Welcome to Systemair Q3 2024/2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the President and CEO, Robert Larsson, and CFO, Anders Ulff. Please go ahead. Thank you very much, good morning, everybody. You are all most welcome to the presentation of our third quarter results, which is covering the period from November until January. On a personal note, I'm really happy to be part of the Systemair organization, and this is my first quarter as CEO for the Systemair. Really happy to be here. Starting with a brief description of Systemair. We are a company operating from our core values of simplicity and reliability. What we do is that we develop, manufacture, market energy efficient, and high- quality ventilation products. We're a company founded in 1974 in Skinnskatteberg, which is still our headquarters. We have today 51 countries with our own sales companies. In total, the products are marketed in 135 countries. We are now having production facilities in 19 countries. We are about 7,200 people, whereof 1,000 in India. That is a brief description of us. Looking into our third quarter, what we could see is that we have an organic growth of 1%. Compared with our previous quarter, ending in October, where we have a bit of more mixed market picture. We had previously, in the second quarter, robust organic growth across all regions, while we are now seeing a bit of more diverse picture. We're very happy to see that we in both Western and Eastern Europe has continued with kind of robust positive growth, while we're seeing a bit more of challenges or negative development in the Nordics, in North America, and also what we label a bit simplistic as the other markets. We have some reasons behind that. We will provide more, a bit more granular picture later on. What's really important for us is that we're continuing the trend of improving our gross margin. Quite a tick up in this quarter. It was about +1 percentage point. Later on, I will also share with you a bit of my first impressions as CEO. That will be at the end of the presentation. In the quarter, we also successfully completed our largest ever IT project. Me, kind of joining the company, fairly recently, I'm impressed how well-planned and how it has been and also about the excellent execution. I'm really happy to see this. Still, we had some. There was some work to be done. That's very true. We were shutting down the system for roughly 60 out of 80 companies during the Christmas and New Year's. We are working on improving our, let's say, kind of finding new ways and improve how to operate with our front end. We have, at this point in time, we are changing the way how we're working and how we are organized in a few of our major markets, like Sweden and North America and Germany. We strongly believe that this will bring us long-term benefits. We had Systemair Days in Karachi, Pakistan, together with a local partner. That was really a highlight event for us. In Las Vegas, at the huge fair for HVAC business in North America, we were able to attract around 700 partners to our hospitality event. That was really nice. As always, there are also a few product updates. We see now a launch of an upgraded Systemair Sense product, and we have also launched the Polarix heat pump series. Looking at the markets, not very much changing from quarter to quarter, but I think it's a good reminder to see that we have 45% of our business in Western Europe. In the quarter, that was a bit of a step up. 16% in the Nordics, 13% in Eastern Europe, 10% + or 11% in North America, and then the other markets. We get back to the more of the details on the development in each of these regions. With this, I hand over to you, Anders. Thank you, Robert. Anders Ulff here. We are now on the fifth slide. Thank you. Third quarter then, covering the months of November, December, and January is from a seasonality point of view, our smallest quarter of the year. This year it was a bit of a mixed plate when looking at the development in the different regions, especially bearing in mind that we're coming from a second quarter with a really strong organic growth, as Robert pointed out here. We noted that especially that the start of January this year was lower than last year. Total net sales amounted to SEK 2.86 billion compared to SEK 3.04 billion last year. This corresponds to a decline in sales by 5.9%, but we have had continued high negative effects from currency conversion. The organic growth was positive by 1.0%. We can conclude that for the sixth quarter in a row, we are reporting an organic growth in a relatively slow and sluggish market. Slide number six. To give a bit more details behind the net sales development, we saw organic growth in Western and Eastern Europe during the quarter. We completed the acquisition of NADI in India in August last year and this contributes with 1.8% to the net sales for the quarter. Finally, currency effect. The strengthened Swedish krona resulted in a negative effect on sales by -8.7%. The effect comes from several currencies since we have operations in many countries and fluctuations are quite big at the moment. Slide number seven, geographical breakdown. Here I will focus on