Hello and welcome to presentation Troax Group AB Q4 report 2023. My name is Melissa, and I will be your coordinator for today's event. Please note, this conference is being recorded, and for the duration of the call, your lines will be in a listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0, and you will be connected to an operator. I'll now turn the call over to Thomas Widstrand. Please go ahead. Thank you very much. Thanks for the introduction, and thank you for listening in. As usual, I will follow it with the presentation, which should be on our web page, so Troax.com, and you will find it under the headlines of Investor. Under Investor, you will find our reports. Obviously, the report that we are talking about today is the fourth quarter. I think it's only this time on the web page in English because there were some issues with the Swedish one. If you have any problem with the Swedish, you have to contact me later if you need some translation or so. I will follow this pattern or this structure. As usual, I don't think you will have any major problem to follow my comments, even if you don't have access to this report. I'll go straight into the presentation. For you who are following it, I will jump quickly to the third page because there the introduction of what we are doing can be seen. The biggest segments that we are working with in Troax is what we call machine guarding. For 2023, we had 64% of our turnover in that part. The year before, it was 65%. I wouldn't say that it's changing a lot. As you see from the picture, we are obviously then supplying solutions for customers who have some sort of potential hazardous machines who can then create problems for people who are working in this environment. If we go to the next page, we come to the next segment, which we call warehouse partitioning. It was around 24% of our turnover this year. What you see from the picture here is also what we do. We sell a lot of solutions for people who are building warehouses, everything from traditional warehouses where we supply everything from shelves and back racking or anti-collapse systems to dividers, what you see down in the right-hand corner of this photo. What I will normally discuss a little bit later is a combination of machine guarding and warehouse partitioning, which we call automated warehouse, which is a combination of warehouses, which is the primary, let's say, installation vehicle. But we normally use then the more machine guarding because the safety level is higher than in an ordinary warehouse. Then I jump to the next page, which is called property protection. As you see from the picture there, we're not talking about hazardous goods or hazardous areas, but we're talking about simply then that people like you and I, we, of course, in our cellars, especially in the northern part of Europe, we want to contain then our bicycles or skis or something, some sort of enclosed cage when we don't use it. So in the cellars, or in some cases, attics, these are then being installed. This is approximately then 12% of our turnover in 2023. Next page is an example then of the automated warehouse. And we have a, let's say, a sub-segment there called safety on all levels, which obviously means then that a lot of our big customers here, they do very big installations. In many layers of shelves, which they install, they normally need then both the shelves, which is more, I would say, of a commodity. Then they need these kind of safety levels, which is also then combined with some sort of sorting equipment or transport equipment, which potentially then could be dangerous for people who are working there. And this, I think, we do in a quite successful way, even if, which I've said now for some time, the demand in this, let's call it, sub-segment called automated warehouse is not so high at the moment since we, as consumers, are not buying too much from e-commerce compared to before. Excuse me. Now we're getting into something also, which is for us a bit new. I've talked about it a couple of times. But if you look at the next page, which is called active safety, where we then actively prevent accidents, we bought a small company in Spain one and a half years ago, which then uses sensors on people. And then there is a sensor also on the forklift truck, which means then that the forklift truck will automatically slow down if they approach then someone who is in the vicinity, even if the person cannot be seen. And this is something then, of course, which we are working with actively right now. And the idea is, of course, then that we go to customers who are already buying our, let's say, core of our solutions, and we add this kind of potential add-on in order then to become an even more full-fledged, so to speak, solution provider for these kind of customers within this segment. If you allow me to jump to the next page, we have what we call a year in brief, some sort of summary. As I said before, it has not really changed a lot. But you see then that if you look at the first chart there, you have the Sales per region. And you see then that actually the mainland Europe, which is then, I'll call it, Europe, excluding then the U.K. and the Nordic regions, actually then diminished a little bit, whereas then the Nordics and the U.K. is then increasing. Not U.K., but the Nordics is increasing. So also U.K., because we've had a number of big projects in 2022 and also before that, that has not been present in 2023. Partly, this is due to the lack of demand with the automated warehouse. U.K. then have a lower demand in 2023. On the other hand, we have new markets, which are