Okay. Since everybody's here, we will start. Welcome everybody to Nolato and this Capital Day, and also to this facility, which is a medical facility that we have had in our groups since 2006. It's also heading up some of the technical design center in this facility, but we will come back to that later on. Today, we have a team of Nolato people here to present. It's myself, Christer Wahlquist, CEO of the company. I've been with the group for 23 years. Here is the rest of the team, if you stand up. Starting from Per-Ola Holmström, he's the CFO.
That's me.
Most of you guys know him since many years. We have Johan Iveberg.
That's me.
Heading up the medical division. We have Jörgen Karlsson.
That's me.
Heading up Integrated Solutions. We have Johan Arvidsson.
Yeah, that's me.
We also have Kristoffer Glowacki, who's heading up the design center within the medical division.
That's me.
If you have questions during the presentation, shoot them, but please state your name and be clear about your questions so we can take them. The agenda for today is we're going to talk a little bit about the group, the strategies of the group, and where we're heading with the group, and our modified or extended offer to the market offering, some synergies, core values, and corporate culture of the company. Per-Ola will talk about some financial review of the group, including our targets. I will talk a little bit about our sustainable work and how we do that, plastic as a material, recycling, and so on and so forth. After that, we will have a tour of the facility and also lunch at the time. After that, Johan Iveberg will talk about the medical division and the plans together with Kristoffer about our expanded offering.
We will jump into Industrial Solutions, talking about our position, our offering within the Industrial Solutions, and the operational focus and efficiency measures. We will go into Integrated Solutions and talk about the positioning, offerings, operational focus, and the EMC. I will conclude with the overall strategy for the group. Is it working for you?
Good. We go. Nolato Group in brief. I will stand over here, I think. Can everybody hear me?
Yes.
Good. The Nolato Group was established back in the '30s in Torekov, Sweden, where we still have our headquarters. We went to the stock exchange in the mid-'80s. The group today consists of approximately between SEK 7 billion and SEK 8 billion in sales and a profit of some SEK 800 million, a good return on capital, and approximately 5,000 to 6,000 people employed. We are working in three business areas, as you know, the Medical Solutions, the Integrated Solutions, and Industrial Solutions, and they are sort of balanced in size. We will come into the situation where we see synergies between the markets and so on. This is Nolato Group in a brief introduction. The business concept is very simple. We are supporting our customers with high-tech development and manufacture of polymer product systems. We work with leading customers in these specific market areas that we have explained.
We'll come a little bit into the different customer groups and so on during the day. You can think that the three different market segments or business areas are very different. It's Medical, Integrated, and Industrial. You could think that we would not have so much synergies because it's so widespread. I think this is actually one of the really strong competitive advantages we have for the group. What we can do is we can take knowledge from different market and introduce it to other markets. We are working in these specific market areas, Industrial with the automotive and the lean, efficient manufacturing, Integrated Solution with a lot of new technologies, really pushing technology to the limit and very rapid, and Medical with a sort of conservative approach and a lot of focus on quality assurance, quality control.
What we can do is, together with these three market segments, create value for the customer by taking the best parts of different market and introduce them to the other segments. Behind the curtain, of course, we have the same sort of philosophy around corporate responsibility. We are working with the same materials, we are working with the same production technology, and we always work as a solution-oriented development partner. I think this is actually one of the strongest competitive advantages we have, that we can use the different market segment and bring them together. What we are working then is, of course, technology transfer and exchange of experience between these completely different market segments. A little bit about our journey. During what we call yesterday, the 2000 and so on, we focused on having customers, and our main focus was the mobile phone industry.
We had years when 80% of our sales was directed to mobile phone. We had industrial, we had medical, but it was smaller as the total portion. We worked as a supplier to these customers. They asked us to produce, and we produced. We had a leading position in Sweden. We developed our position in Asia and Central Europe, but Sweden was really our base. Today, we are more a solution provider to these customers and partners. It's more a partner approach today. We have balanced the group in the sense that the business areas are more balanced in size, so they are more equal. We are working as a partner, and we have a global footprint. We have a very strong Asia footprint, we have a very strong European footprint, and we have a footprint in North America. It's not that strong.
A little bit stronger today than yesterday since we bought the company, it's still a possibility for us. If we look into tomorrow, we are going for a worldwide solution provider to our partners. We focus on continuous growth within all three business areas as a solution provider, and we are creating a strong footprint on the three important continents for our business. It's actually been a geographic and technology journey that we are continuously on. If we look on the mega trends in the community, and those mega trends being, we see globalization, we see aging population, we see digitalization, we see shorter product life cycles, people wanting more for less.