commenting on the organic growth rate for each region. Starting with the Nordics, where we had a negative organic sales development by -10.5%. Especially the Norwegian and Danish market are currently in a period of lower demand, but the Swedish market was on par with last year. In Western Europe, our single largest region, we saw an organic growth of 5.8% for the quarter. Within the region, we experienced a positive development in U.K., Spain, and France. We are also happy to see continued positive signals on our German market. In Eastern Europe, we had a very strong organic growth of 27.4%, partly due to weak comparables. Sales were especially strong in Azerbaijan, Poland, and Slovenia. As pointed out in the past, our sales in this region are more sluggish due to a higher degree of project-related business. In North America, the organic growth rate was -8.7%. It is the part of our North American operations focusing on school ventilation that are exposed to seasonality that experienced a quarter with low sales after a couple of years with high activity all year around. In Middle East, Asia, Australia, and Africa, we had an organic decline in sales of 6.5%. We experienced a quarter with good sales in South Africa, Middle East, and India, while the Turkish market is challenging currently. All in all, total organic growth amounted to 1.0% for the group. Slide eight. We had a positive development of our gross margin, as Robert stated. In the quarter, we achieved 36.3% compared to 35.3% last year for the same quarter. We're happy to see this continued positive development that is due to contribution from implemented restructurings and cost reductions, but also a positive product and market mix. Our adjusted operating profit amounted to SEK 199 million, or an operating profit margin of 7.0%, which is in line with same quarter last year. Selling and admin expenses in comparable units increased by 0.4%. Slide number nine. Profit after tax amounted to SEK 132 million, compared to SEK 135 last year. Net financial items for the quarter were negative by SEK -34.1 million. Currency effects on bank balances and loans were negative and amounted to SEK -15.1 million. We had interest expenses of SEK -16.5 million, compared to SEK 15.8 last year. Coming to the tax rate for the quarter, it was high on 30.7%. The tax rate was affected by a change in the tax legislation in Turkey, where inflation accounting is removed from the tax base. Adjusted for the Turkish run-off effect on the tax, it amounted to 25.1%. Going to slide number 10, looking at the cash flow development for the quarter. We received a free cash flow of SEK 328 million compared to SEK 55 million last year. Within working capital, there were a significant decrease in trade receivables of SEK 267 million. Net investments for the quarter of SEK 90 million relates to production capacity investments in Czech Republic, Slovakia, and Norway. Our net debts decreased down to SEK 849 million, which is SEK 133 million lower than one year ago. Adjusted net debt to EBITDA amounts to 0.52, and we have a strong balance sheet that enables us to pursue further strategic M&A and investments for organic growth. By that, I hand back to you, Robert. Thank you, Anders. A bit of what is going on. This is an example of a bit unusual products or business that we have received. The normal situation is that most of our customers, or almost all of them, would be only in one country. But this one, we have an agreement with a fitness franchise or fitness company, who is really appreciating the value we can provide and the performance of our products. What happens is that during some time during the next future, we are going to provide them with the solutions or, I would say, products that is helping them to offer their clients better indoor air climate in their gyms. Also doing this offering with less energy and achieving low operational costs. This is a fun one to see. Of course, one key aspect here, of, on top of the, the performance of our products is our ability to serve them in several countries. Now, with the Olympics in fresh mind, still we are proud to present that we did provide an almost complete ventilation and safety system for the MSG Arena, where the hockey games were played during the Olympics. What's really special with this one is that the arena should be able to switch between a freezing and ice hockey rink into a concert hall in just a few hours. You can just imagine what this means for the indoor climate with massive humidity spikes and potential fog that being created. Really calls for high-performance products and flawless performance in many dimensions. Also, during a concert, you want to listen to the music and not some noisy installations. Moving to next slide, which will be the 13th, now slide number 13. I would like to share with you a few impressions or observations. Joining Systemair, the first thing that I, comes to my mind, this is also after meeting a lot of people in the company, traveling around. It's really a fantastic, strong company culture. It is rebuilt around the entrepreneurial spirit and a lot of dedicated, or I would even say passionate people. I believe that we are