Welcome to the HEXPOL Audiocast with Teleconference Q1 2021. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. I'm handing over to CFO Peter Rosén. Please go ahead with your meeting. Thank you, and welcome to the presentation of the results for the first quarter of this year. Presenting today are Georg Brunstam, our CEO, and myself, Peter Rosén as CFO. The agenda for today is to first give you a business update, then take you through the Almaak acquisition and give you some more flavor on that, and then go through the financials and the focus areas for this year. We will finish with a Q&A session. With that, I hand over to Georg, who will take you through the first parts of the agenda. Thanks, Peter, and welcome everybody. I will start on page four in the presentation you can find on the webpage. We are happy to report actually our best quarter ever so far in spite of a really challenging environment. We are never satisfied, but it's a quite decent result given the circumstances. We have record sales 36% up and a record quarterly result. We have strong sales in all regions and all product segments, and especially good in Americas. We are doing this in spite of the lower automotive production. As you know from other sides, the light vehicle automotive production is lower in all markets except China in the quarter, and particularly lower in Europe. All other segments are strong. We also see a good proof of both our organization and our business model. Our business model means, and we've said this in many cases, and we have proven it over many years. We do pass on all cost increases, raw material increases, and you can see this in the report that is exactly what we have been doing as well. Business model strong, business model working, and business model executed in a reasonably good way. We have in the quarter substantial global supply issues. We have major price increases on raw material, and we are escalating energy prices. We do handle that. It's of course not easy, but we do handle. I think it's important to say that the terrible invasion by the Russians in Ukraine is affecting us in Europe, that HEXPOL has no operations or business in or to Russia, Belarus, or Ukraine. In the past, we had maybe some few EUR million, and that has stopped since long in sales into Russia and Belarus and Ukraine. All in all, no operations, no business, and no employees in this tragic region. We also see our M&A agenda being executed again. We closed the Almaak acquisition just after the Q1, and the acquisition is fully aligned with our presented strategy in M&A and an earlier communicated strategy both in M&A and sustainability, and this fits nicely into the agenda. I will come back to the Almaak acquisition a little bit later on. We do see the global challenges with shortages in semiconductor, transport and raw material issues, and energy issues. We see that continuing, but as I said, we saw that in the quarter as well, and we handle it. We do have an advantage with our strong customer focus and also closeness to our customers and shorter supply chains, and that is strengthening us. I must say we are very flexible, and we are also on our toes to meet the expected increase in light vehicle production, which everybody's forecasting to come. We are on our toes, and we are flexible to handle that. I must also say that, in the quarter, our strong American position with 50 or 55% of our business in Americas is actually a good thing for us when Americas is performing quite good. If I turn to page 5, then you can see the two business areas, and on Compounding, which is the biggest, it's very similar comments to what I mentioned on the group. Again, Americas performing nicely. We do see all the issues in all regions however. In all sectors outside of automotive, it's strong. We also had a good quarter in Engineered Products, sales well above last year and a strong EBIT. Especially the HEXPOL Wheels business is performing well. We have a good sustainability agenda, as you know, and we have continued focus on that, on the CO2 reduction by 75% by 2025. We have good progress, and we are confident that we can meet that target. We are also introducing new compounds based on bio-based materials and recycled materials. The whole acquisition of Almaak is really driven by sustainability as well. They have more than 78% or close to 80% of the material recycled. Strong focus on M&A and increased activity levels. As before, if you turn to page six, you can see that we have a strong culture delivery. We are decentralized, we are coordinated, and we are accountable, and we do deliver on sustainable polymer applications, and we are preferred by many customers right now. If you then turn to page seven, I can give you a little bit more details on the Almaak acquisition, which is really driven by what we have said in the strategy that we want to establish a thermoplastic compounding platform in Europe. We have it in Americas, and now we got it with Almaak in Europe as well. In addition, it's a strong sustainability focus with close to 80% recycled engineered polymer compounds from Almaak. It was privately owned by two gentlemen who are staying on with a 30% share and are going to continue to run the company as before, but with added synergies being