The HANZA Q1 Report 2025 presentation. During the Q&A session, participants are able to ask questions by dialing pound 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Erik Stenfors and CFO Lars Åkerblom. Please go ahead.
Thank you, warm welcome to this presentation of HANZA's first quarter 2025. I'm Erik Stenfors, the CEO of the company, and I'll be glad to give you this update together with our CFO, Lars Åkerblom. As we all know, we are in a turbulent period of the global economy, and therefore we are pleased to present a solid report, but also a clear roadmap for the future. To provide a better understanding of where we are right now and where we are heading, we will start with a short general overview. For many years, the traditional routes for global manufacturing have been blocked, one by one, for various reasons. We see some examples on this slide. It was the pandemic who opened the eyes on how fragile the global supply chains are.
Now, this year, with the new administration in the U.S., it's become even more complicated with global manufacturing. They are imposing these new tariffs. The question is then, where is HANZA in all this? In this new manufacturing landscape, where are we? From the start, we have had our concept to have local and complete manufacturing. There's a feature of HANZA: we have combined different kinds of manufacturing technologies. You see some of them on this slide. We can offer both mechanics and electronics and cable harnesses—a good advantage for our customers. Now we're up to about 3,200 colleagues. We have 25 factories grouped into what we call manufacturing clusters. You see on this map the five manufacturing clusters we have in Europe. We also have in China—not a cluster, but a single unit—and that is, we call it the gateway.
That is to help our customers to relocate manufacturing to China for manufacturing in China for China, and also back to Europe. Another feature of HANZA is that we have something called MIG. We help our customers to rewire the supply chain, to optimize it, to move manufacturing. All in all, this means that actually HANZA has a very low exposure to trade barriers, being a European manufacturer producing in Europe for Europe. We could even have a small advantage when it comes to customers who want to relocate their manufacturing. If we look at—also, this is our business model, but also if we look at our expansion model, we have built HANZA in steps, in defined phases. We put a milestone two, three years ahead. We have defined operational and financial targets. We have passed three milestones so far. We are heading for number four.
This is important. It's called HANZA 2025. You will hear a lot about this during this presentation. We can actually grow in three dimensions. We could grow with more technologies, manufacturing technologies. We can grow with more geographies, and we can grow with more capacity. This HANZA 2025 is about increasing capacity on existing geographies, existing manufacturing technologies. What's interesting, if you look at the sales graph up to the right corner—this is the sales for the first quarter for a five-year period. In 2021, we were close to SEK 0.5 Billion sales. Two years later, in 2023, we were up to a SEK Billion sales. This quarter, if you include LEDEN for the full quarter, we are over SEK 1.5 Billion sales.
It means that our business model, combined with our expansion model, ensures steady growth under different economic conditions, as has been the case for these five years. In strong economies, we can really help our customers to have a better solution with our all-in-one concept, the different technologies. In slower economies, we can help with rewiring the supply chain and also building on our company. With this short introduction, I think we are ready for the progress report when it comes to operations, sustainability, and finances. We will also end with a look at the future and, of course, a Q&A session. If there is anything you would like to have further explained, please use that moment to ask any questions you like. The quarter. The main event of the quarter was, of course, that we closed the deal with LEDEN.
The deal we announced in December last year, it was a bit delayed because we had to wait for approvals from the authorities. It is part of HANZA as of March. What a nice quarter it has been. I have been traveling around Apaline, and you see his photo here up to the right, meeting new colleagues, meeting new customers. We got very interesting new customers like Eaton, if you know the energy management company, and Danfoss. They are into, let's say, smart motor controls. We also got more ABB in Finland for Finland. Very nice. They also have a brand new facility they opened in January this year in Uulainen. You see a picture from that factory, actually from a customer meeting next to the photo of Jukka. A fantastic sheet metal mechanics factory.
