Nolato AB

STO:NOLA B

Earnings Call Transcript 2019-Q1

[Operator]

Hello, and welcome to the Nolato AB Q1 reports 2019 [Operator Instructions] Today, I'm pleased to present Christer Wahlquist, CEO. Please go ahead with your meeting.

[Christer Wahlquist, President & CEO]

Welcome to the Q1 information from Nolato. This is Christer Wahlquist and Per-Ola Holmstr?m is here by my side, and we're going to present our Q1 report, of course.The Q1 ended up with the sales of SEK 1.656 billion compared to little bit more than SEK 2 billion last year, and that was -- if we adjust that for currency and Group structure, it was a decrease of sales by 23%. We had strong performance by Medical Solutions, but Integrated Solutions had lower volumes as previously announced. And it was due to stock reduction with one of the major customers.The profit dropped to SEK 175 million, which should be compared to SEK 244 million last Q1. That corresponds to a margin on EBITDA of 10.6%. Of course there was the volume impact but also some weak margins within Industrial Solutions.Cash flow after investment amounted to SEK 25 million in this quarter, and we have a continued, very solid financial position.I'm now turning Page 2 to Page 3. And this is just to summarize the 3 different business segments or business areas that we have, the Medical, the Industrial and the Integrated Solutions. I'm turning to Page 4, where we start with Medical Solutions. And sales in the quarter ended up at SEK 611 million and the EBITDA at SEK 78 million, corresponding to margin of 12.8%.Now turning to Page 5. This quarter corresponds to a 15% increase of sales, but if you adjust that for currency, it was a strong 9%. We saw increase in volumes in both the Medical Device part of the business area but also in the Pharma Packaging. We see project activities within the Autoinjectors, insulin product and incontinence products on the strong level. And the production capacity increase is completed according to plan. [indiscernible] an EBITA of SEK 57 million, gives a margin of 11.1% in the quarter.Turning to Page 8. This corresponds to 45% decrease in sales, and if we adjust for the currency effect, we got 51%. But as announced, inventory adjustment in VHP segment had a negative impact, of course. But we see indication that the inventory situation has normalized, and we assessed the second quarter to be better than previously announced. And we expect sales to exceed the fourth quarter 2018.We have received orders for the new VHP models, and we retain a strong position with the customer. And during the quarter, we weak -- we are still weak mobile phone volumes but good growth for the EMC part of the business area.Turning to Page 9. Showing the 2 segments that we are working within the Integrated Solutions, we have the Consumer Electronics to the left, which comprise the VHP, the mobile phones, and now the connected devices. And then we have the EMC/Thermal working with the shielding solution and thermal solutions for telecom and other industries.On Page 10, we will find Industrial Solution Q1, and we have the sales during the quarter of SEK 533 million, and an EBITDA of SEK 44 million, giving a margin of 8.3%. That corresponds to the 6% decrease in sales and that is the same if we adjust for the currency under Group structure. We have during the quarter an inventory adjustment for a customer in the hygiene sector. We also have restructuring of production equipment at a customer side within the Automotive segment, giving effect on the volumes. The margin, 8.3% is impacted by unsatisfactory efficiency during the production facility. We have measures implemented and we see it gradually getting effect. And of course the margin was also affected by the lower volumes and the reduction of stock levels.Turning to Page 12, we show the 2 segments of the business area, the Automotive and the General Industry. So all the 2 segments of the Industrial Solutions business area.

[Per-Ola Holmström]

Okay. Then we're turning to Page 13. Some Group financial highlights. Net sales increased to SEK 1.656 billion, a drop from just a bit more than SEK 2 billion last previous Q1 2018. Adjusted for currency and Group structure, that was a decreased by 23%, mainly affected by Integrated Solutions.The margin has been affected by lower volumes, it dropped to 10.6% compared to 12.9%. And we get an EBITDA result of SEK 175 million compared to SEK 264 million including SEK 20 million of non-reoccurring.The net investment in this quarter was SEK 105 million paid and that was approximately at the same level as last year, and it is in line with what we have communicated it's assessed to be, SEK 400 million level during the full year 2019. Earnings per share totaled SEK 4.98 compared to SEK 7.83 last year.We have a net financial asset of SEK 373 million end of this quarter, that is excluding pension liabilities of SEK 185 million, and it's also excluding the new way of showing lease liabilities of SEK 353 million end of this quarter. And, of course, we will pay if decided by the Annual General Meeting, which will be later this afternoon. And if so, it will be a payout in May of SEK 368 million in dividends in May.

