Good morning, welcome to the HEXPOL Q2 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Peter Rosén, CFO. Please go ahead. Thank you, and welcome to the presentation of the second quarter of 2023. 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, to go through how we continue to execute our business model, and then go through the financials and summarize the quarter before we open up for Q&A. With that being said, I hand over to Georg, who will take you through the first parts of today's agenda. Very welcome. If you turn to page four in the presentation, I will make some comments on that. We delivered another strong quarter, in fact, a very strong quarter. It's in line with Q1, which was our best quarter ever in terms of EBIT. It is the best Q2 ever for us so far. So a strong quarter in line with Q1. We improved, as expected, the margin substantially to 16.5%, which is a strong margin compared to last year's 14.8%. We also improved the margin substantially sequentially from Q1. We are confident in our business model, and we execute it in a good way for including price adjustments up and down. We have a good product and price mix in the quarter, and then we have a good the Americas development. Strong cash flow generated, the operating cash flow was more than a billion, close to SEK 1.050 billion. We have a positive development in the Automotive segment as expected, and also as expected, we have substantially lower demand in most markets from building and construction, mainly from building, but also from construction. Maybe long-term construction will be helped by incentives like IRA in the Americas. So far, very soft demand also in construction for us. We had good sales improvements in automotive, but still it varies from brands- to- brands, markets- to- markets, and models- to- models. We have lower sales, lower top line, driven by, as you know, lower sales prices, driven by lower prices on main raw materials. Some raw materials we do see still an uptick on, but the main ones are down, and they're also sequentially down. The availability of raw material is improving, but on some specialties, there are still major issues. Our sustainability strategy is, as earlier communicated, very strong. We are on target to achieve our decreases on CO2 emissions, and we also have linked our M&A agenda to recycled compounders. We have a good progress in projects. We have a high number of projects, particularly to the automotive industry, with recycling components. If you turn page, I will quickly comment the two business areas. The comments I just made on HEXPOL Group is very similar on HEXPOL Compounding. As I said, a good price and product mix and good development in the Americas and a strong EBIT development, a strong EBIT and a strong EBIT development on EBIT margin. Substantially lower demand from building and construction, and from producers of consumer products. Good development and improvements in automotive. On HEXPOL Engineered Products, a good quarter again, but lower than previous quarter, but mainly affected by negative sales, negative FX effects in Sri Lanka. The M&A activity is high. We have high focus on it. There are many objects and opportunities, but it's slightly difficult to find agreement on price and forecast levels. The activity is higher than before, and it's positive. The acquisitions we have done during the last years, they are now integrated, both in our organizations and also geographically. If you turn page to number six, you will see our culture house, and we are strong believers, and we are executing well on the culture and the business model, and we have a good culture in the company, and we have stable and experienced people, and that's good in these, how should I say, these turbulent times? If you turn page to seven, you see our business model, which we execute in a very strong way. Importantly, is the fragmented market, which opens for M&A. In all markets, you see the sustainability, where we have strong focus and strong targets. Also, our global presence helps now all the customers to shorten the supply chains, which they all wants to do. We have strong and long-term relations with our customers. It's high stickiness on our business. If we turn to page eight and look at the sales development during the quarter, we delivered sales of about SEK 5.7 billion, which is in line with the same period last year. Organic sales were down 8%, while the acquisition of McCann added 2% in sales. In addition to this, we saw positive FX effects of some SEK 380 million. As you already mentioned, sales automotive-related customers in total showed improvement, but it still varies from market- to- market. Following on the lower demand, sales to building construction, as well to consumer-related products, are down compared to the same period last year. Our sales prices are down compared both to last year and to previous quarter this year, following on the lower raw material prices that we've seen. This lowers our sales amounts, but everything else being equal, it has no impact on EBIT in absolute terms, and we'll come back to this one. If I may ask you to turn to page 10, and we'll take a look at the financial overview. As you mentioned, we delivered the best second quarter result ever with an EBIT