increasing. Even if it's still on a low percentage of our turnover, our aim is, of course, that it should continue to increase. For 2023, it's increasing with a few percentages, which is in line with our expectations. Going down to the figures themselves, which you already have seen, unfortunately, we have seen a reduction of the order intake and also of the sales compared to 2022. That is because that during 2022, we had still a number of these projects for automated warehouses that were delivered and invoiced, and those we haven't had for 2023. But if you exclude then the influence of automated warehouse, which will come back at a certain stage, I will touch on this a little bit later, then I would say that the core of our business is still growing also in 2023, albeit not on any impressive figures. But the core of our business, excluding this, is growing in 2023. And that probably shows a better, let's say, description of how we normally are developing because the huge increase which we had during 2020 and 2021, coming from partially then that people were investing a lot in these automated warehouses, was not, as you know, long-term sustainable. So we had a big peak in 2020, 2021. And then, of course, we got a bit of a stabilization in 2022 and a reduction in 2023. And this is what makes then the figure. To show a little bit more negative, despite the fact that we over a long period of time have had organic growth in the range of 8%-10% or even 8%-11% over a business cycle per year. But the positive thing is, of course, then that we already have improved our results both in absolute terms and also in margin. So I think we are more or less back now to where we should be, both in the gross margin and also on the operating margin, especially seen on the EBITDA level. So with a little bit more volume, we would have I don't think we would have had any problem to exceed the targeted 20% for 2023. Now we ended up with 90.6, which is not exactly where we want to be, but I still think it's on the acceptable level. So regarding dividend, which I also will come to, as you see, there is a proposal for the annual general meeting to do at least a small increase of dividend. And that, I think, goes without saying then that this explains a little bit then that both the board and the management in the company sees then that there are good potential for future growth and, of course, for future growth in earnings. With this, I jump to the next page, which is more of a summary of the long-term figures for those of you who have not been around. So we're just putting 2023 in here. And I've already explained then what happened, I think, 2023 compared to 2022. So I don't go into that in much detail. But you see that on the result side, it's going up. Whereas then on the turnover side, it's going down a little bit. With this, I jump to the next page called financial targets. It's more or less some sort of summary of 2023. If we look at then the organic growth, we should have an organic growth which is, of course, higher than what is the long-term market trend. The market trend or the market demand is expected over a business cycle to increase with some 4%-6% per year. It has not done that for 2023. I think in the best of cases, it's been zero. But because of our dependence then on the automated warehouse, it's actually then decreasing this year. We are close on the operating margin, which is the next bullet point. On the capital structure, you probably know also that we have a very good net debt situation in relation to EBITDA. So we should be if we should not exceed 2.5. Despite the acquisition that we did in December of Garantell, which for us is a good potential strategic investment, we are at 0.9 now at the end of the year. Regarding dividend, our proposal is to pay out approximately 54% of the net profit of the company. Going to some sort of more oral comments called summary of Q4 2023, which is the next page, I would say that Q4, if we take that a little bit isolated, is what's characterized by a continuation of the lower market demand that we've seen during the whole of 2023. This is then mainly then again, sorry to repeat myself, but this is mainly then coming from this development with automated warehouse customers. We started already in 2022. We noted a stabilization in Q3. It has actually continued but on a low level also in Q4. In Q4 then, we were a little bit negatively hit by two, let's say, trends. Or maybe trend is a little bit too early to say. There was a lack of activity, especially on the order side in the building sector in the Nordic region. That's something which we have seen coming around the corner since, obviously, then the new building in the Nordic areas and also in the other part of North Europe, where we are strong in this area, has more or less diminished with substantial percentages compared to before. That will, of course, I think, be maintained during 2024. So we have no reason to see any immediate improvement there. I think, on the other hand, we're going to see then sustainable low demand during 2024 for this sector. However, I think we have other possibilities to compensate that. But just regarding talking about the building sector, that would be a little bit weak for 2024. And then, which also is not quite common for us, there were a little bit of absence of bigger project orders generally in the Q4. And I especially would like to point out that the automotive demand in North America, which previously has been on a rather strong level, was quite weak in Q4. It was better in Europe for automotive. But for North America, it was, I would