[Christer Wahlquist, President & CEO]

Okay. Turning to Page 14. And some current situation by business area. Let me start with the Medical Solutions. We see a maintained growth strategy, a lot of focus on innovation, and we see high activity in market and good project activity. On the Integrated Solutions side, we have established a new position in the new product area. We see continued strong position within the EMC Thermal and, of course, in the base we have flexible production structure.Industrial Solutions. We are -- have advanced our market positions. We have -- efficiency measures have been taken, and we see gradually having an effect. And we also see some indication of a slowdown in the economy but stable volumes.Now we are open for questions.

[Operator]

[Operator Instructions] And we have a question from the line of Mikael Las?en from Carnegie.

[Mikael Laséen]

Okay. Yes, I have a few questions and they are related to Integrated. First of all, can you talk about the development and discuss the development in the quarter for that segment? And elaborate on why you expect higher sales now than you previously expected? The reason behind that.

[Per-Ola Holmström]

Yes. I can start to give some background to the assessment we have made for the second quarter. We do see signs of the inventory situation leveling out. And because of that, we have -- and because, of course, recent discussions with the customer plans, forecasts going forward, summarizing that to the data we see that's just giving us the opportunity to increase our assessment of the second quarter. And hence, we, again, compare with the fourth quarter 2018 and say that we assess that level to be exceeded during the second quarter this year.

[Mikael Laséen]

Okay. Great. And can I also ask the other product categories within the Integrated? How did they perform in the quarter? Was it stable sequentially? Or anything -- any major changes there?

[Per-Ola Holmström]

Yes. We did see somewhat weaker mobile phone situation, but we had continued growth for the EMC business. That is the situation for the other parts, which I think you were asking about.

[Mikael Laséen]

Yes. But it was roughly unchanged sequentially from Q4.

[Per-Ola Holmström]

Yes. A bit weaker for the rest part, let's say, the old telecom part than during the last quarters, and that's expanding the mobile phone part.

[Mikael Laséen]

Okay. Got it. Can you also comment and talk about the outlook for the second half maybe? You talked about that, I think, in the previous report that you have received orders for the new product releases within the tobacco heating side. Can you say something about what could happen there, the impact? And if say you have any impact already in Q2?

[Per-Ola Holmström]

Yes. We have commented on that we have got the other projects within this category and that we already said in the Q4 report. The situation is the same right now, we don't see any differences in that. And exact timing of those products will be based on releases by the customer and some technical things going on. So we don't have the exact time schedule for that, but positive for our -- from our side is that we are part of those. And actually from our side, we don't really see -- well, it's okay, either of the near ones or the old ones from our own side.

[Mikael Laséen]

Okay. So the value added from your side is more or less unfinished in the new categories compared to the ones that you are manufacturing today?

[Per-Ola Holmström]

Well, the most important from our side is that the customer is selling those kinds of products and that is positive for us, then of course, different variants have different kind of value added for us and slightly changing but no major difference is expected.

[Mikael Laséen]

Okay. And one final question, if I may. The industrial side was approximately as expected, but can you elaborate on the initiatives that you have taken in the Automotive side? And what happened within the hygiene area? The implications or their effect in Q2 or Q1 from that? And when we can expect the segment to get back on 9%, 10% audience?

[Christer Wahlquist, President & CEO]

Yes. The activity we are taking in the efficiency side is of course, we have in the process of replacing some people in management. We're also working very actively in improving efficiency and ramp production, what will be yields and the scrap and a lot of those candle effects. Of course, this takes some time but we gradually see gradual improvements coming. And the second question was related to the hygiene sector. And we believe, that the effect we saw in Q1, it will continue for, I think, Q2 to just for normalization, so to say, at the company side.

[Operator]

[Operator Instructions] And as there seem to be no more questions registry. I now hand back to our speakers.

[Christer Wahlquist, President & CEO]

Okay. Thank you very much for listening to the presentation of Nolato's Q1. Thank you.

[Per-Ola Holmström]

Thank you.

[Operator]

Thank you. This now concludes our conference. Thank you all for attending. You may now disconnect.