of SEK 945 million, which is an increase of 13% compared to same quarter last year. This is also in line with the first quarter this year, which was our best quarter ever. At the same time, the margin came in at 16.5%, which is 170 basis points above last year, positively affected by good product and price mix. As mentioned before, the lower sales prices have positively impacted the margin. At the same time, the margin is up 70 basis points compared to the first quarter this year. Overall, a very strong margin development. Financial net improved some versus the first quarter this year, but it's up versus last year, primarily driven by the higher interest rates that we see. Equity/ asset ratio remains high at 60%, and return on capital employed is also high at about 19%. As you mentioned, we've delivered a very strong cash flow in the quarter of about SEK 1.050 billion, and that is up more than 60% compared to same period last year, where we delivered about SEK 600 million in operative cash flow. If I then ask you to turn to page 11 and look at the, just a different view, sales at SEK 5.7 billion, which is more or less in line with the same quarter last year. At the same time, operating profit is up to SEK 945 million, an increase of 13%. The margin increases 11% up to 16.5% in total for the quarter. I think we mentioned this on a regular basis, but I think it's worth mentioning again, that our margin will move with the price adjustments that we do. Opposite to what we've seen, the last couple of years with increasing raw material prices, we now see somewhat lower prices. When we pass on the price decreases, we pass on the absolute decreases, and this has, everything else being equal, has a positive mathematical impact on the margin. Just to mention that. If we then look at page 12, and we look at the drivers of the increase in operating profit, we see it's the the higher gross margin that drives the increase in EBIT for the period. OpEx is up somewhat compared to last year, and that's driven primarily by the acquisition of McCann and negative FX effects, but also some inflation, not least salary inflation. At the same time, OpEx is in line with first quarter of this year, so there is no change compared to where we started this year. If we move over and we look at the two segments on page 13 with the technical compounding, we delivered about SEK 5.4 billion in the quarter, which is in line with same quarter last year. As mentioned before, we delivered higher sales to Automotive segment, which was offset by lower sales to building, construction, and consumer products. At the same time, operating profit came in at SEK 883 million, well above last year, positively affected by product and price mix, which also drives the higher operating margin, which is up 15% in the quarter. If we look at the Engineered Products on page 14, sales are up 3% to about SEK 370 million, with overall strong performance, not least in Asia. Operating profits strong at SEK 62 million, but below last year, which is also the case for the margin. This is fully driven by negative FX effects related to our Sri Lankan operations, where we've seen the Sri Lankan rupee strengthening versus primarily the U.S. dollar. Then if we change focus and look at the balance sheet, on page 15, working capital in absolute terms is in line with last year numbers, despite the acquisition of McCann. As sequentially, we do see some improvements, and working capital in relation to sales improved compared to last year. Underlying, there's no change in payment terms. Then if we move over and look at the cash flow for the quarter on page 16, we delivered a very strong cash flow of about SEK 1.050 billion, which is well above last year's numbers, and it's driven by strong EBIT and improvement in working capital. We can move over and look at page 17 and the financial position, which is very strong at the end of the quarter. Net debt stands at SEK 2.9 billion, with a net debt EBITDA ratio of 0.7. All in all, we continue to stand with a very strong financial position as the second quarter of this year. By that, I hand over to Georg. Thanks, Peter. If we sum up and if I sum up Q2, it's a very strong quarter. It's basically more or less exactly the EBIT we had in the record quarter of Q1. We have lower top line due to lower sales price, due to lower raw material prices. Then we saw that continuing in Q2 versus Q1. We have a very strong margin and a strong margin improvement, 16.5% coming from 14.8 a year ago. Very good cash flow and a very strong balance sheet and a lot of it good potential M&A candidates. A little bit tricky to find each other on both multiples and forecasts right now. I guess that's a question of time. The sustainability agenda is, as earlier communicated, very strong. We have a strong focus on it, and we are coupling the M&A agenda to recycled compounds and companies who are having that. By that, I think we open up for questions and answers, please. