Earnings Call: Q4 2020

Feb 23, 2021

Thank you, and very welcome all of you to our presentation of the Q4 today for NKB. And with me, I have Peter Kruk, our CEO and Anders Forssien, our CFO. So please, Peter, start. Thank you, Gunilla. So moving into the Q4, I think we ended the year in a very strong way. We could see a continued Positive development of our markets that we saw already starting in Q3, which then continued very well into Q4. So we've seen a continued market recovery in all of our segments, and we've seen especially strong growth in the electrical vehicle charging applications. Net sales have largely followed our development that we saw in Q3 with month on month improvements. In comparison with Q4 2019, the major contributors to the growth has come from our acquisitions that we made earlier in the year. Order intake in the quarter has been very strong. This has been a result of the market comeback, but also from good sales performance in our businesses. We've had high degrees of activities and also large influx of new projects. We've also seen an additional sort of boost to our orders from announced price increases that are coming into effect during quarter 1, where some of our customers have placed early orders in order to sort of mitigate some of that effect. So and also finally, we're exiting 2020 with a healthy balance sheet and a strong cash flow. It also support us taking continued active roles in consolidation of the market. And by that, we can move to the next page. We're then moving to the announcement we made yesterday, where we have acquired PCB Prevent, Who are a leading PCB supplier in Italy, serving customers both in Italy, but also in Switzerland. The profile of Prevent PCB is very well aligned with NCIB. It has the same focus on delivering quality products to demanding customers in the high mix low volume segment. And within NCIB, The Prevent business will get access to a broader range of factories and new technologies, which will further improve the opportunities for growth. So the turnover for PCB Prevent in 2019 was SEK 210,000,000 and their EBITDA was a little over SEK 30,000,000. With the company comes 22 employees, 12 of these are located in Italy and 10 are located in China. We are paying for the company SEK 185,000,000, which is an equivalent of 6 times EBITDA before potential synergies. There is a potential earn out of an additional SEK25 1,000,000 that can be achieved throughout the 1st year performance. Then a few slides describing NCIB Group. So this is an overview of who we are. We are today 17 companies. We are 4 74 specialists. We are serving some 45 markets, and we are having a portfolio of some main 27 factories. Our mission is very clear. It's supplying PCBs for demanding customers on time with 0 defects, Produce sustainability at the lowest total cost for our customers. And our vision is to be number 1 PCB producer wherever we are. We are already the leading producer globally, but our aim is to be there in every market where we operate. Then if we move to next page, we can then see what is PCBs. PCBs are the board upon which Our customers mount their electronic components to create a PCBA. And these are, of course, core components in almost any product today, which has intelligence to it. And our market is really focused on the high mix, low volume and on demanding customers in this area. These are typically applications where there's a quite high product value, especially in relationship to the PCB itself. There are very high quality demands on the product typically. That also means that it's less price pressure on products like the PCB, which is a core component in order to ensure quality. And also the fact that we're using working with the high mix, low volume customers means that these customers generally have a hard time buying directly from the larger factories or from the leading factories, whereby we can consolidate volumes from many customers and get access to the leading factories. Then if we look upon our history, the company started in 1993. It was founded by 3 Swedish gentlemen. It expanded from Sweden into the Nordic countries and then into more of Central Europe and China. Then we got the additional ownership from as the original founders sold the company. And we have then expanded further into more of Continental Europe and also U. S, both through strong organic growth, but also from a number of acquisitions over the past few years. And in fact, we've been growing every single year, but 2,009, which then of course was covered followed by a year of very strong growth to compensate. And then if we summarize our Q4 performance. So Quite strong growth of 22%, reaching SEK550 1,000,000 in net sales. If we look in U. S. Dollars, which are primary currency of sales, our growth is even better. We're growing by 32%. Our EBITDA amounted to SEK52.2 million, an improvement by 27%, and we're reaching an EBITDA margin of 10.1%, which is an improvement over prior year by 0.4% as a result of continued cost focus, but also from continuing improving margins on the residual business. Okay. Anders Musial here. Then I go in for the full year number of 2020. We're also happy to see that we have been growing 19% compared to 2019, ended up a revenue of SEK 2,100,000,000 and corresponding to USD 230,000,000 which was actually 22% growth. And of course, we're very happy to show a growth despite this Turbulence we had during the corona pandemic, etcetera. And if we compare as you said, the growth are coming from acquisitions, but even the comparable Finance was only 1% behind measured in U. S. Dollar, which we think is very strong. We also managed to increase the EBITA margin and the EBITA profit 91. The result includes some transaction costs for the acquisitions, meaning that the actual EBITA margin 9.7%, which is better than 2019. So we are very happy with the full year results as well. Going into next slide, we consider the different segments. We see in Nordic, where we have about 5% lower revenue than 2019. I think we had a good start in Nordic, but we saw a rather Slow activity during summer and also during the autumn. We see that orders picking up right now, but still the revenue was rather weak the second half of the year. Still, we did a very strong healthy EBITA margin of 16%. We have been in line with that for the last couple of years. Europe had a good growth together with the acquisition of Flatfill. Take away the acquisition, it was 6% below last year. But here also, we saw a very negative development in the transporting sector in the spring. We had very weak revenue in South Europe in the summer, but also can see a strong recovery during the last quarter, which is really good. North America, also big growth connected to NCIB. The acquisition of Paribour Group, which we did in April. Here, we can say excluding the acquisitions, we did a flat revenue development, which is also good, we think. EBITA margin in both Europe and North America around 6%, which is sort of in line which we had expected. And Also in the that means that we are investing for future growth in these markets. East, we're, of course, hit by the corona pandemic both in China and in Russia. I would say Russia has been hit the most maybe with a lot of low activities during the whole year. China also partly impacted by the U. S.