Hello, and welcome to HEXPOL Audiocast with Teleconference Q4 2021. Throughout the call, all participants will be in listening only mode, and afterwards there will be a question and answer session. I will now hand over to HEXPOL. Speakers, please begin. Hi, good afternoon and welcome to the presentation of the fourth quarter of 2021. Presenting today is Georg Brunstam, our CEO, and myself, Peter Rosén, CFO. The agenda for today is to first give you a business update, then go through the financials and the focus areas for next year. As normal, we will finish off with a Q&A session. With that, I hand over to Georg who will take you through the first part of the agenda. Hi, good afternoon. Georg here. I will pull up slides which are on the website, so I'm starting with the one heading strong sales in a challenging environment. I would like to start to say some words about the full year before I go into the quarter. 2021 is a very strong year for HEXPOL Group. We have record sales and we have record profit. It's the best year ever for us so far. We passed a little bit over SEK 16 billion in sales, 19% up. Adjusted profit is 36% up, and earnings per share is 67% up. We're also above 2019 in all aspects, and 2019 was, as you know, a strong year. We are above that. All in all, I think we are reasonably pleased with 2021. You can always do better. It's achieved in a challenging environment, and that environment we had in Q4 as well. We believe Q4 was reasonably good for us given the circumstances. We have strong sales in all regions. Light vehicle production was down. I think it was down 13% globally, and that affected us of course in our markets. But the other sectors were strong. We had also weak end of the quarter as expected. We saw our customers closing down a bit early for Christmas and New Year. Having said that, I think they did that in order to be back in 2022. We are not that concerned about the weak ending of the quarter that it was as expected for us. However, the environment is challenging, and it's continuing to be because of global supply issues and price increases, and also problems with availability on raw materials. We do see some improvements on how should I say, mainstream raw materials, but on specialties, the situation is as bad as before. Of course, that is affecting the totality. We also see that the automotive industry is continuing to struggle with the semiconductor shortages. However, we also see them handling it in many ways. One way is that they of course take away options, including semiconductors. They are of course adapting. We also had a strong cash flow and in local currency. We had a strong inventory reduction, and we wanted to have that. We do see higher M&A activity now when it was opening up a bit, and then it was closing down a bit again. We do hope that the increased M&A activity when you can meet people will take place. We are restructuring our U.K. business with a plant in south of England being proposed to move its production to a main factory in the Midlands. We are proposing or the board is proposing a regular dividend 30% up and an extra dividend of SEK 3 extra per share. We are confident that our M&A agenda will be supported by the balance sheet, which is very strong. We don't see any contradiction in this. The balance sheet is strong and our cash flow in particular is very strong to support the M&A agenda we have. We do see the challenges we have continuing. I must say we have been handling them in a very good way quarter 3 and quarter 4 when the challenges have been very strong. I am very pleased how the organization is handling it. We have a good culture, we have experienced people and they are very good in handling the situation. Of course, I mean, the recipe changes and the constant planning changes are affecting, together with the high raw materials are affecting the gross margin a bit. For sure we are flexible, we always been, and we are extremely ready to meet the expected increase in light vehicle production, which everybody is predicting will take place in 2022. If you turn page, I'm just repeating myself on the record year 2020, 2021. I will not dwell on that anymore. I'm coming into the strong execution of the updated strategy and increased focus on the next slide. As I said, strong sales in all regions and product areas, and in most customer segments except for the light vehicle production, which was not bad, but of course not as good as it could be. Good EBIT considering the challenges we have. If I look at Engineered Products, we have a very strong and a good quarter again, and particularly HEXPOL Wheels was performing well, and particularly in Asia. A good EBIT in Engineered Products. Of course we have a continued focus on sustainability. We have our overall target of a 75% CO2 emission to be reduced by 75% by 2025. We are introducing new compounds based on bio-based material and recycling materials. We are also introducing certifications from ISCC, and we also got some good ratings from EcoVadis. As I said, on the M&A, high focus and increased activity level. During 2021, we closed two good acquisitions within our core business, and one supporting the electrification in a big way. On the next slide, you can see the culture house which we have had before. I'm not going to go through it, but I can just say that it's working. Our business model is strong, the culture is working and is strong, and it's actually a very, very strong asset in these challenging times. If we then turn to page 7, looking at the