It's been a very pleasant first quarter to get closer to this company. Okay, we could not enter the company until March, but we had a little bit of a quiet start before then. I would say the integration is running smoothly, and it should, because we do a lot of work before an acquisition with our due diligence of the HR and the company culture. We are on full speed with integration, running very, very smoothly. We have also separated the business according to our cluster concept. Jukka, who used to be CEO of LEDEN, is now Cluster President for Finland. He has our old units. You see them on the map, three of them, and the units from LEDEN. In Estonia, we put the Tallinn unit to Liiva Kongi, who is the President of Baltics.
This has also been a very good separation. I believe very much in this. It's clear that the people also appreciate to be part of the same geography and the same culture and the same language. In this unit that we got in Tallinn, we also got, let's say, a minor part of non-core business, product-owning business. It's not according to our strategy. It's a very nice business, however, running at a bit lower margin, and we are now evaluating our long-term strategy concerning this unit. We will come back to you about this later on. Talking about a very nice quarter, this was also a highlight. We opened a new factory in Töksfors, Värmland, Sweden, in February. Very good day at work, nice opening ceremony, and a very nice dinner with partners and investors and customers and suppliers. Very nice.
We were running before this opening because of demand. We had to use an old grocery store. This is a final assembly unit we have built. Now, because of the new building, of course, we can move the assembly to this building. It is adjacent to the sheet metal mechanics, and that's the way it should be. When you have made a box, you should fill it with something without transportation. We can do it now. It improves our efficiency. There are a number of other projects going on in HANZA. Worth mentioning is the one in Poland, the integration of Prabotti. It's a unit in Poland we got with the acquisition a year ago, the Orbit One acquisition. After that, we've been working to streamline and optimize where to have customers and where to have different technologies.
This is a work ongoing, and we'll go on. It will be ready before the end of the year, but it will still take some time to finish this, and it will be really good at the end. That's a large project. We also have other similar smaller projects, but all of them should then be ready by the end of this strategy, HANZA 2025, according to our plan. We started something we call LINX. It's a market program. What we see now, we talk about the turbulence, the new situation in the world. It's not for the best all the time, but we also see that it has brought strength to some certain market segments. We also see in Germany that they are open now to change the supply chain. Previously, they have been rather conservative, at least compared to the Scandinavian countries.
We have been more into outsourcing. Now this is changing, and it means that we also have a chance to take a bigger stake of the operations, the manufacturing in Germany. These new areas, to take advantage of them, we have launched a market program, LINX. I'm sure it will show some good results already this year, and I will come back and we will present more, of course, when we have some results. This is something to keep your eyes on. With that, I will leave the floor to Lars.
Thank you, Erik. For you that's been following HANZA for a while, you see that the interim report that we released today has a new format, a little bit changed in the layout and the way we present the information and figures. We hope it will be more easy to take on and more visual in how we present the development of HANZA. Starting with sustainability, the main thing happening in the beginning of 2025 was, of course, the release of the sustainability report for 2024, together with the annual report. That was according to the European sustainability reporting standards and a major step towards the CSRD. We also started the integration of LEDEN to be able to report the LEDEN figures. They are not included in the figures you see to the right.
We have in the waste a one-time effect due to washing fluid that we always in the first quarter are replacing. That is a one-time effect on a little bit higher KPI. On the other hand, on energy use, we are having a one-time effect in a positive way. We are taking away the gas consumption to adopt the scope two way of measuring the energy use. That is how we are going to present it going forward. We see the injuries are on a stable and quite low level. We have also been working with cybersecurity and bringing more factors into EcoVadis. Looking into the financials, as Erik said, we had LEDEN joining the group in the beginning of March. We have only one month of the quarter that LEDEN is included. On the other hand, it has a full effect on the balance sheet.
That brings the KPIs a little bit to you need to adjust for the fact that LEDEN, which is a quite big acquisition, is then included one month, but the full for the balance sheet. We also speak about the old HANZA comparison units, and that is now together with Orbit One that we acquired and integrated from beginning of January 2024. The market is not that strong. We have increased the sales by 6%, and that is due to the acquisition of LEDEN. We actually have negative organic growth of 3% in HANZA overall. ProPharma, including LEDEN, we are on SEK 1.5 billion, so on a yearly base on SEK 6 billion. We have an organic growth in the end of the quarter in the old HANZA. We continue to have sequence increase of the margin. We reached 7.3% compared to 7.1% in Q4.