Also, the community have a lot more focus on corporate responsibility and want to make sure that the products that they are using as a consumer are good for the environment, and that companies are treating the environmental and the people in a good way. It's an effect. It's something on the top of our minds. If we look into our customers' behavior, we see that our customers more and more are focusing on their core activities. We see outsourcing in many aspects, both on production but also on development. Time to market is essential for our customers. Internet of Things, connected devices, connected homes, connected cars, we see those kind of trends. We see, of course, competitiveness. We see also our customers focus more on corporate responsibility.
On our side, we see that with our global platform and our excellent relationship within global segments that are growing and working with the technology transfer between different market segments, our strong development skills, our design and productivity, and our very well-established CR focus, we are gaining ground on these mega trends. They are affecting us in a good way. Strategies and the key factors. Well, our vision is to be our customers' first choice of partner. Whenever a customer is thinking about a new development, they should always think Nolato first. We don't have the ambition to have 100% of their spend, but we have ambition to be top of the mind, their first choice of partner. We are doing this by having a broad customer offering.
Of course, the productivity, the long-term approach together with our partners, that we are working for lifetime, helping them to create a better situation for themselves. Of course, ethical and sustainable development, high competence, what we call local present globally means that there should be a Nolato facility close to the customer's factory around the globe. Of course, in the background, stable financing supporting this development. Nolato is a decentralized organization. We have a headquarter of the group consisting of five, six people governing this group of between 5,000 and 6,000 people. We are doing this by values and business principles that guide us in the daily work. Those are very simple. We are professional, we are well-organized, and we are responsible.
The business is then conducted in a way that the management team are traveling around, having discussions with individual entities around the globe, making sure that the strategies are aligned, that we are performing in a good way, and that people are able to make the right decisions. Of course, we have all these standards. I will come a little bit into this later on, but we have, of course, whistleblowing. We have the quality systems. We have the environmental system. We are part of the United Nations Global Compact. As I will explain a little bit later, that is just paper. It's what you do in reality that really matters. The way people are acting and the way Nolato is acting on the market together with customers and together with employees, that's what makes the difference.
Now, if you have any initial questions to me, please shoot them. Otherwise, I will hand over to Per-Ola.
Thank you.
Okay. Hello everybody. My name is Per-Ola Holmström. I am the CFO of the company, and I have been with the company for many years, since 1995, actually, when I started. I am going to give some brief overall information about our financial situation. To start, some historical numbers. The last 20 years, you can see on this page, showing our development of sales, the different years, and during this time period, we have had an annual average growth rate every year of 7.6% during this period. Of course, including acquisitions, but most of it is organic growth. During the same time period, we have had even more growth when it comes to the EBITA. There we have 8.7% every year. It has, of course, many different reasons why we have a higher increase of that rate than the sales.
I'm sure one of the reasons are that we have been on this journey that Christer Wahlquist told you about in some of his slides earlier today, going from more being a supplier to more being a partner and a solution provider. We communicate three different financial targets. You see them on this picture here. It's the EBITA margin, which should exceed 10%, and it's the cash conversion, where we should exceed 75% of our EBIT result. The equity assets ratio should exceed 35%. The margin we have been able to exceed the target during this time period. Of course, we have been in a very good business cycle all of these years, most of the time. We have also exceeded the equity assets ratio over the time period.
When it comes to the cash conversion, we haven't, and we have chosen to be part of growth possibilities during some of these periods with high numbers, and that has done that we have invested quite much in CapEx during these years. We have also got an effect of a working capital need because of the expansion, of course, and as we measure the cash after investments and after working capital need, that has affected the numbers, and we have not been able to reach that target. Some financial trends. On the left-hand side, on the top diagram, you can see the development of sales, and the line is showing the EBITA development. The last five years and the last 12 months in the red color. We have had good growth during 2017 and 2018. Very high growth, I would say. The EBITA has followed that growth as well.
We can see a decline during the last 12 months, and that is affected by our Integrated Solutions business area. We have had a situation with inventory reductions within our VHP segment, which has affected the comparison compared to 2018. As I mentioned, the EBITA margin has been on these levels on the right-hand side. The last three years, we have been between 11.2% and 11.7% in EBITA margin. A stable level during those years. Return on capital employed is not a target we communicate separately, but we focus on that internally. We find it important to do, and it's not only the margin, it's also the balance sheet, which is important in our different business areas. Except for 2016 and the last 12 months, we have been able to be between 25% and 30% when it comes to return on capital employed.
