Hello, and welcome to Bulten's presentation for the first quarter, 2023. My name is Ulrika Hultgren, and I'm in charge of corporate communication and investor relations at Bulten. Presenting the report are Bulten's President and CEO, Anders Nyström, and our CFO, Anna Åkerblad. As usual, you will be able to ask questions after the presentation, both on the web as well as in the telephone conference. The agenda for today will be a brief overview of Bulten, the market development, the results for the first quarter, and finally, some words about our focus going forward. I will now hand over the word to Anders Nyström. Please go ahead, Anders.
Thank you, Ulrika, and let's go to slide three in the deck for an overview of Bulten. As most of you know, Bulten is a supplier of fastener solutions. Our primary customer group is light vehicle and commercial vehicle OEMs, but customers categorized as automotive suppliers and customers outside of the automotive industry are continuing to grow their share of our business. It's important to know that we don't just supply hardware. To many of our customers, we're a partner for product development support, innovation, procurement, and logistics. Bulten's three largest customers are still Ford, Jaguar Land Rover, and Volvo Cars. They are and will remain important, but we have a group of new customers, strong growth in our base, and that's something we welcome.
2022 full year sales reached close to SEK 4.5 billion, which is a 20% year-on-year growth from 2021. Turn to slide four. The vehicle production outlook provided by GlobalData, formerly LMC Automotive, shows small movements from the last revision. Despite high inflation, interest rates, and somewhat deteriorating consumer confidence, the outlook shows a fairly solid growth for the remainder of 2023 of around 4% for light vehicles and 6% for heavy commercial. This means that global sales trends should give Bulten an expected 4.5% growth in 2023 with the market sector mix that we have. The growth is forecasted to remain at this level into 2024. It should be noted that there are regional deviations as well as deviations between OEMs. Turn to slide five.
The most important raw material for Bulten is steel wire rod. The prices for steel wire rod have now started to weaken, which is favorable for our margins as customer price adjustments are made with approximately one-quarter time lag regardless of the direction of the change. This means that in times of decreasing raw material prices, we do get a certain margin improvement. Turn to slide six. In terms of energy prices, we have to assume that we'll face continued uncertainties. Prices have come down from its peak in the second half of 2022, but the cost of electricity in Europe is still more than double compared to the old normal about 2 years ago. Energy efficiency is a key priority for us when we invest in our plants and machinery. Slide seven.
One highlight in quarter 1 was the grand opening of our new surface treatment plant in Poland. We'll come back to that in a minute. We're progressing the actions we announced regarding our manufacturing and distribution footprint in Europe with the wind down of the Pembroke plant and one of the Swedish warehouses. The increased ownership stake in TensionCam was an important move, which I'll also come back to in a minute. The celebration of our 150th anniversary was and continues to be a cause of pride and joy throughout the company during this year. Slide eight. As many of you know, Bulten acquired a minority stake in the startup company, TensionCam, back in 2020.
We did it because we believe in their technology, and that the combination of TensionCam sensors and Bulten's broader knowledge of the mechanics of threaded joints is a great combo to optimize the technical solution, as well as providing customer value. Since 2020, we worked collaboratively on getting the technical solution ready, and as we are now going into commercialization, Bulten took a majority stake in the company, which is a logical step for us. The technology does is that it enables real measurement of the clamp force achieved when torquing a bolt or nut. Clamp force measurement is really the Holy Grail to understand the health of the joint and preventing it from coming loose and cause excessive maintenance costs or even failures. The early pilot projects we've done with a number of customers to date confirm the functionality and the market demand.
Slide nine. Our new plant in Radziechowy-Wieprz in Poland was officially opened in January. Production is now being ramped up, which means that we're gradually moving outsourced plating operations from our supply base into our new state-of-the-art facility. The new plant is a game changer for us in terms of cost efficiency, flexibility, sustainability, and inventory levels. The real estate around the plant also allows for further expansion on an as-needed basis for additional manufacturing operations in the future. Next slide. This year, as mentioned, we do wanna recognize our 150th anniversary. Bulten was very much part of the Swedish Industrial Revolution when it was founded by Gottfried Rystedt, Nils Pettersson , and Herman Friedländer back in 1873.
It's good to know that this company is as vital as ever, growing in all three regions and moving our boundaries in terms of our customer groups, our product capability, and being a sustainability leader in our industry. With those words, I'll leave the stage to Anna for the financial results in the quarter.