say, rather weak. We do expect it to come back now in Q1, Q2. But again, for Q4, it was a little bit of a weak point, I would say, from the order point of view. Again, I want to repeat that the rest of the market generally seemed to continue to have a stable activity level. We don't see any reason that there should be a big lack of demand with the exception then of the building sector, which I already said. And for the automotive sector then, which I've already mentioned, we think it will come back in North America, let's say, during the first half year at least. Steel price, which has been fluctuating, as you know, in the last couple of years a lot, is rather being stable in quarter four. And for the whole year of 2023, it was actually reducing a bit. This was, of course, helping also to come back to, let's say, the level of EBITDA or operating margin that we want to have. So that's a good thing. What comes forward, we don't know. But of course, we can never assure that this will be maintained, as I mean, there are some geographical or geopolitical problems which might come up. And then it could stir, of course, this stability. But at the moment, as per the end of the year, it was quite stable regarding the steel price. So with this, we have shown you then that we return now not only for the quarter four but also for the whole year to, I would say, rather decent levels on the operating margin. Despite the fact then that we would have liked to have a little bit more volume going through our manufacturing units, we have done some reduction of costs, of course, to compensate for this. I think that's been done in a good way during 2023. Of course, if you would have been able to wish something, you would have liked to have a slightly higher volume going through the manufacturing. Nevertheless, we have achieved then the targeted level on gross margin. The positive, when we talk about volumes, which I already commented, was continental Europe and also the new markets, which were quite good, I would say, in Q4. It's not so that it's some sort of general decrease in demand. I would say that there are some segments of the market and some geographical aspects which have to be taken into consideration. But for instance, in the new markets, I think that without giving any forecasts or anything, but I think that the demand in new markets seems step by step over a longer period of time to improve. And I don't see any reason why that shouldn't continue to improve going forward. Adjusted earnings per share, 0.16 EUR. Working capital is on a lower level. You've seen this also. We've reduced to balance, of course, the lower demand with the automated warehouse. Cash flow was strong in the quarter. Even if, of course, if you look at the net cash, it's, of course, negatively influenced by the cash-out acquisition of Garantell. And coming to that, you probably know, which we have informed about, that as per 1st of December, we acquired then Garantell, Swedish-based, but we call it European-focused manufacturer of mainly anti-collapse systems and shelves. I mean, on paper, it looks like it's a clear competitor of Troax at etc., of course, in some ways. But I would say it complements us in a very good way. So we have different ways to market. Partly, it's a different customer segments or customer list. So I think we complement each other in a very good way. We acquired company then Garantell. We'll maintain its brand name and its manufacturing, etc., as we want really to develop that as a separate organization. It adds approximately EUR 30 million in turnover. And as I already said, then we're quite happy since it complements then the way of selling, the way we go to market. Troax is selling a lot with own sales companies, selling a lot with advice and recommendations and so forth. Whereas Garantell is selling a lot more from a small central headquarters and, let's say, being more oriented towards the customers who want then a little bit more easy solution. And they can contain their own advice in a more simple way. Talking also about what else we did in the quarter, we have finished the building work for yet another expansion then in Hillerstorp, Sweden, which still is one of the main manufacturing units from a volume point of view. We are also in the process of expanding the manufacturing capacity in China outside of Shanghai. So we are closing the old factory we had there, which we had for some 10 years. Due to the fact we need to increase then the capacity, we are moving to new buildings and also investing in new capacity in China, which I think is a good sign for the whole region for the future. In Poland with Natom that we acquired, as you know, a couple of years ago, we will now, let's say, in April 2024, we will move all our activities to a complete new facility that we bought in connection with the purchase of Natom outside of Poznań on the western part of Poland. So the old manufacturing unit will now finally be closed, which will have a good effect then in a positive way, of course, on the cost side in that company. Going to the financial highlights, I don't intend to go through that a lot. I mean, you can read for yourself. I already mentioned that we think then that the order intake was a little bit on the weak side, even if we don't see any general lack of demand or something which has happened. We think it's more that customers are perhaps a little bit postponing things until things get a little bit more stable or interest rates are coming down or these kind of things, which, of course, influence their decisions. Gross margin, good. EBITDA, I would say, also on