Some additional financial KPIs. We have had high CapEx during the recent years, especially 2018, as you see, and also the last 12 months. 2018, it was SEK 452 million. We expect that we will have about the same rate as we have the last 12 months for 2019, which would be around SEK 400 million. To compare, we have depreciation of about SEK 360 million run rate right now. We are investing more than our depreciation, and we have done that for some years. As we expect the numbers going down a bit this year. That is doing that we are well-invested. We have good production sites, state-of-the-art equipment, and room for some expansion. Working capital. The recent years, we are between 3%-5% of the sales, which we find as capital effective, especially within our Integrated Solutions business area.
We have a good balance sheet and a good cash flow doing that. The working capital need is on very limited levels. Tax rate. The last two years, we have been between 21% and 22%. The first six months of 2019, even lower than that, just above 20%. The final graph on this one to the right is the net debt development. The black line is showing the net debt to financial institutions and then take away the cash. The red line is showing the same time period, but also including our pension liabilities, and from 2019 also the new lease liabilities according to IFRS 16, as you know. As you can see, we had a net debt situation during 2016 when we acquired the Swiss company and the Polish company during that year. We went down to just below SEK 400 million, if you include the pension liabilities.
We have had a positive cash situation and filled up the cash, and when we went out from the June numbers, quarter two of this year, we had a positive cash situation of SEK 190 million, if we don't include the pension and lease liabilities. If we do, then it was a negative number of SEK 337 million. With that situation, we have, of course, a strong financial situation, giving us the ability to invest in CapEx where we need. It gives us the possibility to be part of interesting customer projects, and it gives us also the possibility to do further acquisitions, even if we did one yesterday that you might have seen. We expect to pay those about SEK 95 million for that company in the fourth quarter of this year. One page showing more the financial perspective, shareholder perspective.
Maybe some small numbers on the top one at least, but it is quite high numbers actually, and it's showing the share price development during the last 10 years. The gray line is showing the share price alone. The red one is then showing the total return, including dividends reinvested in new shares. If you add up that timetable, the total return has increased with about 1,300% during that 10-year period. We have a dividend policy saying that we should pay dividends of at least 50% of the net profit that we have every year. On the bottom left side, you can see the dividend development during these 10 years, going from three SEK to 14 SEK the last period. Okay, any questions to the financial numbers and this part? Yes?
Can you maybe say something about the organic growth possibilities? You had margin targets, and so on, but not anything about top line.
Yeah. Our ambition is divided by business areas since they are working in different environments. We have an ambition for each division to grow faster than the market. We will come into a little bit of the details later on today. That's always our target.
For the total group, what's the target, really?
It depends a little bit. It is hard to say the long term, but Medical Solutions is growing 35%, and then Industrial Solutions is a little bit lower, and Integrated Solutions is more project based, so you have to add up the numbers. It depends on where we see the growth, and also the volatility we have seen within Integrated Solutions, it is hard to put a number on each year. Yes?
Hjalmar Ek, Lannebo. On the working capital.
Yeah
What would you say is a sustainable level over time? Maybe 2014 was a bit exceptional, I guess.
Yeah. I would say, and maybe we have had a very good situation lately, so somewhere in between is what we expect. Yes?
Mats Liss, Swedbank. Can you elaborate a little bit on CapEx going forward? We have seen a higher level in the last few years. What are the plans going forward? Should we expect a higher growth rate, or was it some step-up investments, or what should we expect going forward?
During 2018, it was a bit of step investment we did, and Johan will come back and share a bit more what we did within the medical business area, which has the largest part of those investments. Some of that is also coming into 2019 being paid. Going forward, as I said, we gear down a bit as we assess the 400 level this year, and I think going forward it could be more in line with the depreciation situation we have right now, the 360 level. Of course, it's depending on a lot of things and what will happen going forward. We haven't planned anything beyond this year more in detail. The 400 level, and I also think we have been in a situation growing the company. We are a larger group today than we were, and that, of course, is doing that.
The numbers we had some years back, we will exceed those, of course. Yes?
Richard Nilsson, SEB. Could you elaborate a little bit about your growth agenda going forward, perhaps? I understand you grow externally to follow customers, and what's the plan going forward?
Yeah. On the growth, we anticipate to grow faster than the market, and we are working together with our partners and trying to create a win-win situation by increasing our share of wallet and making sure that we are growing on the individual customers as well. Most of the growth is coming from existing customer. That has been our target for many years, and then we add a few large growing customers a year.
Thanks. Thank you.