part of HEXPOL Group. The main market is in Germany, but 50% is outside of Germany and the main end user segment is the German premium automotive end user segment. As before, it's the same business model, it goes through the tier ones before reaching the OEMs. Around EUR 75 million in 2021 was the turnover and a good profitability in the company. As I said, the founders are staying and there is a put and call option for the remaining shares. I'm quite happy it's fully in line with creating the European platform on highly advanced engineered polymer thermoplastic compounds in Europe and also with a high degree of recycling content. I'm very happy. It's a nice company and it will bring what we think. Very good. If we then turn to page 8 and look at the sales development during the quarter, as Georg mentioned, all the challenges that we saw during last year with the semiconductor shortages, global transportation issues, and the raw material pricing increases continued during the quarter. Some of the challenges were actually further accentuated by the tragic war in Ukraine, especially visible were the problems with some automotive customers in Europe where several production stops following the cable shortages that some of the automotive manufacturers in Europe get their cable harnesses from Ukraine. Despite this, we increased our sales with 36% compared to same quarter last year. Of this increase, 20% came from organic growth, 6% came from the acquisitions that we did last year in Spain, and we also saw positive FX effects of about SEK 360 million, which resulted in the reported sales for the quarter of SEK 5.2 billion. Looking at the regional development, we saw strong sales growth in all regions, Europe partly due to acquisitions, and as Georg mentioned, we're especially satisfied with the performance in the Americas, and then also we saw growth in Asia. If we then turn to page 10 to look at the financial overview of the quarter, we delivered an operating profit of SEK 775 million, which is well above the same quarter last year. It's actually the highest we've ever delivered in a quarter, which becomes even more notable considering all of these challenges that we've faced. The margin came in at 15%, and that is negatively affected by the acquisitions that we did last year. That uncertain still run on somewhat lower margin levels than the other HEXPOL companies, and the challenges related to raw material shortages and the price increases related to that. Equity asset ratio remains very high, above 60%, and the return on capital employed is at high 22.4% here in the quarter. If I then ask you to turn to page 11, we'll look at a little bit more on the financial highlights. As mentioned, we had 36% sales growth to SEK 5.2 billion in the quarter and the high operating profit, SEK 775 million. This is 10% above what we did last year. Just a reminder, Q1 last year was also a very strong quarter. We still delivered 10% more than what we did then. At the same time, we saw the operating margin come down to 15%, partly due to the acquisitions that we did, but not least the raw material challenges. A reminder that as Georg mentioned, we pass on price increases, and then we primarily pass on the absolute increases in amounts, not the relative or the percentage increases. Everything else being equal, this will have a mathematically negative impact on the margin, but not on the profit in absolute terms, as you can see in this quarter. It's quite logical that the margin comes down due to the price increases. Again, the profit does not as we pass on the cost increases. If we turn to page 12 and we look at the drivers behind the operating profits, we see that the increased sales gave a little bit more than SEK 300 million, and they were partly offset by the lower gross margin because of the higher raw material prices. OpEx came in higher than last year, driven by negative FX effects, some higher inflation pressure, and the acquisitions that came after Q1 last year. If we then turn to page 13 to look at the business area or segment of HEXPOL Compounding. Compounding delivered sales of SEK 4.8 billion in the second quarter, which is an increase also here of 36% compared to Q1 last year. Also here, the increase is driven by 20% organic growth and the acquisitions of VICOM and Unica that we did last year add another 7%. We saw sales improvement in most customer segments and all product areas. And as mentioned, especially positive was the strong development in the Americas. The operating profit came in at SEK 721 million, well above last year, where higher sales were offset by the lower margin driven by the acquisitions and the raw material price increases. If we then turn to page 14 to look at the Engineered Products segment, we saw sales increase with almost 30% to 330 million SEK for the quarter. Overall, very strong development, but especially so for HEXPOL Wheels that performed very well. Operating profit increased with 17% to 54 million SEK and operating very well above last year. Also here, we saw that the higher sales were offset by a lower margin following on the raw material cost increases. If we then turn to page 15 to look at the working capital development, we see an increase year-over-year, both in absolute and