Going back one year, we were on 5.3%. We continue on the development of the margin towards the 8%, which is our financial goal. LEDEN came in the same level as what we call HANZA, old HANZA, a little bit above 7% in March. Of course, one month is quite a short period to make any general assumptions on where LEDEN is on the margin level. It is a good start for LEDEN. The EPS is increased compared to last year on 1.14% if we adjust for one-time items. We have one-time items. Erik talked about the integration of LEDEN, the new opening ceremony, the move from the old grocery store in Töksfors, and the continuous project to integrate the Orbit factory in Poland. We have also been working with the ERP system and adjusting some values on the stock.
The one-time cost in the quarter amounted to SEK 11 million. Cash flow, we continue to have positive cash flow, not as strong as in the end of 2024 when we saw the effect of the work we did with the working capital in Orbit One. We are starting up and working with the working capital also in LEDEN. We strive to see a similar effect on a positive cash flow effect also when we are able to work with the working capital in LEDEN. On the rolling 12, the cash flow from operations is about SEK 600 million. That also led to net debt, of course, increasing with bringing on the net debt in LEDEN and paying for the shares in LEDEN. If we deduct for those increases of the net debt, we actually decreased the net debt by SEK 86 million.
The equity-to-asset ratio is, of course, decreased when we add LEDEN, but we are still well above the financial target of 30%. We are on 34%. Also the net debt compared to the EBITDA. We said when we did the acquisition of LEDEN that we might be above the financial target on 2.5%. Since we have such a strong cash flow, we are now on 2.3%. Below the financial target, and we expect the net debt compared to EBITDA to continue to decrease. Looking into the segments, we continue to have a stronger margin in main markets compared to other markets. We see a calendar effect in other markets that led to that we actually decreased the margin a little bit from Q4, where we saw that calendar effect. We see in other markets that we actually have an organic growth of 2%.
We have, on the other hand, negative organic growth in main markets. The reason for that is the weak market in Germany that affects both the sales, but also the margin in a negative way. We continue to see the increase in profitability in margin. Again, we are reaching on a solid way on to the 8% or above 8% during 2025. The ownership and development of shares. We did a share issue to the sellers of LEDEN of 2.9 million shares, which led to that we have at the end of the period close to 44 million shares. The board proposed dividends of SEK 0.80 per share compared to SEK 1.20 million a year ago. That is approximately SEK 35 million. The AGM will be held on May 13, a week from now. We see some changes in the ownership schedule.
Håkan Aleen, which was the main owner, is not on the main owners list anymore. Erik continued to increase his shareholding in Q1 and is now owning 1.4% of the shares in HANZA. By that, I lead over to you, Erik, and the summary.
Thank you, Lars. A very quick summary, and I look forward to the future. Very, very strong start to an important year. We finalized all these very important activities. We saw a sequential increase in the operating margin. For old HANZA, we saw LEDEN coming in at a very good margin. Now we will work together to increase it further. All this, that's what makes us confident in repeating our financial goals. We also launched this new market program, LINX. Again, keep an eye on this. I'm sure it will deliver some results already this year. We are closing up to the launch pad of HANZA 2028. As soon as we are done with 2025, we will start 2028. Expect new operational and financial targets to come as soon as we have reached the current.
Most likely, we will present that during a capital market date somewhere late this year. With that, we open up for questions.
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 Lucas Mattsson from Inderes. Please go ahead.
Good morning, Erik and Lars. Lucas here from Indirs. Thank you for a great presentation. Could you start off by elaborating a bit on what factors are expected to sort of help to bridge the gap to the 8% operating margin target in 2025? To what extent is reaching that target contingent on an economic recovery, given your outlook for a potential upturn in 2025?