Any more questions for Per-Ola so far? Good. I will go into the ESG and plastic as a material, recycling, and a lot of sustainable work. Let me just get this on. This is very key to me, sustainable strategy. It's very essential for us, and if we treat this in a very good way, in a proactive way, we create new business opportunities. First of all, we have a long tradition of handling our environment in a positive way, making sure that we are decreasing all the targets of our emission, our carbon dioxide footprint, and so on and so forth.
I think the most important thing in this area is actually how we develop new products and which products that we choose to develop and produce for our customers, and I think that's really where we can make the big difference, and I will come into that in a little bit. It's all about creating business opportunity by greener solutions and managing our sustainable aspect in a proactive way and, of course, being accountable. If we look into this, we have a package around the sustainable arena. We are following United Nations sustainable development goals. We are part of the United Nations Global Compact. We have our Spirit, our basic principles, our code of conduct. We have the right management systems. We have long-term objective surrounding the sustainable objectives.
We report Global Compact and Carbon Disclosure Project. We have a sustainable report that is according to GRI standards.
We do everything right in that aspect. Really what I would like to talk to is how we develop and how we treat it in day-to-day business. Our contribution to the more sustainable world, we are doing a lot of efficiency improvements. We show the graphs later on. We do sustainable innovations and solutions, and I think here we can do it better. If we always, when a customer come to us and ask us to develop something, first of all, we look at the project or product and make a judgment. Is this something that is the right way to do it? If we don't feel that way, we rather turn it down and walk away. If it's a good thing that we think fits our way of thinking, then we have an ambition to always suggest a greener solution to the customer.
It's not always accepted by the customer, in most cases not, but we should always be positioning ourselves for a greener solution. That could mean different kind of material, assembly solution that is easy to recycle. It could be less material to design our material and a lot of those things. I think in the long term, our customers will emphasize and see that this is the right way to go. Not all our customers are accepting those suggestions today, but it will come, and I think this will be creating business for us. Of course, we increase our usage of bio-based and recycled polymers. We are phasing out all kind of hazardous additives to the plastics. We are cutting the proportion of fossil raw material, in the products.
We are offering positive, stimulating, and safer workplaces, and we are being a good corporate citizen. This I think is very important. This is something that is guiding our teams when we choose what kind of products that we go into. Polymers, it's a very good material. Plastic is a very good material, but it's misused in so many aspects. There are a lot of products on the market that should not be made of polymers or maybe should not be used at all. The first thing we are thinking about, from a life cycle perspective, is this product that the customer's asking us to develop, is it a short usage? For example, here is a plastic cup that you use for maybe five minutes, then you throw it away. Is that the type of product that is interesting?
It could be straws, it could be those kind of short life cycle products, versus the long usage, when you use the product for many years. It's a big difference in the aspect of how it affects the environment. That is the first question. The second one, plastic in the nature, that's a big problem. When the polymers or the plastic products end up in the nature, in the oceans or somewhere, versus the recycle, the reuse. That's the second one. Can you reuse this? Can you recycle it in a good way? You have the third, what type of polymer is it based on? Is it based on fossil fuel, or is it based on bio-based polymers? This is a growing area and virtually all polymers can be produced from bio material, from growing things instead of taking up oil and creating polymers.
If you go this way, you will have a carbon dioxide footprint that is not adding carbon dioxide to the environment. What we think we are aiming for green, green, but it could be in some cases, if you have a short usage, but you have a good recycling and it's coming from bio-based, that's okay because it's handled in a good way. If you get too many reds, then this product should not be developed. This is sort of guiding ourselves, and I think the discussion in the media around plastic, it's going to be a little bit more, how should I say, balanced. Polymers is great material, but it's misused in so many aspects, and we have to take part in that, making sure that not so many bad products are put on the market.
If look into the plastic and where they could be used in a climate smart way, it really saves energy. Using more plastic in the car or the aviation industry reduces weight and thereby reduces fuel consumption over a long period of time. It can be recycled, it's a good material in that aspect. Also, in the construction industry, plastic are used as insulation material. It's very good. It's creating and saving energy over time, it's a good usage of plastic. In the packaging industry, it reduces cost and weight of packaging, reducing the greenhouse gas emissions and cost of energy. In the food industry, it makes sure that we reduce waste of food. You have to look at in a bigger perspective, the plastic, where it's used and why it's used. What are we doing then?
Nolato is working towards a sustainable business future. We have actions for a greener tomorrow. We are continuously striving to design and develop environmental-friendly solution with less material, less packaging, and sustainable logistic management. We are investing in new developments and production method using recycled material and bioplastics, for example, coming from sugar canes. By partnering with our customers in the early stage, we can consider the environmental impact throughout the entire product life cycle and supporting our customer, creating better products. By using the renewable energy, the bio-based and recycled polymers, we are cutting waste and reducing our carbon footprint. We are saying no to support development and production of products that do not meet our environmental requirements.