relative terms. This is driven by an increase of inventory levels. Due to the raw material shortages and risk of further, we've decided to purchase what we can in order to secure all orders we receive. This is something we purchased also during last year. There is also a negative price effect as the value of the raw material goes up due to the price increases of raw materials. Underlying, we don't have any changes in the underlying payment terms with suppliers or customers. This is purely driven by the decision to increase inventory levels. If we turn to the cash flow of page 16, we do see a softer cash flow in the quarter, and this comes as a direct consequence of the increase of inventory. If we look at the other factors impacting cash flow, the investment levels continue, as one can expect, to be below our depreciation levels. What this all turns into, you can see on page 17, where net debt remains very low at less than SEK 900 million, and that the net debt to EBITDA ratio continues to stand at a low 0.24. We continue with a very strong financial position when we close the first quarter of this year. Thanks, Peter. If you turn to page 18, I will sum up the quarter and Peter has just described the strong financial position we have, which is of course very good. As I said, we had the best quarter ever so far. We are really simply happy with that given the extreme challenging environment. It's also a very strong increase from the quarter four results. I also should say that quarter one last year was also a very good quarter. We are up against a very good quarter, and we are very much up against quarter four last year. We are seeing that our business model is strong and working. We are passing on, we are executing the price increases we need. We do pass on everything we are getting. It gives of course a mathematical effect on gross margin that on the EBIT we do see increase. We have a strong M&A agenda and we are executing on that. I'm very happy to have the Almaak company on board now since first of April. We see good possibilities and a good M&A pipeline going forward. We're also executing on our sustainability agenda in a strong and good way, and we have good progress on our targets, and in particular on the CO2 emission target, which is 75% reduction by 2025. If you then turn to the last page, which is focus for 2022, and it's of course in these post-COVID days, it's there. It's always a priority to handle the safety and health of our employees. We of course are on our toes to handle the volatility in demand and the challenges in global supply chains, including supply and pricing. Of course the M&A activities are crucial and the further developments on our sustainability work is also crucial. Going forward, I'm sure you all note that we have a very strong presence in Americas, and we see that as an advantage in the quarter, and also I think going forward. We are also flexible and of course we are on our toes, as I said, to meet the increased demand in light vehicle production. Everybody seems to be predicting that light vehicle production will increase. With that, I think we are open for Q&A. Absolutely. Ladies and gentlemen, if you do wish to ask a question, please press zero and one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero and two to cancel. There will be a brief pause while questions are being registered. The first question is from Carl Broquist, ABG. Your line's now open. Thank you and good afternoon. My first one is if it would be possible for you to give a bit of insights into the split between pricing and volumes, perhaps at first for the group, and then, if possible, if there were any particular product segments where you saw very good volume development as well? If we start with, as you know, we don't communicate exact volume, but we can say that in the quarter, volumes were flattish. We saw, as you also can see from the financials, a fairly high price effect from price increases when we look on the group level. If we look at the product or the customer segments or product segments, the one customer segment that stands out being more volatile, that's the automotive related to both semiconductor shortages and the cable harnesses challenge that we saw for especially some of the European automotive manufacturers. All other customer segments perform well. All right. in those areas, one would say that volumes are up. Okay. You of course mainly have an exposure towards Americas and Europe. Within Americas, we mainly read about COVID lockdowns in Asia and European automotive manufacturers being particularly hit now during the start of this year. What can you say about your customer base in North America, mainly within automotive? No, I think, and I think as we commented as well earlier, we have a good performance in Americas in spite of light vehicle production being down a bit there as well in the quarter. We have a good performance there. We are executing well in Americas, and you know we have had an improvement program for a while in Americas, you know that. I think it's paying off right now. A good development in Americas and more tricky in Europe with the light vehicle production. In all regions, all other segments are good and I think we have a good position in the market. I see