kind of, well, we are operating on markets with strong and positive, long-term drivers. The topic of indoor quality is gaining recognition and the combination with energy efficiency is also addressing one of the large needs that we have. The combination of this mean too means that sustainability is really a built-in natural part of our business. In general, we are also a company that has been during many years investing for the future. We have today a very broad product portfolio and we are having a really strong manufacturing operations with factories that are in excellent shape. Having said this, it is now time for us to reach to the next level in our commercial operations. We have been very busy dealing with the effects from pandemics. We have had supply chain disruptions. There have been tariffs and what have you, and there are also some restructuring works going on. Taking the commercial net operations to the next level, sharpen our value propositions, and sales execution, that is going to be vital for our future profitable growth. Today, we are implementing structural and organizational changes in key markets like North America, Sweden, and Germany, and this is to increase our customer focus and also, in the very long run, creating a more efficient organization. At the other end of the scale, so to say, in a company having many operation units located in many countries, there is always a few of them that we would like to see improvements. We are continuously evaluating our actions and strategic options to reverse the negative trends. I think this is the direction going forward, and with this, we open up for Q&A. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Lara Mohtadi from ABG Sundal Collier. Please go ahead. Hello, good morning. Just a couple of questions from my end. Firstly, on organic growth in the Middle East, Asia, Australia, and Africa, this was down 6.5% this quarter, and you already mentioned that the Middle East actually showed good organic growth, but Turkey continues to face difficulties. Could you maybe just unpack a little bit on this? How much of the drag is specifically from the Turkish market? Should we expect this to continue in the coming quarters? I start answering this one. I will hand over to Anders later on for some further details. Yeah. Let's say we are very proud of what's kind of... Or pleased to see the development in India. Turkey, I would say is on the other side of the scale. We have had for many years now, high inflation, and we also see that the interest rates have been increasing. This has been causing a really challenging market situation in Turkey. I think that is the biggest, bigger picture. Anders, what would you add to that? Maybe that the Turkish factory that we have there is also quite dependent upon project related sales. It's a bit volatile there, in general, Turkish market, domestic market is not showing any good signs for the moment. Mm For us. Yeah. All in all, what do we do about it? Of course, we have a great factory in Turkey. I think we are looking for opportunities to use that capacity for other markets, if possible. Okay. Very clear. If we just move on to the Nordic market. You mentioned that the Norwegian and Danish markets also currently in a period of weaker demand. Could you maybe just provide some more color on what is driving this? Is it that you're seeing weakness across the board, or is it maybe concentrated in specific markets like residential, commercial, maybe, I don't know, public infrastructure? I think once again, I start and maybe add, Anders will add something. I see that, let's say in general, the construction market in all these countries is very weak. This has been kind of, let's say a persistent pattern for not only this quarter, but for the last years. In Sweden, I would say we have seen some growth, much because of the changes that we are implementing. I think we have, let's say there are really good signs from how the sales organization is being energized, and we expect to see good things coming out from there also in the going forward. Would you add to that, Anders, on some- Yeah ... on some facts? To comment then on specific product areas in Norway, half of our turnover relates to the residential market, and that market is kind of slow right now. On the commercial side, it's okay. Denmark, we are more dependent upon the commercial market, and there's also not a booming market for the moment. Overall, I mean, we have, we came from a quarter that was quite positive. Overall, we are slightly positive, I would say. Yeah. For, the, let's say, the market has, as such, has not changed. No. We believe in our capacity to create the long-term profitable growth. Okay. Very, very clear. Thank you. Just a question on your gross margin. Well, it improved nicely, to 36.3%, despite lower volumes and weaker holiday activity. Do you see further room for gross margin expansion, or do you see this 36% level sort of, as a sustainable baseline, going forward? Well, lower volumes is not quite accurate there. I mean, it's 1% organic growth. I need to point that out. What we have seen here for some quarters or a year or so, improved margin and that is to a