I can start, and then Lars, if you'd like to continue. We are not relying—of course, we hope for a market recovery, but we are not relying on it. Hope is not a strategy. What we are doing is we are collecting new customers, and you know that today's sales is tomorrow's revenue. The customers we brought in last year will help us to drive towards this goal. We have done these major activities we talked about. There is always a startup phase with this, I would say, state of the art. If you remember, we opened also a sheet metal mechanics factory in Estonia last summer. Now we have three state-of-the-art factories: Estonia, Sweden, and Finland. Of course, there is a startup of them, but that also drives the margin.
We have all the other activities, and not least the synergies. The margin increase comes from higher efficiency caused by our cluster concept. When we get our business together, that will also drive the margin. There are a number of different things that will make us—we are very confident about this margin goal this year. It is not relying on a better market.
Okay, great. That's very helpful. Thank you. You mentioned organic growth towards the end of the quarter. Could you specify which segments or geographies that are contributing most to this growth?
No. To give you a clear answer, we're not revealing that. We are happy to see because, again, we need organic growth, and it's not driven by the market. The market was rather flat since it started a year ago. It's driven by new orders and new sales. We are glad to see that's kicking in, and that's also what will drive organic growth further on. If you would accept that answer, Lucas.
Okay. Okay, that's good. Lastly, have you observed any recent shifts in customer behavior in response to the rising global economic uncertainty due to the tariffs and so on?
Yes, yes. Again, we have a very low percentage, less than 1% for the US, so we are not affected. What we see, though, I had a very interesting customer meeting the other week where there was one customer who said, "Now we will move the manufacturing to Europe." They had it in the US. Actually, I had two such a meeting last month. It can be more disruptive that people move manufacturing to be closer to the market. If you have a company offering manufacturing in Europe for Europe, that could be the obvious choice. We have not seen so much in the other direction. I think that Europe is still our end market, so it's just positive.
Okay, interesting. Thank you very much for taking my questions.
Thank you.
The next question comes from Fredrik Nielsen from Redeye. Please go ahead.
Thank you. Good morning, Erik and Lars. I want to start with the margin in other markets. I noticed that you mentioned that seasonality might have some effect, but still, I mean, it was down like one and a half percentage points compared to Q4. I mean, over time, we should expect it to move towards main markets regarding margin. Is it just seasonality, or is it something more having a negative impact in the quarter?
Hello, Frederick. If you're looking to the graph, maybe I can show it. Down to the right, you see that if you take away the Q4, you see that we are increasing the margin. The main reason is the seasonality effect in Q4, which we have seen also in 2023. In Q1, we had this project in Poland, which is part of Central Europe and part of other markets that led to lower margin. We still are solid in our belief that we are on the right track and on the way to see more equal margins in other markets and main markets.
I can add a bit to this. Lars is pointing at the right way here on the graph. If you look at the quarters for the main markets, 2024, it was 7.0/ 7.2/ 8.9 and now it is 9.4. In Q4, it was 8.1. Disturbingly serious. If we do the same exercise for other markets, you see 3.3, 4.0, 4.4, now 4.9, but Q4 disturbingly serious with 6.3. This seasonal effect in Q4 is disturbing a rather straight line otherwise.
Yeah, yeah, that's a good point. In 2023, for example, it was roughly the same for the full year. I mean, it's a bit hard perhaps to draw seasonal conclusions from just one year. That was my point, but perhaps that's representative for the current business there then.
You had the same thing in 2023. From Q3 to Q4, it was down in the main market SEK 12.4 million to SEK 10.4 million and up in the other markets SEK 5.7 million to SEK 6.5 million. You have the same seasonal effect there. It is just driven that we are more active in other parts of the world than in the main markets during the end of the year.
Okay, maybe my numbers are wrong. I have to look at it. Let's move on. Could you give us some color on the impact on growth from orders from new customers, which you disclosed quite a bit last year, and the demand from current customers respectively?
The thing is that what you can expect from the new uncertainty and turbulence in the world economy is that there will be a further recession. Everybody's been waiting for the upturn of the economy. It was talked about that it was destocking a year ago, but destocking indicates it will be for a short period. We do not believe in that. We believe rather that is a new level of demand, and we do not expect it to go back even to the post-COVID level, which was really, really high. The question is, when will the upturn come? Still, we see that our customers are positive about this year. That has not affected their full-year forecast. We still believe in a good year.