positively our competitiveness in the marketplace right now. Understood. My final one, if it is possible for you to give any comments on how you feel that supply constraints and production rates of customers and so on progressed here during April compared, perhaps to March? No, I mean, we never comment on the quarter we are in now. We don't do that. No. Understood. We don't do that. Sorry. No, sorry. That's fully understood. If I may, sub-optimal recipes, is that something that's mainly affecting overall productivity or something that's also affecting, you know, gross margin from a mix point of view? It's actually both. We do still have that in a big way, still. I mean, that's not changed. But we handle it, but there are of course effects from it. We do handle it and we do service our customers. All right. Which long-term is great. Thank you. Any other questions? I don't think we were that clear. Operator, are you still there? We don't hear this one. I'm sorry. I was placed on mute from the system. Mr. Österberg, your line is now open. You can ask your question. Thank you, operator, and good afternoon, Georg and Peter. I have a couple of questions from my side. Hi. Yeah, hello. The first one is sort of we continue to see a volatile operating environment here, and I was wondering whether you can share some more flavor on how that's impacting sort of the competitive environment. Are you able to take market share in an environment like this or does it sort of what are the main effects here? Because we've continued to see a very challenging supply chain and raw material price increases for a long time now. That's a very good question. There are no statistics in our industry, so my comment is based on feelings and then information from the marketplace through our own organization. My feeling is strongly that we are very well positioned. We are close to our customers. We are experienced. We are flexible. We are also quite big in this industry, which means that we are absolutely not third or fourth in line. We are first in line every time. We have lots of chemists working in collaboration to change recipes to maneuver. We have 52 manufacturing units close to our customers. Yes, I think we are in a good position, and I'm quite optimistic about our competitiveness right now and going forward. Maybe a question for you, Peter Rosén. Good to see that the margin is still holding up so well despite all the challenges. Are there any negative impacts still from the VICOM and Unica in terms of the negative mix? In a sense, yes, because they still run at lower margins than the rest of the HEXPOL companies. Yes, there is still some negative impact from those two acquisitions. There is. Just a follow-up there. Is that related to sort of the current market environment where there will be sort of more volume leverage, or is that an effect of sort of integration efforts still ongoing and the long-term plan being that they should sort of normalize over a couple of quarters? It's exactly as you're saying. It's an ongoing integration. It's moving in the right direction, but of course, it takes time to change a price management structure which they had in the past. I think our price management is better and more data-driven, so we are implementing that there as well. Now it's improving, but it takes some time. South of Europe is also tougher with the energy surcharges. Having said all that, moving in the right direction, but still, of course, dampening the margin. All right. Thank you very much. Then just a final question on M&A. What are you seeing in terms of M&A activity in the market? It's, I mean, it's good to see the acquisition of Almaak and adding to your product portfolio, but you still sort of have a quite low gearing. What is the current latest sort of read on the M&A environment? No, I mean, I think Peter and I have said quite a number of quarters that we have a good pipeline and we do intensify our efforts. I think after it's opening up a bit more now, it's becoming easier to get to a transaction as well. I'm actually quite optimistic on that too. We have a good pipeline and we are executing on that. Okay, great. Thank you very much both. That was all the questions from me. Thank you very much. Thanks, Christoph. The next question is from Johan Dahl, Danske Bank. Your line is now open. Thank you. Good afternoon, Peter and Georg. You talked about sales exposure in these regions, Russia, Belarus, et cetera. Can you just talk about on the sourcing side, if you see any elevated risk there for your ability to supply going forward, carbon black or what have you, from those regions? Yeah. No, Johan. Hi. It's a good question. There are some elements in the polymer industry and maybe particularly in the rubber industry coming from Russia. It's mainly coming from traders in Europe, stock keeping traders. So it's not coming directly. We do see that these traders, distribution companies, I should say, stock keeping, they're having problems getting materials. It's mainly carbon black out of Russia. We have never been a big buyer of that. In Americas, we buy actually nothing. We buy a bit in Europe. We are step by step replacing that. Of course, that means that the market is short and then prices are going up further. Okay. Also on