large extent due to the restructuring we have done with Menerga as one example, and also, I mean, historic price increases that are having more effect as we go on. How far we can continue to develop the gross margin is really hard to say and predict, it's something that we focus on, of course, constantly. It's also a little bit dependent upon where we are growing also in geographically and product-wise. Yes. You also mentioned implementing these structural and organizational changes. Could you maybe elaborate a little bit on these and what they specifically maybe entail? When can we expect to see some benefits from these initiatives? What we do is that we have found out that we concluded that we will have a benefit from creating, let's be a bit more focused organization. We have been referring to this, with these major markets where we have things ongoing. With focus, we mean that, we want to have organizations selling all our products into the markets and we want to have manufacturing units supplying products to, let's say, all markets. Sorry, we got a visitor suddenly here. I think that is the main intention here. That is the purpose with this focused organization. When it comes to sales also, we are proud of what we do today, but, revitalizing our kind of processes and tools and more or less, how we do it? We see we have, opportunities to improve here. This is kind of the directions. Okay. Very, very clear. That was all from my end. Thank you very much. Thank you. Thank you. The next question comes from Carl Ragnerstam from Nordea. Please go ahead. Good morning. It's Carl from Nordea. A couple of questions from my side. Firstly, you mentioned, January was slower this year. Of course, we've seen that in some companies in the space. Could you give the factors behind it? Was it also related to the IT migration you mentioned? Also, what have you seen so far in February, which is the first month of the Q4? Thanks. Okay. Thank you for your question, Carl. Well, you're correct saying that we did close down our ERP system for 60 out of the 80, roughly 80 operation units we have. I'm really proud how this was planned and executed. Well, nothing is ever flawless, but this was as close as you could get. This means that visibility for end of the year is kind of weak. We saw also that we had. There was kind of a slow start. You could look into the calendar, but with that easily comes into excuses, and we don't do that. Clearly business was kind of ramping up a bit slower than expected in the beginning of January. What would you add, Anders? I think you're spot on there, and we have not really commented anything on February in the report. Just to say that, I mean, nothing with this quarterly report that has changed our slight positive outlook for the future. Okay. That is very clear. In North America, the school ventilation is seemingly burning volumes. Can you help us understand what is defined as seasonality or normal seasonality reasoning? Also curious to hear a bit more about if you're planning to take out costs in Canada specifically, or if you keep costs at the current level, expecting at some point the volumes to pick up here? I think this is a bit of a historic question. Anders, could you help starting, and I'll add later on? Yeah, absolutely. What we have seen now for a couple of years, regarding then specifically what we do in our one of our Canadian factories, focusing on school ventilation, is that they have had no longer any seasonality. Most of these units are installed during summertime when the school is closed. We have, in the last couple of years, been producing them and selling them all year round, quite stable due to different, yeah, reasons. This year, we are back to more normal seasonality, meaning here wintertime, it's really low activity, and especially this year we have seen very low activity in that field from a production point of view. We are entering now the high season more and, we have not cut down on any costs there because we will need these people there in the production. We have a quite decent backlog and, volumes will pick up more to the normal side here during the spring and summer. Okay. That is very clear. Also, on your first impression here, you mentioned that I interpreted it that you're maybe planning to change the operational footprint a bit. How many plants are you looking into potentially discontinuing and divesting the properties of in order for? Also, do you see that you could utilize the current size of the production in Skinnskatteberg or Lithuania in order to export into some of the smaller countries where you currently have a production that is obviously not utilized enough? Thank you for that one, Carl. I think I start and maybe Anders add if needed. Let's say I think we have a healthy habit of reviewing and or continuously reviewing and trying to figure out what would be a more optimal setup when it comes to our kind of where we are present and how we operate. That is a continuing effort. If we're going to close, let's say if in a topic of closing, let's say I think the history of Systemair is that future thinking and very persistent, but also decisive, I would say. That to me, that