-China trade war. So revenue was down 12% during the quarter, but flat in U. S. Dollar. And anyhow, very strong gross margin and good results, so happy for that. Next slide, Dan. We see that we continue to grow, and we continue to grow with good profitability. We can see that gross margin has gone down a little bit compared to 2019, but that is also connected to lower gross margin in acquired companies and In Babble Group in USA. If we exclude the acquired companies, gross margin ends up in 31.8%, which is a small improvement compared to last year. Going into the quarter then, As we said, net sales for the quarter increased by 6% in U. S. Dollar, but in Swedish kraft, 5% lower. And what we also said was the order intake was really, really good, and we had 57% increase Last quarter, measured in U. S. Dollar. And we saw, as Peter said, a lot of recovery in most markets. And there are also, of course, a Part of that is connected to the preordering before the price increases. EBITDA continued to develop also very good. We ended up with SEK 52,200,000, which is SEK 11,000,000 better than last year and EBITA margin of 10.1%. We have got a little bit of state support during this quarter. We got about CHF 400,000 Italy, we did get some more support during second and third quarter from countries in South Europe. But in this last quarter, there was only Small part in Italy. Operating cost is still much lower due to travel restrictions and so on. Going into different segments then, we can see that net sales in Nordic grew 5% in U. S. Dollar, but measured in NCIB. It was a bit down. Order intake increased a lot here, 36%, and it was especially in Norway, where you had a fantastic ending. And a lot of projects and projects for electric vehicle charging. EBITDA increased to 21% to SEK 19,000,000 and EBITA margin to 16%. So we have been able to run the Nordic operation for a couple of years now on a very high profit level. Segment Europe, where we see the strongest position right now, I would say. We increased Revenue by 53 percent in U. S. Dollar and 38 percent in SEK. Also here, of course, it is the acquisition who drives the growth. But looking in the market in general and see all the order intake, so in the U. S. Dollar, we increased 77%, And that's a big part even for the organic growth, yes. So we see a very, very strong recovery in almost all markets. UK, which we have a lot of transport industries, is going well. Germany is going well. The company in Flatfield, we in Netherlands, we acquired also have very, very strong order intake. And we see that the countries in Southern Europe are back to a more normal situation again. So very positive signals from our customers in Europe. And the integration of flat fill has been more or less finalized, and we're very happy with that. So that works well. North America, also here, connected to the acquisition, we see a strong growth In net sales, over 100%, measured in U. S. Dollar. But excluding acquisitions, we were flat. EBITDA increased compared to last year, but EBITDA margin went down. The reason for that is that the margin was lower in the acquired Order intake even here increased a lot compared to last year, so that's also good. It's a positive sign. Going into East, Finally, we had a flat revenue development, the measured USD and 12% down measured in SEK. Yes. We can say that Russia is struggling a little bit from the corona effect. We see that positive signs in China, But we also have had some weaker second half of the year connected to both corona and a little bit to the trade war between China and USA. On the other hand, we managed to do a very healthy profit with good results both in Russia and in China, and especially the gross margin in China was very good the last quarter. Finally, looking into some of the KPIs. Return on equity, 24% compared to 40% last year. This is, of course, the main reason is that we made a share issue that we have a very high equity. So it's not nothing to do with profitability. We still have a very healthy balance sheet. We have a net cash position by end of December, and we have a solvency of 47%. Net working capital is still very lean. We are below 8% of last 12 month revenue. So that is also very good. Available cash at year end were SEK 660,000,000. And of course, now we have paid Close to 200,000,000 for the acquisition in Provent, but we still have a very healthy balance sheet and strong balance sheet for further acquisitions and activities. Peter, someone on the financial targets? Yes, let me prepare where we are. Sorry, one more thing also. We have proposed a dividend of SEK 5 per share. Thank you, Anders. And then if we look at where we are in comparison to our NCIB. You can see that we have an average growth target before acquisitions of 8%, and we are delivering 5% In 2020, overall, our EBITDA margin is better than our target. We're delivering 9%. And also on the net debt side, we have a net cash position, as Andres mentioned, and we're proposing an increased dividend above our target of 50%, a minimum dividend. So still maintaining, say, a strong position on the profit side, where it's not quite on where on the target on growth as we reported in the previous quarter. Then looking on our strategy, we are continuing with the strategy plan where our focus is on increasing market share in Europe, USA and East, where we still see a lot of opportunities for increased penetration in the market. We're also working on deepening our collaboration with existing customers where we can provide increasing values to our customers. Then we're also looking to see how we can expand geographically, and this can be both into new markets, but also within regions in markets Like say parts of U. S, which maybe we are still not covering to the fullest extent. And then we also want to take an active role in consolidating the market. It is still a very fragmented market. Even though that we are in number one position, we still have single digit market shares overall. Okay. So then thank you very much. And I just wanted to remind you that our next quarterly report is on May 7. So very welcome then. Thank you very much. Thank you. Thank you.