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Hello, and welcome, everybody, to the presentation of Nolato's Third Quarter 2021. I will start on Page 2, and I can be proud that we have had a record quarter for the Group, even though we have had difficulties, difficult times. So it was a record quarter with sales just about SEK 3 billion, which then corresponds to a growth of 21% increase in sales, but if we adjust that for currency and acquisition, it was 16%. During the quarter, we have had some supply chain disruptions and affected by some disturbances and difficulties, but a very strong growth for the integrated solution. With our profit, EBITA rose to SEK 339 million, creating an EBITA margin of 11.2%. We have a strong financial position with net financial debt of SEK 72 million, creating possibilities for the future and continuing to growing the company. Turning to Page 3. The Group, Nolato Group consists of 3 business areas, which are, of course, in the completely different market segments, but creating synergies between the different business area on the basis of we have the same type of technology, the same time of production equipment in the different segments. So the combination of the 3 business area creates a strong growth. Turning to Page 4, starting with the business area Medical Solutions. On the Medical Solutions business, we are on a global expansion journey, and you will see on the graph showing the growth we have had over the last 20 years. So that journey will continue, and we will continue to grow the business and expand in different places. On Page 5, you will find the different focused product areas for Nolato Group within the medical sector. It consists of In Vitro Diagnostics around 18% of the medical business area sales. That is a long-term growth area with increasing need of diagnostics in the hospitals around the world. Then we have cardiology at the 7% of the total medical business sales. It's a smaller area, but a very interesting area due to some premium margin and it consists of mostly long-term implants with extreme demands. Then we have Thermal packaging, where it consists of liquid and containers for liquid and solid drugs at approximately 12% of our medical business area sales. Continence Care, 12%, it's a high-volume area with very high volumes and spread around the globe. Then we have the endoscopy and general surgical, 20% of the business area. That is part of the business that's been mostly affected by the COVID situation with postponed surgeries and so on. Then we have drug deliveries systems at 15% and its advanced delivery system for different kind of products. It could be out to injectors, different distribution methods for drugs into body. If we turn to Page 6, focusing a little bit on the details of the Medical Solutions business area in the third quarter. We had a troublesome quarter with sales of just shy of SEK 1 billion. We saw continuously low volume within the surgical and some inventory adjustments across different customers. During the quarter, we have had a ramp-up of a large project within the IVD segment, and we have had some difficulties in that ramp-up. So it's adding some costs on the short-term period. And the expansion and the expansion of production capacity across according to plan. So the sales ended up at SEK 977 million, within the operating profit of SEK 100 million, creating a margin of 10.2% in the quarter. Then we will move into Integrated Solutions business area on Page 7. In this business area, we are in the mode of expanding our -- into new market segments. And this is a journey that we initiated some 6 years ago, and it's been a very successful break in, and we have good growth since that sort of expansion of the business area. On Page 8, you will find the 2 different parts of Integrated Solutions. So it consists of consumer electronics, which is the largest portion of the business area and that is built up from VHP, different WiFi system, different kind of wearables or other connected devices. The smaller part of the business area is called EMC/Thermal and that is shielding solutions and thermal management for electrical connected devices or circuit board and so on. This business is based on telecom experience, but we are over the last years, expanding this into new segments, and we have seen a good growth within the automotive sector for those kind of shielding and thermal management systems. On Page 9, we will go a little bit deeper into Integrated Solutions for the third quarter. We saw in this business area, a very strong growth, a new record quarter. And we saw good growth across the business area, the different segments. Within the consumer electronics side, we saw a strong growth for the VHP area, and it's based on, of course, increased volume but also some impact from inventory buildup. We also had a quarter with strong growth within the EMC and this is based on rollout of 5G, but also strong growth within the automotive sector. Sales ended up for the business area at a little bit more than SEK 1.5 billion, creating a growth rate of 39% organic during the quarter. The operating profit EBITA ended up at SEK 200 million. For the fourth quarter sales, we are expecting it to be in line or slightly lower than this year's third quarter sales. Turning to Page 10, focusing on Industrial Solutions. On this business area, we are on the technology and geographical expansion journey. So we are expanding our footprint and are now established production on the 3 most important components of the world. If you turn to Page 11, we will see a split up of the 2 segments of Industrial Solutions. So that is then based on general industry and automotive and automotive being a smaller portion of the business area.