Thank you, Anders. On Page 11, you can see an overview of our quarterly sales the last years, including 12 months rolling sales. Sales was increased in the quarter with 34% compared to same period last year. Bulten delivered the fifth quarter with sales above SEK 1 billion, showing a positive trend. Next slide, please. According to the waterfall, you can see the positive growth in rolling 12 months in all customer groups. On the right side, you can see that as a proportion of the year-to-date sales as of the first quarter, sales to other industries outside automotive has decreased in percentage compared to last quarter due to seasonality. Our main customer group, OEM Light Vehicles, had a good growth in the quarter and amounts to 68% of total sales. Next slide.
The first quarter delivered a strong EBIT of SEK 116 million, equal to 8.4% EBIT margin. Compared to last year, we had an adjusted EBIT margin of 7%, excluding one-time effects from divesting our Russian business. The EBIT margin is already at the level set for our strategy target of 2024. Next slide. On Page 14, you can see that our earnings per share amounted to SEK 3.56 in the quarter compared to adjusted numbers last year of SEK 2.07. Next slide, please. Cash flow from operating activities, including changing working capital, amounted to SEK 196 million in the first quarter. Cash flow from investing activities amounted to -SEK 40 million in the quarter. Cash flow from financing activities amounts to -SEK 216 million.
Total cash flow for the quarter amounted to - SEK 60 million with a cash position of SEK 392 million at the end of the quarter. The increase in total assets compared to same period last year relates to increase in inventory, construction of new facility in Poland, and new leasing contracts. Our net debt, excluding lease liabilities, amounted to - SEK 277 million for the first quarter. We have continued to take measures to release tied-up capital in inventory as stated last quarter. Next slide, please. Our adjusted key indicators for 12 months shows a positive trend, both compared to last year's rolling 12 months and full year 2022. Our adjusted return on capital employed, including financial lease, is at 11.9% for rolling 12 months.
Our adjusted net debt and adjusted EBITDA ratio is at -0.6 at the end of the quarter, and our equity assets ratio, excluding financial lease, is at 51.7%. Next slide, please. On Page 17, you can see our financial targets as well as some of the guidelines regarding relevant key figures for Bulten. Comparing with the same quarter last year, the growth in sales is 34%, and both margin and return on capital employed has improved over previous numbers. In the table to the right, you can see some guidelines for some other key figures, and we are very much in line with our guidelines. The guideline for average net working capital in relation to 12 months sales is at 20%-25%, depending on the growth pace.
At the end of the quarter, our rolling 12 months are at a level of 19%, which is positive. Additional measures have been taken to decrease tied up capital, as already mentioned. Increased sales also contributed. The guideline for capital expenditures as percentage of 12-month sales are 2%-3% for maintenance of equipment and additional up to 2% for capacity depending on the market development. At the end of March, the rolling 12 months level is at 4.7%, including construction of the new facility in Poland during last year. The guideline for depreciation as percentage of 12-month sales is 4%-5% considering IFRS 16. Without IFRS 16, it has been in a level of 2%-3%. We are in line with our guidelines. Now back to you, Anders.
Thank you, Anna. We turn to Slide 18 for a look into the rest of 2023, where we of course have a number of focus areas. Now firstly, we made a lot of progress in our inventory rightsizing activities, and we'll continue with it as a priority in the next weeks and months. The plan to grow into non-automotive sectors, both organically and through acquisitions, is still very valid, and we maintain our focus on identifying the right targets. As we already mentioned in this call, executing on our footprint improvements and the start of the commercialization of TensionCam are very much on the radar. We're now taking the step to rebrand our PSM units to use the Bulten name across the board, sending the message clearly that we are one company under one organization. Next slide, please.
Finally, it's appropriate to remind everyone of the strategy and our financial targets, which we stand by to be a SEK 5 billion company delivering 8% EBIT and 15% ROCE in 2024. I think you've seen that the last quarters confirm that we're on our way towards fulfilling these targets and that they are very realistic within the timeframe we set. That concludes our presentation, and we're ready for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Mats Liss from Kepler Cheuvreux. Please go ahead.
Hi. Hi. Thank you, and congrats on solid numbers again. Looking at the comments you made here on the steel price impact and so on, I guess you also mentioned that the steel rod prices have been stable, I guess should be sort of interpreted like you haven't seen so much support there yet.
Hi, Mats. I didn't quite get your question. Can you repeat it?