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Your first question comes from Julia Utbult from SEB. Please go ahead. Hello, thank you very much. My first question is on the organic growth, which I assume was - 7%, and I also assume that there was decline in both volume and price. I'm curious about which of those were more or if it was, more like a 50/50 split? Hi, Julia, it's Peter. If you look at the organic sales development, the 8%, that we saw, volume compared to last year is down mid-single digit, and prices are down low single digit, 8%. Okay, thank you very much. On the end market development there, you still see declining in both construction and consumer. Is there any difference from Q1? Does it look worse now or similar to Q1? No, it's a stronger downturn. We see that particularly in building, but we also see it in construction where we do expect something to come back. I think it takes a little bit longer with the incentives like IRA and so on to in the Americas to get. Substantial downturn in both building and construction, more downturn than in quarter one. We also see some consumer-related end user segment, which are down. However, good improvements in automotive. Would you say that the outlook for the U.S. is a bit worse now? You said in the Q1 report that the U.S. still saw good development. Has this changed? No. I think we have a good development in the Americas, both, quarter one and two, mainly driven by automotive. Okay, thank you. One last question before I go back in line. You had a very good margin development in this quarter. Would you say that it's boosted by the rapidly falling input prices, or could we expect those levels going forward? We don't give the margin forecast. Having said all that, I mean, we are pretty confident in our price management. We also see in the quarter two an even more weakening of the raw material prices than we saw in quarter one. Okay, thank you very much, Georg and Peter. Thank you, Julia. Thank you. The next question comes from Johan Dahl from Danske Bank. Please go ahead. Yes, good morning, everyone. Just a few questions, if I may. Just looking at the volume development, if I understood it correctly, possibly sort of down mid-single digits here in the second quarter. If you look at HEXPOL as a group and, you know, tilted very much towards a growing light vehicle production, you know, I was just thinking, it just seems that the segments outside the light vehicles seems to be down almost by double digits, it seems. I'm just thinking, is that a fair way to look at it, or are we underestimating inventory reductions in your system? Or is it that you're declining volumes due to price pressure? I'm just trying to understand here, how to look at those volumes. Yeah. Hi, Johan, it's Peter here. When it comes to the segment that we mentioned, building, construction, and also consumer-related products, it's fair to say that we're talking about double digits of decline. Look at our general sort of engineering exposure, transportation, food, et cetera, you know, is that also down towards those types of levels, or is it? No ... growing, or how? No. No, it's not. It's not. I mean, we see them stable, some slight up and some slight down. I mean, we see the other segments, quite okay. Mm. We see the, reiterating, we see the building really down, of course, in all markets, and consumer close products also down in a big way. Automotive up, as we both said, but the other segments are stable, some pretty good, and then some, slight down. Got you. We certainly see in the numbers that you present today, you know, that your pricing model is working well. Would you say that your competitors are starting to, you know, get their production in order, get better supplies, and start to, yeah, perhaps be a bit more competitive on price? I mean, we see them doing that, but we have seen them doing that for a while. There's no change in the competitive situation in that context. Got you. Just finally a follow-up, could you just elaborate a bit on the product mix that you talk about in the report, driving margins? I mean, not the price, the raw material, changes, but the product mix as such. Also, if you could clarify a little bit how those recycled projects with automotive, how that's progressing and how it's accelerating, as you seem to indicate in the report? Well, no, that's Johan, good questions. The product mix is good in the quarter. The product mix is driven by good, how should I say? Good price management, and also the Americas is delivering a better price mix than before. That's a positive. On the projects in automotive, we see huge number of projects in the development pipeline. It takes a while, of course, to have a new component in a car. I mean, a huge number of products with recycled contents. We are very positive on that. Of course, I mean, that's not a next quarter project as such. All right. Thanks a lot. Thanks. Thank you. Your next question comes from Karl Bokvist from ABG. Please go ahead. Yes, thank you. Good morning. Just to follow up there on Johan's question regarding the mix aspect here. Just for us going forward, should we think about mix in terms of end market categories, or is it more difficult for an external party to have a view on because it relates to the chemicals themselves and, you know, a mix between TPE and rubber or within rubber, et cetera? Yeah, that's luckily enough, a very complex picture, and that's really good. You can have a very, very good price and product mix in medical in a quarter, but you can also have a bad one. There are