Good afternoon.
We turn to Page 12. We will focus a little bit on the details of Industrial Solutions. During the quarter, we have seen supply chain disruptions leading to lower volumes in third and fourth quarter and that ended up a decrease of 4% in sales adjusted if we adjust that for currency and acquisition. So the sales ended up at SEK 540 million with an operating profit of SEK 42 million, creating an EBITA margin of 7.8%.
Now it's my turn, sorry. Good afternoon, stone to comment group financial highlights on Page 13. In the middle of that page, you will see the Q3 numbers for 2021 compared to 2020, the same period. We had net sales of just about SEK 3 billion. That was an increase of 16%, adjusted for currency and acquisitions. The operating profit increased to SEK 339 million, if we compare last year without the nonrecurring acquisition costs, we had for GW of SEK 17 million, the comparison number is SEK 304 million. The tax rate for the combined group is 20%. And we had cash flows after investments of SEK 116 million compared to SEK 82 million last year, taking away the acquisition of GW, of course. That we had, even if we invested a lot, the net investments affecting cash flow was SEK 245 million, and that is on a higher level, as we have commented earlier, compared to last year, where we had SEK 112 million. We expect the full year to be between SEK 700 million and SEK 800 million during 2021, and that is mainly CapEx for expanding medical. Earnings per share were SEK 0.95 compared to SEK 0.79. Key financial position remains strong with net financial liabilities of SEK 72 million if we exclude pension and lease liabilities.
We then turn to Page 14 and some comments about our current situation per business area. If we then start with Medical Solutions. We are, of course, maintaining our growth strategy. Focus a lot on innovation, based on our strong customer relationship. We see impact from the pandemic, and we have temporary high cost for the ramp-up of a large new project. Within the Integrated Solutions, we have established our position in new product areas. We have a very flexible production structure. And we see the 5G rollout and new initiatives in the automotive sector that are very positive for the EMC part. In Industrial Solutions, we have advanced our market positions. We see a continued efficiency improvement, even though we have impact of supply chain disruptions, and we've put a lot of emphasis on sustainable solutions. PAUSE Thank you. We will now open up for questions.
[Operator Instructions] Our first question comes from Adrian Gilani with ABG.
This is Adrian Gilani Göransson at ABG. My first question relates to the Integrated Solutions segment. I was just wondering, is it possible to quantify how much of the Q3 sales in VHP were boosted by inventory buildup?
I'm afraid we don't have the full picture of that. It is -- as we say, the larger part is coming from volumes. And then we do see a small effect from inventory buildup as well. And we don't have the full picture of really what is out here. But when we combine our information that we have, we do assess a certain impact from inventory buildup.
I understand. But if you look -- so first with the inventory buildup in Q3. And then also your guiding for similar integrated solution sales in Q4. Is it then fair to assume that your largest VHP customer may go into 2022 with very high inventory levels and that we might see a dip in the growth rate for a few quarters [ down ]?
Yes, it is hard for us to say. Then, of course, long term, we think and do you think that we had products within this area, which are growing. So sequentially, as we then guide Q4, there would be no growth. So that is, of course, based on the inventory buildup in Q3. So we are actually not saying something definite about the next year with this. We have a good view of the next quarter. We don't know every detail, of course, but we have a good view, and that is typically what we are trying to estimate.
Okay. And just continuing on the Medical Solutions segment. You obviously mentioned some ramp-up costs from a major project with this IVD customer. Could you specify -- first of all, how much these cost affected Q3 earnings, but also perhaps the size of this project and when we will start seeing revenues from it?
As you know, we are in a situation with Medical that we have continues to grow over years. And of course, that is based on ramping new projects and so on and so forth. So this project is one that is supposed to be ramping and those kind of ramps are building then year-by-year over a long period of time. So it's part of our long-term strategy. Of course, we had those kind of ramping, and it should be seen in a longer perspective. The cost during the quarter, we will not give a specific figure for that. But of course, we have put extra engineers and so on to solve these ramping things.
Okay. I understand. So even though you won't give an exact figure, is it fair to say that the ramp-up costs will be similar in Q4 as they have been in Q3?
We don't see any major differences in the cost situation between the 2 quarters.