sales development. As Georg mentioned, the challenges that we've seen during the year with semiconductor shortages and the global transportation issues and raw material changes continued during this quarter. They were especially visible with automotive customers with several production stops. Some customers also extended their holiday closures, again, driven by the component shortages that they face. Despite this, we increased our sales with 20% compared to the same quarter last year. Out of this increase, 12% came from organic growth, and 6% came from the two acquisitions that we completed during the year. We also had some more positive effects in this quarter of about SEK 60 million. All of this resulted in the reported sales of SEK 4.1 billion. Looking at the regional development, we saw strong sales growth in all regions, although highest in Europe, partly due to acquisitions, but then followed by growth both in the Americas and the Asia areas. If we then turn to page nine and look at the financial overview, we delivered an adjusted operating profit of about SEK 630 million in the quarter, which is on the same level as the year before. The margin came in at 15.4%, and was negatively affected by the acquisitions this year. They both currently run at lower margin levels than the other HEXPOL companies do, and also the challenges related to raw material shortages and the price increases that we've seen. OpEx remained low at SEK 194 million, excluding the one-time cost that we had in the quarter. The equity asset ratio improved further actually in the quarter to 65%. I think it's important to take a look at the full year as well. As Georg mentioned, this is the best year HEXPOL has ever delivered, with sales about SEK 16 billion, and an adjusted operating profit of SEK 2.7 billion. That gives an earnings per share of just about SEK 6 per share, excluding the one-time items, and SEK 6.85 including the one-time items. This also means that for the full year, we deliver a return on capital employed of almost 23%, which is very high and well above what we did last year. Taking into account all the challenges we faced during the year, we are very pleased with the performance for the full year. If we turn to page 10 and just take a look at the highlights, looking at the development compared to the same quarter last year, we see that sales increased with 20% to SEK 4.1 billion, and the adjusted operating profit came in at SEK 628 million, which is on the same level as last year. Here we see that the higher sales were offset by the lower operating margin. We can see that even further if we look at the next page, on page 11. When we look at the drivers of the profit, we see that the increased sales were offset by the lower gross margin. OpEx is on the same level as last year, and this is despite that we've done two acquisitions during this year. Again, the lower gross margin is partly driven by the acquisitions that run with lower margins, and partly by the higher raw material prices and shortages that we're seeing. If I can ask you to turn to page 12, where we look at HEXPOL Compounding. The segment delivered sales of SEK 3.8 billion in the quarter, which is an increase of 20% compared to the same period last year. The increase is driven by 12% organic growth, and the acquisitions of VICOM and Unica added another 7%. As Georg mentioned, we saw sales improvements in most of our customer segments and in all product areas. Operating profit came in at SEK 586, which is just above last year. Again, the higher sales were offset by the lower margin. If I then can ask you to turn to page 13, we look at HEXPOL Engineered Products, where sales increased with 21% compared to last year, with overall strong performance, but especially so for HEXPOL Wheels that had a very good year. Also here we see that profit came in on the same level as last year, where operating margin came down a bit compared to last year following on the raw material cost that we faced during the quarter. Then if I ask you to turn to page 14 on the working capital, we did see an increase year-over-year, both in absolute terms, absolute and relative terms. This is primarily driven by an increase of the inventory levels. As we've seen the previous quarters, this is due to raw material shortages and risk that will continue. We decided to purchase what we could in order to secure all orders that we received from our customers. At the same time, we see an improvement compared to the previous quarter this year, primarily driven by lower accounts receivables, but also in local currency, we see lower inventory levels compared to the previous quarters. We don't have any changes in the underlying payment terms with suppliers or customers. We've been able to keep them on the same levels throughout the years. If I can then ask you to turn to page 15 and the cash flow. We see a very, very strong cash flow in the quarter. This was expected, not least because of the insurance payment that we received according to plan during the quarter. Also excluding this payment, we delivered a strong cash flow where we saw the improvements in working capital. For the last quarter, we delivered SEK 1.3 billion in operating cash. If I then ask you to turn to page 16 and the net debt, we see that continues to improve, following on the strong cash flow. The net debt-to-EBITDA ratio now stands at 0.25x for the end of the year. We continue to strengthen an already strong financial position this last quarter. With that, I hand over to Georg. Thank