No, I started out with mentioning that steel prices could have been some support or could be supportive given the. Well, when prices ease and come down. Again, you mentioned that steel rod prices have been sort of stable. I just, well, wanted to get a feel for how much you have felt the positive impact from lower steel prices in this quarter, I guess, or if it still remains to be seen.
Well, I mean, there is a little bit of that in quarter one. As you can see, it started to flatten towards the end of last year and is now starting to come down. I'd say that the improvement we've seen now is from the balancing of the pricing. You know, flattening at the top of that graph means that we are sort of in phase with between customer pricing and costs at this point. That of course gives us a margin improvement compared to quarter four last year.
Mm-hmm. Well, just to get a feel for the seasonality here, I mean, historically, I guess my... If I remember right, the second quarter usually is a bit, well, seasonally stronger than the first and, well, the strongest of the year. Is there any reason to believe differently this year?
Not really. The seasonality sort of stays the same, more or less. We see stable volumes going forward, we could say.
Sorry. That to get a feel about the TensionCam there. It seems like an interesting opportunity for you. Well, haven't sort of got the full sort of information that I probably need. Is this a move that you expect to gain market share from, or is it something that you do to keep the position you have? If you could sort of make some comments there, please.
Yeah. With TensionCam, we're actually entering into a completely new market where we're not at all, we're not active there at all today. I believe that the market demand is substantial. There hasn't been really an affordable technology to do this in the past. There are competing technologies, and they all have their pluses and minuses. What we think we're offering to the market now with TensionCam is a very good value proposition to monitor and measure clamp force. I mean, there is no real sort of estimate of the size of the market out there that we could sort of latch on to or there's no official data of that market. That it's substantial, we are fairly certain.
The time it will take to really get the technology out there, market it, make it known to the players who would be requesting it, of course, that has to be seen. We have a plan and it's early days. We're starting to commercialize it as we speak and it's surely very exciting.
Sounds great. Well, just, yeah, I mean, you it's the second quarter now you're trading above the 8% target, I guess you expect the second quarter to, well, look pretty good anyway. Is there any reason to indicate that you're ahead of the 2024 target or is it sort of too early to say?
We don't give forecasts. I'll leave it up to you to drive the conclusions, Mats. I think you can at least come to the conclusion that the target's within reach. We know that there's a certain seasonality over the year where, you know, quarter three is a little bit weaker because of customer shutdowns and vacations. You can clearly see it's within reach. What seemed like a very ambitious target three years ago when we set them and published them back in 2020 during the Capital Markets Day, as you remember, we've come a lot closer.
Mm.
Yeah, I think that's a conclusion you can draw.
Yeah. Yeah, it looks like that. Thank you very much.
Thank you, Mats.
The next question comes from Kenneth Toll Johansson from Carnegie. Please go ahead.
Yeah. Thank you. I have a couple of questions. I'll take them one by one. First on CapEx. You said that you have the guidance for sort of maintenance CapEx to 3% of sales, but you recently finalized the Polish plants, so I think there should be limited CapEx needs for that going forward. Do you have any other sort of major CapEx projects ongoing or starting up that I'm not really aware of? Or do you think it will be more sort of maintenance and a few debottlenecking in 2023, please?
Hi, Kenneth.
Hi.
We look at the CapEx, you are totally correct that we had our biggest investment in Rad in Poland, which we were affected by last year, which also is of course showing in the rolling twelve months numbers. If we look at the quarter right now, we are within the guidelines, more of the maintenance CapEx. That is what we are seeing right now.
Great. We will wait for press releases on the next big project, I guess.
Yeah.
Also on the Polish plants that you inaugurated in January and you're sort of gradually putting in more and more work there, when do you think that the Polish plant will be sort of up and running so that it will contribute to lower operating costs for you?
That is being ramped up right now, and gradually between now and early 2025, then that's when it will be running full speed ahead with all of the different surface treatment specs that we're investing in. There are still a couple of lines that aren't installed yet. The first two are up and running, but it's a gradual phase in.
Yeah. Could you say that already in towards sort of Q2 or towards the summer that you that it should have a positive EBIT margin effect because you're doing more of the work yourself, so to say, compared to outsourcing those operations?
I think you have to, you have to do those estimates. The only thing I can say is it will be phased in gradually from zero early 2023 and to full production in the first half of 2025. Yeah.
Okay. Good. The some other questions. I mean, I saw in the annual report that you have a bit less business to the driveline now and a bit more to chassis, if I get it right. Does that have to do with the electrification or is it a deliberate strategy to change more into chassis, or does it affect your profitability in any way?