Okay. And just 1 final question, if I might. Your production capacity expansion, you say it's going as planned. Could you just elaborate quickly on when we can expect sort of added capacity when we can expect this come into effect? And if there is a possibility of capacity constraints becoming an issue before this comes into play?
Yes. We have a tradition of expanding facilities when we sort of see our projections that we will reach capacity constraints within the year perspective or something like that. And then we generally build for a couple of years of growth ahead. So this is not something that you will see in any numbers. It's more that we have quite a few of those expansions at the same time in different places around the globe. And I don't see that we will come into any constraints on the store space any place. We have always a long-term view on this and expanding ahead of time to make sure that we can address our customers' needs.
The next question comes from Carl Ragnerstam with Nordea.
It's Carl here from Nordea. A couple of questions from my side as well. On the component side and the problems there, have you seen an improved or worsening situation now when exiting Q3, if you take it by segment.
If you talk about constraints of semiconductors and those kind of things, I would say it's still a volatile situation across. So it's similar, I would say. But it's still early in the quarter, but it's a similar situation.
Okay. Perfect. And also, you mentioned inventory corrections in, I guess, IVD as well there. Should we expect it to last in Q4 as well or?
Well, again, it's early in the quarter. And our feeling is that, that will continue to some extent in this quarter as well. It's from different customers and we expect that it might be coming from different customers between the quarters, maybe that we expect some impact from that in the fourth quarter as well.
But not in the same magnitude, it sounds like, correct?
Very hard to say as we are not that far into the quarter yet.
Okay. Perfect. And also, when I read the report, you seem quite optimistic towards the growth in EMC during the quarter. Could you perhaps give any flavor if you in terms of percentage did grow EMC at a higher pace than hit it the back? Or if you could give any flavor on that?
Yes, we had good growth in this quarter and actually even a bit higher than the VHP part. So it was a very good quarter. On the other hand, you could say that the reference numbers in Q3 last year was not that high. So in that way, it was an easy comparison.
And on your guidance for Q4 on Integrated Solutions, do you assume a high growth for EMC there as well? Or is it purely driven by [indiscernible]?
It's including a good growth for EMC as well.
Perfect. And the final one from my side is a bit on the surgical side of your business, it's been soft or weak. In Q3, have you seen a sequential weakening performance? And what do you see in current trading?
We have not seen a sequential weakening no. And I think there is a lot of factors in this. Of course, hospitals are trying to get surgeries going. But then of course, there is inventory situation. So it's volatile, but it's definitely not been weaker than previous quarters.
And you haven't seen any improvement so far either?
No.
Okay. Okay. And sorry, a follow-up on that. Do you consider doing any cost cuts? Or would it just wait until the market will come back at some point? Or how do you plan?
We are, of course, very, very focused on having the right cost. But of course, on the other hand, we need to make sure that we can follow the customer when things are starting moving. And within the industrial and medical business area, it's more part of the total cost is fixed cost or semi fixed.
Our next question comes from Mikael Laséen with Carnegie.
A couple of questions. Just was wondering if it's possible to quantify how much the Medical segment is held back by the customer inventory changes? I mean approximately the magnitude of it.
Sorry, did you say the inventory changes to quantify?
Yes, exactly.
Yes, it's a mix of those 2 things that we are indicating in the quarter. And it's not that easy to say what it was actually. In many cases, we don't have the full background to it for these customers. And we collect, of course, different information. We try to make our judgment around that. And we do see that it is inventory corrections going on, but to quantify the magnitude is very hard.
Okay. So it is sort of broad-based among different tech or quite many customers, it's not only in 1 or 2.
That's right. It's spread around many customers.
All right. And is it possible then to say something about the IVD project ramp-up situation, what is causing this? And approximately how much shall the lower margin was caused by this? And what do you expect going forward when you have this back to normal again?
Yes. What's causing it to take the larger picture, of course, there's been a very much focused on creating more capacity for IVD. And in those situations, together with the customer, we decide what's possible to decrease time. And of course, that is based on the forced project plans and so on and -- Some of that are creating some difficulties. That was, I think, first part of your question. The second part was when it would be back more to normal. And I expect that to be happening the beginning of next year. If you have a third part of the question?
No, I think that answered my questions.
We have no further questions. I hand back the word to our speakers.
Thank you then for being interested in the presentation of our third quarter, and I wish you all a very, very good day and rest of the week. Thank you.