inventories, clearly you're putting some safety stock here in the quarter. Should we view this cost-plus model that has worked so well in the past? Are you taking more of a position in the market right now? I.e., will that mean sort of slightly added incremental risk if you see- No. Yeah, I see what you mean. No, no, there's no incremental risk. I mean, this is a raw material inventory levels. The raw materials have a very long shelf life. If raw materials would become abundant, so there wouldn't be a risk and we would see a steady flow, then we would just go back to normal purchasing patterns, and then this inventory would move out very quickly. You're pricing according to your cost of inventory, not according to any sort of market price? Sorry, take that again, Johan. I think I understand if you're saying that it's no added risk. I'll, you know, that's what I take away. Also on Sri Lanka, can you say anything there? What's the risk here of potential stops in production, et cetera? Yeah. It's also a good question. Now it's a small part of our turnover and business. It's quite a difficult situation in Sri Lanka. Not so much for us. I mean, people are coming to work and they need to work, they need to be paid, and we are paying, of course. Then we get electricity, and then we also have to bring foreign currency as we export basically everything we produce out of the country. We are in a priority situation in the country, but the country is in a very difficult situation. Production hasn't worked according to plan until now. Can you say that, sir? Oh, absolutely. Right now as well. All right. Thanks. The next question is from Julia Utbult, SEB. Your line is now open. Hello. Julia Utbult from SEB here. Thank you very much for the presentation and for taking my question. I have a few questions and some guidance would be very appreciated. My first question is input costs has no doubt been a large focus. In order to understand your sensitivity to raw material costs, would it be fair to assume that your raw materials represent around 60% of cost of goods sold? Or what would you say on that? That's an actual number that we don't comment on because it's very much related to our business model and our own cost structure and competitive reasons. It's not a number that we disclose. Yes. I'm sorry, I cannot comment on it in more detail. No, I see. My next question is regarding your transportation costs, and I'm curious about to what extent your local presence. Could you please provide us, for example, with some of your most important routes? I mean, we are local to our customers and the normal supply for us is an overnight lorry shipment, a truck shipment overnight from one of our facilities or even during the day, from our facilities to the customer. That's the distance we have in the majority of the business. Okay. All right. I see. Thank you very much. My last question is about the tax rate. How can we think about that? It looks to me like you had a standard around 24% and a little bit lower during 2021 due to insurance payments. Is there anything that we should be cautious about going ahead? No, I think you're right. There were some bigger movements last year that impacted the tax rate. I think if you look at the going forward, one shouldn't expect any major movements. I think one can take a look at what we've done in the first quarter. Okay. Thank you much. Thank you very much. Very helpful. Thank you. That was all my questions. Thank you. Yeah. Thanks a lot. The next question is from Andres Castanos-Mollor, Berenberg. Your line is now open. Hi. Hello. Afternoon. I would like to ask about the construction sector and market. How is it doing? It has been very strong, actually in all regions. That's great to hear. Thank you very much. Also, I would like to hear your thoughts about U.S., and Europe in terms of outlook and of capital allocation. How do you feel about your footprint in these two places and what do you expect of in terms of performance going forward? Actually, we are quite happy with the footprint we have, and particularly when we see the mega trends that everything is regionalized or even naturalized in terms of supply chains. We are close to our customers and in all the big regions, and we are strong in the Americas region. It's 55% of our total. That was a good quarter in Americas in quarter one, so not unhappy with the footprint. The capital allocation, I mean, we do our capital allocation when we need to invest to serve our customers. In terms of M&A, we are keen to acquire in all regions. That's great. Thank you. A couple of smaller clarifications, if I may. On Sri Lanka, I understand the manufacturing plants there mostly serve Engineered Products division. Is that right? Yes, only. Okay, got it. On Almaak, you said how much percentage of its raw materials were sourced from recycled sources, sorry? 80%. Got it. Between 78-80. Understood. That's excellent. Thank you very much. That's it for me. Thank you very much and congratulations on the results. Thanks a lot. a lot. Thanks. So far, we have no further questions. I'll hand back to you, gentlemen. Okay. Thank you very much, everybody, for listening in, and thank you for your questions. We wish you a very good day. Take care. Bye. Thanks a lot. Bye for now.