you. On the next slide, I will sum up what we were starting with. Again, we are very pleased to deliver the best year ever so far for the HEXPOL Group and very strong sales and also adjusted operating profit up 36%. Of course, the earnings per share up even more. We are reasonably happy with a good ending of the year with a challenging quarter 4 that we think we handle it in a very good way. We are experienced and we do address the challenges in a good way. They are, of course, affecting our costs and certainly the cost for changing recipes and planning is costing some money for us. We have a good M&A pipeline, and we see increased activity, and we are sure that we can handle that with our very strong balance sheet. The regular dividend plus the extra dividend is not changing that. Going forward, I can just say that we are ready to be flexible to handle the expected outcome in the light vehicle production. We are eagerly waiting for it to happen, so that's good. The focus on the next slide for 2022 is, of course, to handle the COVID things, which are a little bit tricky right now. I mean, the quarantine rules around the world and in Sweden, they are quite difficult to handle. Particularly the quarantine rules, as I said. Of course, we are focused to handle the volatility, which we have proven to be good at. We will, of course, continue to focus on our sustainability job and the active M&A work. With that, I think we leave it open for questions and answers. Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a brief pause while questions are being registered. Our first question comes from Gustav Österberg with Carnegie. Please go ahead. Well, thank you, operator, and good afternoon to you again, Georg and Peter. A few questions from me on demand and pricing. Firstly, your organic sales growth here year-on-year is up 12% despite sort of clear strength in the supply chains. Could you give us some more color on the extent of the impact from these constraints on volumes? i.e., sort of where could you have been given current end customer demand if we had a more normal supply environment? That's a very difficult question. I do understand it, but that is very difficult to answer. I mean, where would we have been if? That's basically what you are asking. I mean, we would have been better, yes. How much? I cannot say that because I mean, it's a combination, of course, that the call-offs are postponed and. It's a really difficult question to answer. I cannot really give you an exact answer on that more than, yes, of course, we would have been better if the challenges wouldn't have been there. That is All right. Yeah. We have fulfilled all the orders we are promising. Yep. All right. If you sort of look at the sequential development during Q4, I mean, if we adjust for the shutdowns that occurred over Christmas, are you seeing any sequential improvement or change from Q3 in Q4? I think that's a good analysis. Yes, I mean, December is of course more affected than any of the previous months, including Q3. So that's a valid comment from you. Okay. Thank you very much. Just a quick final one for you, Peter, on the acquisitions. I mean, would it be possible for you to quantify the effect on the margins from the two acquisitions you made during 2021? Then perhaps also, sort of, you've historically been very quick in driving higher profitability in the acquired businesses. Is there, you know, any reason to expect any deviation from a normal sort of timetable here? Or how should we think going forward? No, that's also a good question. I mean, we can answer that one a little bit better. We are confident in our M&A model and we will improve those companies for sure. One of them went into the raw material situation with a not as fast price adjusting model as we are used to. It takes some time for us to adjust that, but we will do that, and we are doing it. We will improve those two companies' margins for sure. When it comes to the question of the impact, we stated already in the Q3 report that the negative impact was around 0.6% on the margin, and the impact is similar in this quarter. All right. Thank you very much to both of you, and I'll jump back in the queue. Thank you. Our next question comes from Johan Dahl with Danske Bank. Please go ahead. Thank you, good afternoon. Yes, a couple of quick questions. Firstly, on organic volumes, for the quarter, would you say it was a decline of low, mid, or high single digit? Just any sort of guidance, that would be great. It's a decline of, if I take the organic one, I guess that's what you're asking for. Exactly. It's a mid-single digit. Mid-single digit, thanks. Also, when you're summing up here, 2021, I mean, it seems as if volumes to general industry has performed really strongly while sort of vehicle demand has been poor. Has that had any significant or relevant effect on your product mix, i.e., from a profitability perspective, which we perhaps should think about going into 2022? No, not really. We wouldn't say that the mix changes has a big impact on the margin as such for us. I'm just trying to interpret what you're saying regarding raw materials here, that you're seeing some normalization on sort of mainstream products. What exactly does that mean? Do you anticipate that cost or sort of extra added cost for supply chain problems? Do you see that sort of being less of a problem going forward, or is that how we should read it? Well, that's a fair comment, Johan. We see a little bit of relief on the main volume raw materials, I