When we give our forecast, we base it on what we know now, and it seems like it will continue, not bounce up, but not go down either. Maybe the locomotion in the US will not have this big impact on our customers. We do not know that yet. We will know that by the end of the year. It could be that we see this upturn, which has been expected for a long time, or it could be that there is some disaster scenario for all companies in the world. All we know now, we believe in a rather solid situation for the rest of the year with the same demand, adding new customers. That is what drives our increase, not the previous demand.
Okay, great. Last question from me. The SEK 6.5 billion in sales target for this year seems a bit stretched, perhaps, given the current environment. Do you believe another acquisition is needed, or do you think you can reach it organically?
Lars, you're right. Answer this.
You can start.
I can start. Yeah, but the truth is that we are lagging a bit behind because we were expecting LEDEN to be part of HANZA sooner. For this first quarter, we had SEK 200 million that was not included in our books. We are lagging a bit behind. We have to do something, obviously. If that was the case, we would be on a yearly basis, 6.2 something. It would be not so far from 6.5. Now, that's not the case. Of course, we need to measure the actual figures, not the pro forma figures. It means that probably some more activities are needed. Again, I will be a little mysterious, but yes, we believe in the target still.
Okay, great. Thanks. That's all for me.
The next question comes from Oliver Ucitolo from Actius Burana. Please go ahead.
Good morning, guys, and congratulations to a solid quarter. You addressed the increased activity in the German market as well as the new customer dialogues as a consequence of the LEDEN acquisition. I was wondering if you could elaborate on this. Have you seen any new sales that might even impact Q2?
Again, there is a time between when you sign an order and you see it in your books as increased revenue. What is driving the sales right now are orders we took last year. It takes maybe half a year to get it up and going. We cannot say that that will impact Q2, what orders we have taken in Q1, but the one from the last year. Now, what I think is interesting in this question is that if we do, like we did last year, some MIG exercise in Germany—so MIG is when we take over and restructure a supply chain—then it is faster than traditional all-in-one sales. Because then you can, in a few months, grab a large portion of manufacturing and move it somewhere where it's beneficial for the customer and also gives a large impact on HANZA.
Would we be able to conclude some of these MIGs in Germany, for instance? That could have an impact already this year. When it comes to traditional sales, it's a longer period. Was that an answer for your question?
Yeah, I think that's a solid answer. I suppose it's safe to assume that you had perhaps some MIG orders in your pipeline then.
We always have something in the pipeline.
Fair enough. Do you think that this increased activity in Germany will drive increased investments or any optics going forward?
I can answer on that one. We see that the investments are lower than a year ago, which we also said during 2024 that we will see a decrease in investments in 2025. We do not see any major investments due to new orders. We should be able to handle those without any major investments. There can always be some minor investments that you need to do in order to add a new type of customer or so, but no major investments needed.
I see. Great. Turning to the integration of LEDEN, and I've tried to address this previously. What does your integration plan look like? I suppose you have a better view of that now. Do you expect any additional costs?
I can start maybe if you'd like to continue, Lars. There are some major steps in this. One is, of course, to cut LEDEN into two pieces, which I talked about previously. One for the Cluster Baltics, one for Cluster Finland. That's done already. We have the integration we have now. We try to optimize the different manufacturing technologies in the different sites. That's a longer-term work. The most important thing, the most important thing is that we work together as one team. That's, again, why it's so important to check the company culture before an acquisition. We see now that already we feel like one unit. The most important part of the integration, being one company, has already been executed. There are a number of other technical things.
Of course, Lars is working with the Shred Service Center to make sure to add things together there. We are talking about increasing the margin by maybe transforming the manufacturing between the sites and all that. That is a longer period. The main activities are already done, and that is why we are quite positive right now.
When Erik says that these actions are done and the factories are split between main markets and other markets, we still do not see the full effect in the P&L of the synergies that will come in during 2025.