means that, let's say if we think that we have a good plan for getting kind of to make necessary improvements, that will always be our preferred option. At the end of the day, if we would end up with the situation that we no longer believe that our efforts will pay the proper rewards, I think we will see that we are equally decisive to do something else about it. That's the one. I will not comment on number or kind of entities or something. It's kind of, it's not the right way. As I say, we prefer not to think like that. That's how I would comment on it. What would you add, Anders? I think that, covers it. Okay. Yeah. No more to add on that one. I hope it helps you with your question, Carl. Thank you. No, it's very good. Thank you so much. It's, it's clear. Thank you. The next question comes from Anna Widström from DNB Carnegie. Please go ahead. Good morning, Robert. Good morning, Anders. Just my first question is just a follow-up on the Nordic situation, because it is quite a drastic change in organic development in this quarter in comparison to the, to the last one. Could you maybe give us some way of sort of understanding what has happened during this quarter, if it's something in the market or something how you've been working or differences in project volumes, et cetera? Would you take that, Anders? Yeah. If we I mean, we have commented a little bit on the different countries here in Sweden. I would say outlook is still positive and we have done several changes in the market, in the sales organizations. That's really positive. Norwegian side, I wouldn't say that anything has changed in the outlook compared to the previous quarter. We are installing new machinery there, also interrupting a little bit the business by right now. We are hoping for to see, you know, a recovery in the residential market, but nothing really changed. The Danish market, I would say maybe a little bit tougher than we have heard before. Mm. More competition, I guess, in a slow market right now. Maybe if you seek for something that has changed a little bit, so slightly more negative in Denmark than currently. Mm. Okay, perfect. Going into the IT project, which is now finished, how should we think about this from sort of a cost perspective or margin perspective? Is that something that should be good from a cost perspective already in Q4 or good for margins in some way, or? Of course, we do this with the ambition really to be more efficient in our work processes, and we will also, with this as a base, we will continue to roll it out further on in our group. We have 62 entities covered by the same ERP globally, and I think that makes us rather unique in the industry also. We have a minimum of adjustments in the system, so we try to run it quite standardized also. Regarding cost, pure cost, I mean, these IT companies right now, it's not like they are lowering costs, rather the opposite. Cost-wise, you won't see any huge effect from that. Of course, as we continue to standardize our ERP platform, of course, step by step, there's small decreases in cost. I think one thing to point out is that, let's say, in this context, I would consider myself a bit new still to the company, but I'm impressed how much of internal resources has been used for doing this. I think that's a great thing, kind of creating internal capabilities that can be used for kind of the deployment and further improvement of how we use these systems. I think that's a factor to include also. Perfect. Very clear. Going into the ongoing investments that you have in several countries, what is your view on the current CapEx level? It was down now year-over-year. How should we think about that going forward? Are there plans to invest further or less into facilities or projects as these ones are finished? We constantly do capacity investments and machinery upgrades, also which leads to more efficient, energy efficient and equipment. That will continue. I think now we have last year was quite a record year when it comes to CapEx, so we have invested a lot in capacity. I wouldn't say that we have any clear need for factory extensions so, and so forth that we see currently. We have a good base, and we are investing both, you know, in any market really for the future. I think we are quite well invested currently. I would expect something that would be a little bit lower than it has been really. Great. If you could give us an update on the Menerga situation, how's the operation status, and do you think that you're on track on the full year cost savings? Yeah. On the, on the Menerga side, I would say that things are going according to plan, step by step. We are doing improvements. The, I mean, the production has been moved and so on, and we are, we have scaled down our operations in Germany, and we are building competence and hiring people in Slovenia, where we are now doing the manufacturing. Step by step. Still, I think there are efficiency improvements to be done also in the production side here. It will continue, and it will come. I would say things are developing in the right direction. Perfect. Just the final one, from my side to you, Robert, on M&A. What's your view of the pipeline that you've