understand that you of course invest in as you said also the 800 million around there at capex to the new project in medical, but you're keeping dividend flat year over year. So what message are you trying to send to us? Is it that you're cautious of 25 or that you have an active M&A agenda that might come into play? I know this of course is a board question but I guess that you're a critical part of the capital allocation of the company so would be good to hear what is your thinking.

Okay, thank you. Sorry for that, thank you.

And a gentle reminder, if you're calling in would like to ask a question, please press star nine to raise your hand and then star six to unmute yourself when it's your turn to speak. We'll move on with Adrian Geler from ABG, please go ahead, you have the word.

Hello, can you hear me? Yes, perfect. I'd like to start off on a question on medical. When you write that IVD grew as or had strong growth but compared to low volumes last year, where is IVD at currently in relation to what you would call I guess normal demand? Are we still sort of below normalized levels?

Okay, and then if we just sort of sum up all of the product verticals in medical and look into 2025, are you able to say whether the overall product mix effect if you expect that to be positive or negative into 25 compared to 24?

Okay, understood. And then I guess a final one for me on the EMC business, just a quick follow-up on the 20% growth figure. Is your best assessment that it could be a bump or would you say that it could be the start of a trend of a structural recovery in the market?

Okay, understood. In that case, that's all for me. So thank you.

We'll move on to the next person calling in with a phone number ending with 2479, please go ahead, you have the word.

Yes, hello, can you hear me? Yes, great. Two questions from my side. It's Marcus from DNB. You mentioned M&A as a place you could allocate your capital given the strong balance sheet, but could you give an update on the GW Plastics in the US and maybe your view on growing organically versus M&A, and maybe if you can, what are some lessons learned from the big acquisition? Should we expect smaller acquisitions or a big one if you could spend some time there?

Okay, and then maybe looking forward, just what should we expect in terms of the size you look at acquisitions? A big one or more bolt-on small ones?

Okay, those were my questions. Congrats on a good report, thank you.

Yes, so with that said, thank you very much Christer and Per-ola for presenting, and we wish you all a great rest of the day. Thank you very much. Thank you all and have a great day.