Doesn't really have an impact on profitability. Sorry, that's my dog. There is no real difference in profitability between those different sort of functional areas in the vehicle. The gradual decrease in powertrain is more, has more to do with, you know, the balance out and balance in the different programs. I wouldn't say that it's directly connected to electrification. We still have a lot of combustion engines in hybrid vehicles, et cetera. It's more to do with cycle plan changes than anything else.
Okay, great. It doesn't matter so much if it's an electric vehicle or a combustion engine vehicle either for your profitability?
Not really, no. The only thing we've said before is that we can see that the new electric vehicle platforms that come our way that we have visibility into, contain a lot of very interesting fastener products, and we're competing for them.
Okay, great. Also, coming back to Mats' question a bit on the financial targets. I mean, you are well underway for sales and margins, but if we look at return on capital employed, it's a bit lower than the target. What is needed to happen for also return on capital employed to catch up? Is it filling empty capacity, or is it reducing working capital, or can you talk a little bit around those things, please?
Yes. Of course, there are many areas that are affecting the return on capital employed, and we are following this closely. We are having plans for this, and we are taking activities like we already mentioned about the inventory and so on. I would say that we still feel confident with the targets that we have. We have measures in place and follow this up in a good way.
Okay, great. That's all for me. I'm sorry for my dog disturbing the call. Sorry.
No problem. Thank you, Kenneth.
There are no more questions at this time, so I hand the conference back to the speakers for written questions from the webcast and closing comments.
We have a couple of questions here via the web, so I'll read them, and then I will have Anderson and Anna transfer them. There are three questions from Patrik O. Rosell . I will read the first one. Hi, thanks for another good quarter. Could you comment a bit on the market in China, which has grown a lot last couple of years?
Yes, I can. China's been a good market for us in the last few years, especially since the acquisition of PSM. One of the things that PSM did for us was that it introduced Bulten to a number of new customer segments where consumer electronics was the biggest one. Consumer electronics really been the growth engine for us in China. That's what you can see in the redistribution between the regions in the last two years. That's really the background of that, and we were looking for that to continue.
Another question regarding return on capital employed, and you already mentioned it, but I will read it anyway if you want to say something further. Could you comment a bit on return on capital employed being a supplier to the car industry is notoriously a tough business. What makes you confident that you will reach the goal of 15% in return on capital employed in 2024? We already touched upon that we have good plans in place, and we are following this very closely. We are very confident to reach the target. The last question from Patrik O. Rosell . You have talked a lot about M&A. Is the business reason to reach scale in the U.S.?
Could you talk a bit about how much sales is needed in a specific market to achieve this? Are there other reasons for M&A?
The reason why we're looking for M&As in North America is we mentioned before that we do, there are a number of reasons for that, but they're all industrial. You mentioned scale, yes, in terms of being an important player in the raw material market, you have to have a certain scale. Which we don't have today with our operations there. We're simply too small. It's also about access to secondary operations. Today, we're mainly a cold header in North America. We also need access to secondary operations like heat treatment and plating. It wouldn't make much sense really to invest in those kind of assets if you're only growing organically.
That's why we're sort of looking for the right target profile to give us those types of in-house operations. Those are the industrial reasons. Of course, we're also looking to spread our customer segmentation. We're completely focused on automotive in North America today. As you know, we have the ambition to grow also into other customer sectors, also in North America. We've done it successfully in other regions. I wanna do it in North America as well. We believe that an acquisition is a way to accelerate that.
The last question that we have received on the web goes like this: How is the market for light vehicle fasteners affected by the new trends in giga mega casting? Fewer fasteners in car bodies manufactured with giga mega casting.
That's a very good question, an interesting one, actually one I haven't had before, so, congratulations. If you think about what the mega casting is replacing, it's primarily sheet metal parts that are today or traditionally been joined by spot welds. I'd say if I was in the spot weld business or in the weld gun business, I'd be more worried. I don't see that the castings are really making a dent into the count of fasteners in a vehicle or the types of fasteners that we're trading with. Good question, but no, actually, I don't see that as a threat.
I believe that was the last question that we have here. I will hand over to you, Anders, to close the call.
Okay. Thank you very much for spending the time and sharing with us. We're happy for the progress we've made in this quarter, and looking forward to presenting the next one to you in three months' time. Thank you very much.