a good level. So nothing more to say about this for the three months. On the 12th, we have a similar development. So I would say then that the figures, what we tried to convey to you being shareholders or investors or analysts, is then that it's been a rather stable development during both Q4 and the year. Nothing really big things have really happened, I would say. Let's see about 2024 what will happen. But that's still lays in front of us. Going to the regional development, next page. And as I said before, you see for the three months regarding orders that we have positive development in what we call continental Europe and new markets, whereas we have quite negative then in Nordic region coming from the building sector, U.K. coming from a lack of these big project orders, which mainly coming from automated warehouse, not entirely. And then in North America, I would say rather substantial decrease coming down from a lack of products with the main automotive companies there where actually we are quite strong in now. And this refers mainly, I would say, for this quarter to negative development in the Folding Guard region. Whereas for Troax, so Troax brand, we are doing more similar figures than compared to last year. Similar pattern you show in sales. But it's a little bit different because, of course, what you saw then in the Nordic region is now seen on the order side. And that will, of course, over time hit also more on the sales side during 2024. But for the fourth quarter, it has not yet materialized that much. So the figures in sales invoice is better than on the order side then. So if you look at the whole 12 months and compare that with the year before, we've had then a 7% decrease excluding acquisition. I think there are maybe 1 or 2% then of price effect. But basically, you could say that there is a 5% decrease then in volume, which, of course, is nothing that we are aiming for. We think there are good chances then to, as soon as the market will at least slightly return, come back to the ordinary growth figures, which we are usually having. As some conclusion, next page, there are still a number of imported orders in all segments, also automated warehouse. We do see then that the customers have very good faith in us. We continue to have a good will in the market. We don't see then that there's been any losses or customers that went away. Also, on the contrary, I still think that the inflow of new customers is on a healthy level. Positive development in result, I will explain, despite then the utilization levels in our manufacturing units. If you exclude then the automated warehouse, I would say then we've had a decent or at least a stable activity level. We are still growing then on the core, let's say, of our business, which is a good and healthy sign for the future. The expectations are that in the margin on automotive and also in the warehouse sectors will start to increase again during 2024, 2025. When we talk about the automated warehouse, we've been informed before by the customers, these kind of big international customers, that we should expect that the products will start in the beginning of 2024. We've always, at least internally, been a little bit hesitant to say that this will probably be delayed a bit. Now, I think we got confirmed that in practice for us, this will probably start earliest by the end of 2024 or by the beginning of 2025. On the other hand, we do see that there are very good potential for that the demand here will come back to very good levels, perhaps not to the very extraordinary levels we had in 2020 and 2021, but to very healthy and, I would say, for us, very interesting growth levels in the coming years. Even if we are not talking about the growth then in 2024, I would expect then that we will start to come back step by step during 2025. And we did an important acquisition, which complements us in a very good way. This concludes then a little bit then the figure point of view. So I would just round off with the more general presentation. So the growth factors are on the next one. And they are still valid. Nothing has really changed there. We do see that the increased industrial automation and the growth in e-commerce over time, at least, will give a healthy growth also potential for us. Onshore and manufacturing, we see some of that coming in now in quarter four, not to any major extent. But we do see that people also in Europe are starting to move back more manufacturing, especially from Asia-Pacific. Next page on production units, which is a summary of that. Now, we have just the information added then the Garantell one on the right-hand corner up to the right. And we have just written at least the capacity for shelves. So you can see then that we have a good machine capacity for further increases then on this specific product unit. For the rest, it's more or less a little bit stable, I would say. There are some increases here and there. Generally speaking, we have decent capacity utilization, even if we wanted it to be slightly higher in some cases. We do still have a good capacity, which means then that when the demand starts to increase, we have a healthy reserve capacity for doing increases with rather short lead time. Next is just a summary of then different brands that we're operating with. I'm jumping then to the two pages for what is called for a safer tomorrow. Just want to cover this a little bit. Not want to put a lot of effort again on the same things as before, but want to draw your attention then to what will be a requirement at the third stage for all bigger companies, including Troax. The last