always good margin products in every segment. It's not that just one segment is better or worse than another, or just one market is better or worse than another. That's good, of course. It's a more complex situation than that. Of course, we are deliberately moving to a richer segment all the time. We did that very good also in quarter one, but better in quarter two. Understood. Then on automotive, I realize kind of how. Well, given your business model and the level of lead times and visibility that you do have, that perhaps it's difficult to say. Within automotive, you see it's still growing, but what is the latest you hear within automotive regarding production versus sales, et cetera, going into the second half? That is a good question. To be honest, we really don't know. We have, of course, feelings and thoughts, but when we read all the external analysts, and there are quite a few following the Automotive segment, we see increased production forecasts going forward in those reports. We also see them a little bit lower every time they come, but they are always positive when they come. Understood. My final one is just on, something you, I apologize if you mentioned it, but, just regarding inventory adjustments in the entire channel and perhaps mainly among your customers. On the customer side, I can comment. I see them coming down, so I don't see any overstock situation there any anymore. I mean, the and our own inventory is also coming down. Understood. That's all for me. Thank you. Thanks, Karl. Thank you. Once again, if you wish to ask a question, please press star then one on your telephone keypad. The next question comes from Andrés Castaños from Berenberg. Please go ahead. Hello. Yes, actually, on inventory is my question as well. I wanted to understand whether your volumes of inventories are coming down or what we're seeing is a decrease in the costs at which they are booked. Can you comment on that and guide us going forward? Thank you. When it comes to actual numbers, movements in on inventories related to volume development, there can be some price adjustment if the raw materials leave the warehouse and we buy new at lower prices. I would say in the short term, by second quarter, it's primarily volume development that has an impact on inventory. Going forward, we don't give forecasts on inventory development, but I mean, as we've mentioned several times before, once we see that we have a stable delivery of specific raw materials, then we will decrease the amounts of raw materials for that for those specifics. This means that you have less trouble with logistics, et cetera, therefore better visibility, therefore, we should expect to see lower absolute volumes as well as lower prices. Is that right? If supply chains continue to improve, yeah, then one can expect more stable supply, and then we feel safe to lower inventory levels for those specific raw materials. I mean, it's really important to understand that we have no, basically no finished goods, stock. It's only raw material. It's all raw material for us. Got you. Thank you. Thank you. We have a follow-up from Julia Utbult from SEB. Please go ahead. Hello again. Thank you very much. It's a quick question on the share of revenue from recycled materials. The last number we had from you was with the CMD, I think, and I wonder if you have an update or maybe it will be more on an annual basis? It will be more on an annual basis, as it looks like. Okay, thank you. Then a question on the integration of McCann Plastics. When it was acquired, it had a margin below group. Is it still under development, do you expect to lift the margin to group level? Is it like margin dilutive for HEXPOL, as where we are right now? I mean, McCann Plastics is a very nice company and it's fully integrated now into our organization, and they are delivering the margins we are expecting, and they're basically in line. Okay, thank you very much. That's all for me. Thank you, Julia. Thank you. We have a follow-up from Karl Bokvist from ABG. Please go ahead. Yes, thank you. Hi again. On the smaller division Engineered Products, currencies notoriously difficult to have a proper view on, but just the kind of underlying operations, I believe in the past quarters, you have been quite happy with the performance in engineered, even if you kind of try to exclude the currency effects from Sri Lanka. How should one at, let's say, current FX rates, think about the profitability in that division now? You're correct. We are satisfied with the operations of the business in itself. They form quite well. When we look at... If you look at the Engineered Products, we delivered just about SEK 60 million in the quarter. We delivered SEK 70 million the same quarter last year. We do have... There are negative effects included in the second quarter. I think when one looks at the EBIT and the margin for the total segment, I think somewhere in average of what we've seen over those two quarters is a fair view. Okay. Thank you. Thank you. All right. I'll now hand back for closing remarks. Okay, thank you very much, everybody, for listening in and posing questions. We thank from our end, and we wish you a good day. Thank you. Thanks a lot. Take care. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.