should say. That doesn't really help, of course, with the supply availability because if we are lacking one, it's still one lacking. You are right. I mean, the changes in the recipe might be a little bit less. Okay, thanks. Our next question comes from Andrés Castaños-Mollor with Berenberg. Please go ahead. Hello, good afternoon. I have a quick question about the U.K. restructuring. Is it fully expensed now? How much savings do you expect to get in the long term from this? Yeah. We have accrued for expected expenses in this quarter, so that should be covered. Then when it comes to savings. There is a very short payoff of that one. Yeah. It's very good for us. We haven't quantified the years, but it's not many years. No. It's a quick payback. Thank you. A second one if I may. I noticed that Europe outgrew the other geographies. I wonder if this is effect of uneven recovery across geographies, or if it has something to do with the product mix? Could you take that question again, please? I see Europe has grown more strongly than the other geographies, particularly America, and I wonder if that is the effect of just an even recovery across the different regions or if it's because the different product mix you sell in- The main reason why we say Europe growing faster in the reported sales numbers is primarily because of the acquisitions that we've done in Spain. That's the main reason why Europe grows faster compared to last year. That being said, I mean, during last year, we've seen somewhat different speed of recovery between the geographies. Asia was first back, then followed by Europe and America's trailing somewhat. Having said that, the light vehicle production in Europe went down more than in America in quarter 4. It's a little bit of a mixed bag, but the main reasons are, of course, the acquisitions taking Europe up. Thank you very much. Our next question comes from Douglas Lindahl with DNB. Please go ahead. Hi, gentlemen. Hopefully you can hear me. A quick question. Georg, you mentioned that you're looking more and more into bio-based and recycled materials, which is also something you touched upon over CMD. I was curious to hear if these potentially are helping you to some degree in the short term, given the issues you see within traditional raw materials and also, has capacity expanded for these more alternative raw materials? Or is there still sort of a structural shortage here for bio-based and recycled materials? Thanks. No, it's a fair comment. We do see an increased interest in all these materials and we do see a somewhat increased sales. The shortages doesn't drive this. It's driven by more than the consumer sentiments by the OEMs. No effect from that. The situation on constraints of all these raw materials is still there. You're not seeing that changing anytime soon either from Well, we do. The response? We do. Okay. We do see investments in these areas, but it takes, of course, some time to get on stream. I think the biggest issue is of course the consumer demand which is not 100% there yet. Mm-hmm. Okay. I see. Yeah, thanks so much. We are ready for it. Absolutely. Okay, good. As a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question comes from Karl Bokvist with ABG Sundal Collier. Please go ahead. Yes, thank you. Good day, gentlemen. My first question is just on the kind of OpEx level that you have in the business. You've been quite explicit on it before. I was just curious on, you know, if we are now starting to see a bit of general inflation also impacting you with kind of SEK 220 in SG&A. That's my first one. Okay. I can take that one. As we've said during this year, if we look at quarterly OpEx levels, around SEK 200 million is what one can expect. And we are quite comfortable on that level. Of course, we do see some inflation discussions and pressures coming into 2022 in the Americas and Europe. We'll wait and see a little bit, see what the impact is and where all those discussions end up. There is some inflation pressure coming through in 2022. Understood. My next question is just on the situation you're having now with increasing energy costs and increasing raw material prices. Do you feel that in the near term you're still maybe you still maybe have a bit of a catching up to do? Or do you feel that you're Or put it differently, when do you feel that you might have reached a balance between price increases and cost inflation? Well, I mean on the raw material side, our pricing model and business model is strong. We do pass them on. The lag is not big. The lag is short. The energy surcharges is more difficult. Surcharges we're getting from suppliers and also the extra energy costs because they are different from country to country and even region to region. They are more difficult for us. We are going to pass them and we are passing them, but the pace varies differently in different regions and markets. On the raw material side, we are passing it and our business model is strong there. Understood. We've talked about automotive, but on the other side, do you see any end market that you feel where you feel demand has improved during the quarter? We had a very strong quarter in building and construction, for example. Very good. All right. That's all for me. Thank you. There are no further questions at this time. I hand back over to our speakers. Okay. Thank you very much for listening in, and thank you for your questions. We wish you a very nice afternoon and a weekend when you've come that far. Thank you. Take care. Thanks a lot.