point there, bullet point, and we will start reporting according to the CSRD directive. We will start according to the 2024 report. Maybe this will be until 2025. But I think we will start, in any case, with reporting on a certain level in the 2024 and in a report just to get acquainted a little bit with the requirements that are put up. Otherwise, the rest is more or less the same as before. We are continuing to work, I think, in a structured way with both quality levels, environmental issues, and also, of course, the personal-related things. As before, we continue with R&D. We are certified. We are protecting people, stop-again processes. I think we are a very clear alternative for the customers who want to have then a full-fledged solution provider in these important sectors, which is part of what we call safety and security, mainly safety, not so much security, but in that area. We are, of course, in a niche of that market where we've been the original since 1955. We intend to continue to be in the leading company in this sector. With this, I'd like to, as usual, end up my presentation. I wait eager for your questions since we now move into the Q&A sessions before we end this little conference call. Please come on with your questions. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question for any reason, you may press star 2. You will be advised when to ask your question. We do have a question from Zino Engdalen with SHB. Please go ahead. Yes. Good afternoon. Thanks for taking our questions. I'd just like to start on or go back to the order intake. You say that you see no major decreases in demand, except, of course, the Nordic area and automotive in North America. Just in general, do you expect to see maybe more orders coming into Q1 than Q4 for any timing effects or similar, more short-term postponing, so to say? No. The simple answer to your question is no. I don't see that. On the other hand, there is some truth in what you are saying, so to speak, because normally, we get a number of these what we call bigger project orders every quarter. And we had, I would say, there were rather few of them in Q4. So with this in the back of your head, I would say, yes, we are expecting, in general, more products to be both in Q1 and Q2 because that's what normally comes in. But it's not related to that directly. Customers have postponed any products. So it's not related to that. I think it's more maybe coincidence or could be, of course, that customers are just postponing because what I was implying, at least then, that they are waiting for things to stabilize or that interest rates at least start to come down a little bit, which means then that they might be more brave to start new projects. Okay. Regarding North America, could you give some kind of indication how large the automotive area and then how the other end markets in that region is performing? I would say automotive is in the US, if you exclude then the automated warehouse, which for 2020, 2021, and partly during 2022 was the biggest single segment in the US. But excluding that segment, which has a little bit of a strange development now in the last couple of years, automotive is the biggest segment that we have in the US. We are quite strong in that sector now, especially with the purchase brand of Folding Guard. We've increased sales during some years now. So I don't want to give you any direct figures. But as a segment, it's quite important. And we are quite strong in that. So unfortunately, then when these kind of customers are not doing a lot of investment then during the quarter, you will clearly see it in the figures like this. In the other way around, when they do investments and we get orders, you will also see it in a positive way. Understood. And looking at the gross margin for the first quarter of 2024, how should we think about it given the events in this quarter and if Garantell has any mentionable effect? Yeah. Good question. Normally, it is so that we think that this gross margin that we have right now is quite sustainable. There are no real price effects in Q4. There are no major effects which are influencing. Even if I'm perhaps complaining a little bit that I would have liked to have a little bit more volume going through our units. So I would say that the margins that we have in Q4 and actually during Q3 also is showing roughly where we are. It's not really influenced by neither any big negative effects or any big positive effects. So I would say it shows plus-minus what the situation is at the moment. So going forward, without giving you, of course, any forecast, but if only the volume will be maintained on this level and we don't get any more major lack of demand or so in the market, I think we have a very good potential of keeping the margins on the levels that we spoke about recently at this level, even if the purchase of Garantell, technically or mathematically, whatever way you want to take it, will slightly reduce the margin because these kind of company have, by definition, a lower EBIT margin. So on the whole, you can expect then that everything else equal, if we are not able to compensate with improvement in other areas, the group margin can decrease with somewhere between 0.5% and 1% just because of the acquisition. Very good. Thank you. I'll get back in line. Thank you. Thank you. If you'd like to ask a question on today's call, please press star 1 on your telephone keypad. And we have, I'm sorry. We do have one more question coming through. Anna Widström from Carnegie, please go ahead. Hi, Anna Widström from Carnegie. Your line is open. Please go ahead. Your