sort of taken over? Could you repeat? I did not- M&A. Yeah, I heard. Do you mean I think you said what's my view on the pipeline? Yes, or some kind. So, uh- Broadly, if you have anything else. No, no. Sorry. I just want to make sure that I answer the question you. Yeah I think, yeah, let's say we are quite active. I think we have a healthy pipeline. I think they are also, let's say, very relevant for Systemair as a company. Then, let's say, the big question is, of course, are we going to make all these ends meet, meaning that the kind of target should be available. It has to be a strategic and cultural fit to Systemair, and we will need to agree on a price. You know, this is, this could be challenging. Time factor, I wouldn't say anything about that, but healthy, and we are active. Perfect. That was all my questions. Thank you so much. The next question comes from Adela Dashian from Jefferies. Please go ahead. Good morning, gentlemen. Just two quick ones from me. A lot of my questions have already been asked and answered. Could you speak about the price dynamics as we enter into the next season? Is it going to look very similar to last year, or are there any changes in that front? I think I hand that one over to Anders because it concerns about the history. Yeah. Now we're not on M&A, I suppose. This is all on. No, no, no. The operational mix. Price. Yeah. All right. Good. Just so I understand you clearly. I think right now, since we see a lot of increases on the raw material side, we are currently reviewing prices at the moment. I would expect some price increases to be implemented going forward. but that's in the middle of the discussions right now, and nothing's really yet decided. due to raw material price increases, we need to evaluate that. Let's say this is, this is what we do, regularly, so nothing really exceptional, I would say. No, no. Three to four times a year we are reviewing that. Okay. Are we talking about low- single digits? Yeah. Even higher than that? No. I would say so. Low- single digits. I see. Okay. Thank you. Maybe you've already covered this, I was a bit late to the call, is the situation in the Middle East affecting your business units over there at all? Yeah. First of all, I think it's kind of we think about first of all, whatever you see on TV, it's really. It's we don't nobody of us want, would like to have this kind of seeing this news coming at us. Our next thought is, of course, with all our employees, their families, and also our long-term partners in the area. That's my first thing. Looking at Systemair, we have a bit less than 100 people in the Middle East, meaning then most of them in Saudi Arabia, and then equally some equal distributions between United Arab Emirates and Qatar. I think as you also know, most of you, that we have a factory in Saudi. If you put the numbers together, it will be like we have 5% of our net sales in the area. It's really a volatile situation, and we are continuously monitoring this one, but it's really hard or let's say it's too early to say what would, what the outcome will be. We continue to monitor it, and we really hope it will calm down soon. I understand. I meant, else any- I know it's a sensitive topic, but are your factories at this point in time, are they still fully operational or have there been any closures? We have one factory in Saudi and it's located in Riyadh. We have kind of calm still. Nothing to report on that one, I would say. Okay. Perfect. Thank you so much. Mm-hmm. Thank you. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments. All right. Thank you very much. We have one written question here. It's regarding our operations, or our acquisition in India. Robert, how will that impact future growth and profits? Let's say we. The purpose of the acquisition was twofold. The first one would be to build a further presence in the local Indian market. I think it was a meaningful addition from this point of view because now we are, like, 1,000 people in India, which is a long-term growth market for us. That's the first one. The other one is that we add capabilities as a group, kind of with acquisition, we add capabilities of further developing our business that is targeting the industrial segments. We're really happy with that also. These are the two dimensions. We were also happy that the starting point for this business is that they were operating at a higher margin than System air G roup, Systemair as a group, as a whole. That's the starting point. Of course, we would like to see, we have ideas how to explore these opportunities going forward, but typically we don't disclose any details around this. Anything to add to that one, Anders? I think it's, pretty clear. It's a very interesting market. Mm-hmm. Yeah. I don't think we have any further written questions in the chat either, so I guess it's time for us to conclude the conference. We hope to see you next quarter report, 10th of June. Anything else to add here, Robert? No. Mm-hmm. Just once again saying that, I'm really happy being at Systemair. We believe that we have good opportunities for long-term profitable growth ahead of us. Thank you very much for your attention. Thank you. Bye-bye.