Okay, fair enough. As you talked about, Erik, how do you feel that these changes have been received by the LEDEN employees and what impact have you seen on the HANZA group?
Sorry, can you, by the people, how they feel about this or what do you mean?
Yeah, exactly. How has this been received by the employees?
Yeah, that's, I think, a good lesson learned for anyone running a company that the thing we do when we separate the companies. The Estonians are much happier to work with other Estonians. There's always a little language barrier and could be some culture things. The same thing when we acquired Orbit One, then we got a unit in Poland and one in Sweden. We separated it. We really felt appreciation from the workers being part of a geographic area close to them rather than being cross countries. That is one thing. Secondly, we have a lot of activities going on. We put a lot of energy and focus on the company culture. We are working hard with that no accidents, that there should be no harassment, no corruption, and all these things.
That is also something that people appreciate, to be part of a company who really cares about these things. I would say that we have had really good mood, let's say, with the workers. Actually, right now, we have a new sourcing team in the building from LEDEN and old HANZA and Orbit One. They are working well together. Overall, a good integration.
Yeah, sounds great. I have one last question from my end. The sales of LEDEN amounted to SEK 320 million for the quarter. I think this was surprisingly high. Can you elaborate a bit on what has been driving the sales and are there any seasonalities here that we should take into account?
I think that a big part of this is, of course, the new factory in Uulainen, with a new capacity. That capacity has, let's say, the machines have started. That capacity will increase over the years. I wouldn't say it's unusually high. It should be like this and more. I think also that the customers appreciate that, I can say, the customers appreciate being part of HANZA. Now they know that we have another strength, another size, meaning that just the size itself makes it possible for them to place larger orders. Don't expect this to be a one-time for the first quarter, rather the other way around.
Interesting. Thank you for solid answers. I guess I will jump back into the queue.
Thank you.
The next question comes from Forbes Goldman from Pareto Securities. Please go ahead.
Yeah, hi. Thanks for taking my question. Just one follow-up on what you said there about LEDEN. I guess my question is what sort of capacity you're expecting for this company throughout this year when considering the recent investments in capacity that you did last year?
I can only answer on a global level, and I can say that we have capacity for SEK 6.5 billion without a problem. That is what we have been. That is the dimension of HANZA for this phase. Of course, it gives another opportunity. Now, as I said, we have three real state-of-the-art sheet metal mechanics factories in Sweden, Finland, and Estonia. Of course, they can help each other. There is a secondary effect of being larger. The capacity itself is SEK 6.5 billion, but actually, if you rotate it a bit, it will be much, much higher.
All right, that's great. You mentioned the LEDEN operating margin was in line with HANZA. Anything you can say on the organic sales level, is that also or that should maybe be a bit higher than for the old HANZA considering the investments you did in capacity last year?
I do not know if we can go into details, but what I can say like this is that I expect the growth of, let's say, LEDEN to be higher as a part of HANZA than before. All factories that we have bought, the customers appreciated it, and there are new opportunities. Of course, there is a general economy that sometimes is taking down the volumes, but in general, we receive more products. I would expect that sales-wise, we will see some synergies on this.
All right, understood. Then a final one on CapEx, having completed the acquisition. We now see CapEx levels coming down a lot year over year. I think it is SEK 30 million here in Q1. Is this level representative for the rest of the year, or should we expect anything else going forward?
We have said for a long time that CapEx will go down, and we have invested quite a lot in the new factories and machines to the new factories. As Erik said, we have invested for a capacity of SEK 6.5 billion. Of course, depending on the market and the growth, but if the market stays as it is right now and the volumes are in line with what we see today, you can continue to see quite low investments in HANZA. Of course, it always needs some replacement investment, but no major needs for expansion investments.
All right, that's understood. Thank you. Well done on a nice quarter.
As a reminder, if you wish to ask a question, please dial pound 5 on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Okay, thank you. Thank you so much for joining this call. Thank you for all the interesting questions. I hope that you will continue to follow us as we continue to build HANZA. Thank you so much and bye for now.