line may be muted locally. Sorry. Can you hear me now? Yeah. We are. Yes. Please go ahead. Yes. Hi. It's Anna from Carnegie. Sorry. Hi, Anna. My first question is regarding the notion that you've started to see some effects from the onshoring. Is that related to some specific segment? Yes. It's mainly to machine guarding. Okay. Perfect. Thank you. My second question is regarding the Troax Safety Center. That's quite a big part of your business model. How is your focus going to be on the R&D for the Garantell group? Good question, Anna. Now, we think that we can add something on the R&D side also for Garantell. Garantell has very good products and have creative persons doing R&D. But I think there are putting organizations together with a bit different backgrounds can create even better product for the customers. So not taking too much time to talk about all the details here. But in summary, I would say that I can only see a huge potential in this, that we can bring out better, more efficient products for the customers, and which also will be maintained from a profitability level from the group, etc. So it's positive. Great. Thank you. And my last question is regarding the M&A focus going forward because obviously, you've strengthened your position now in Europe. Do you have a focus area going forward? Yeah. It's naturally so that the purchase of Garantell increases the dependence on Europe. So if something interesting comes up in Europe, we would still be interested. But if we talk about priorities, it's still so that the first priority for acquisition, if something comes up, is North America. We're very keen on doing further acquisitions there of different reasons. And then coming up more and more is that since the market in Asia-Pacific is starting at least to grow a bit, even if it's a number of years behind both Europe and the United States, I think we are more keen compared to a couple of years ago to do also some sort of acquisitions there. So if I can just choose freely, I would say that the priorities are very clear. It's one, North America; two, Asia-Pacific; three, Europe. Okay. Great. That's all for me. Thank you. Thank you, Anna. Thank you. Our next question is from Daniel Lindkvist with Danske Bank. Please go ahead. Hi, Thomas. Hi, Daniel. Just a few quick ones from my side. Starting off with Garantell, now they're entering the order book and the order intake. How should we view that? Will their orders turn up in the order book, or are their lead times shorter and the cycle from order to delivery will happen during the quarters to a higher degree than in the other regions? Yeah. Garantell is very similar to what we have in, let's say, the ordinary core business of Troax. So it's a very short time between quote or orders to delivery. So normally, if you get an order in one quarter, it will be delivered in the same quarter. So you won't see any major, I think, let's say, jumps between quarters or so. You will have a rather even development from that respect. Okay. Okay. Great. And then in North America, for the deliveries with your ordering intake from Q3 and then deliveries in Q4, from what I find, you should have some backlog with you going into Q1 and Q2. Is that the case? No. That is correct. It's correct. It's not a huge backlog, but we have a certain backlog. So that's absolutely correct. Yeah. Yeah. And you came to fill the backlog with the continental Europe and Nordics, but you still have some in the other areas, perhaps? Yes. No. Yes. No. Yes. No. Yes. Correct. Okay. Perfect. So just to understand the correct event, for the Garantell, you should not expect to have one quarter of the yearly sales in the order intake or in the order book entering a new quarter. No? No. You will have a fairly even order versus sales invoiced delivery process. Okay. Perfect. And then earlier on, you talked about smaller customers being more active than the larger ones. And in this quarter as well, it seems that major decisions from the bigger clients are having longer lead times. Yeah. When we talk about automated warehouse, you're absolutely correct. This was seen once a day. We got orders also in automated warehouse in Q4. But we still didn't get these big projects or big orders coming mainly from these big international customers. So it's more smaller and medium customers who are giving order in this area. So that's correct. Okay. Perfect. So little drama, as usual, then with the report. Yes. No. I wouldn't say it's too big drama. No. I don't think so. Perfect. Thank you so much. And have a nice weekend now, Thomas. Thank you, Daniel. Thank you. Great. Thank you. As a final reminder, if you'd like to ask a question on today's call, please press star 1 on your telephone keypad to register your question. As we have no further questions coming through, I'd like to turn the call back over to Mr. Widstrand. Thank you very much. I appreciate, as you know, your interest and your willingness to listen to me. I'd like to invite you again, of course, on the 22nd, I believe it is, on April in connection with the annual general meeting because then we're going to present the Q1 figures. Then, of course, I will have the opportunity to talk to you again. Unfortunately, it will be my last conference call. I'm looking forward and to hopefully end that in a nice way. As you have seen, I've got, I think, a very good successor, which, of course, then I will try to introduce at the same time. I'm sure that they will continue to do the development in an even better way than we've been able to do. Thank you. I'm looking forward to talking to you again on the 22nd of April.