If we look on our environmental figures, this is actually what we are in our factories, and we have a target to reduce this 20%, and we're on good track. This is more how we run our facilities, how much carbon dioxide emissions are coming out of our factories. Also driving down energy consumption, so better lighting, better efficiency of heating and cooling in our facilities, and also taking down the waste volume from our factories. Questions? Yes.
Colin Samuel here. First of all, what portion of the material you purchase is virgin materials versus recycled, for instance?
The majority. Definite the majority.
It's virgin?
Yes, it is.
In 10 years' time, five years, what's your target?
We have a target to increase. You have to think that the reused material have, today, some properties that are affected by the reuse. Normally, if we are working in the high-end segments with a high qualification, then when we have reused material, we'd rather sell it to some industry that are working on simpler technical solutions. It's reused, but not maybe for an implant or a medical device where you have problems with recycled materials. There are different type of products that can use recycled than virgin material. More questions?
Do you see this green agenda or considerations affecting certain business areas more than others?
I think it's in different steps. Different industries have different, how should I say, thinking about this. I think what we see now is in the mass consumer areas, we see more trends towards this. The medical is always a little bit behind. We can work a lot on design issues, but using non-virgin material and new materials is always a longer journey with all the approvals and so on. It's different between different areas.
How often do you say no to projects that, from an environmental perspective, is that happening?
How often? Maybe one out of 20 something. One out of 20 suggestions we might turn down. Something like that.
What could it be, then? What is the problem?
It could be that we think it's a short life cycle, hard to recycle, and it could be done in a better way, and the customer's not listening to our suggestions. Those kind of things. In the next four to five minutes, we will dive into the Medical Solutions business area. I will start with more business presentation, and then later on, Kristoffer will guide us into the virtual world of product development.
First of all, my name is Johan Iveberg. I joined Nolato back in 2010, so almost 10 years ago. At that time, I started as the managing director for Nolato MediTech, which is this site and the Botkyrka site as well in Lomma. That's why I had some extra knowledge in the tour when we did that. Since 2016, I'm head of the business area, Medical Solutions.
Okay. We have a history with growth. We started out back in 1997, 1998, with the business area, medical. We have been in the medical business since the 1950s. I think end of the 1990s, Nolato decided to make a business area out of medical, to really focus on that. Since then, we have had a pretty nice growth journey over the years. I would say 50% of this is organically growth and 50% is through acquisitions. We have done six successful acquisitions during this period, and one of them is site here today. We are today a company with roughly SEK 2.5 billion. We are a leading development partner and a manufacturer and provider to leading pharma and med tech customers globally. We work with, I would say, most of the big pharma or the biggest pharma and med tech companies.
Out of the top 30, I think we are engaged with 80% of those, globally. You can see some of them in this list. We are, since some years, also globally present. We are not that many companies that actually can manufacture on three continents. We have altogether 12 manufacturing sites, a lot of them in Europe, but we are also in Asia, and we are in the U.S., supplying these kind of customers. We have a very strong position with the global pharma and med tech. If we look on the global pharma market, it's quite big. Say it's like $1,200 billion in total. That includes everything, pharma and med tech. Huge market, and growing. Out of that, the outsource market or the medical device market that could be attractive for us is roughly $250 billion.
Out of that, roughly 10% is where we can act, what we see as our market, where we, with our knowledge and capabilities, can act. The market is growing and has been growing over the years and will continue to grow in the pace of 3%-5%. The ambition for the business area is that we should out-compete that. We should grow more than 3%-5%. From the previous slide, you can see that we have managed to do that. Of the EUR 1,200 billion, EUR 600 billion is made by the top 20 companies globally. 50% of the total sales worldwide is actually concentrated to 20 companies. Those 20, they are getting bigger, but the number is getting smaller. There is a consolidation going on the market, and it will continue.
Other trends is, of course, this is long-term business, and it's long-term growth in areas such as diabetes and drug delivery and diagnostics. Those are some of the quickest growing segments in the medical device. Long product life cycles, even though they are getting shorter, they are still very long. Global supply, our customers, they want us to be able to supply them in three continents. That's a competitive advantage we have now that we are present globally. There is still an increased need for outsourcing. There are some other trends, like plastic replaces glass and metal, and also that design is of more importance today. When you use a medical device, you don't want it to look like you are sick. You want it to look like a mobile phone or some kind of fancy device. That goes for everything. Actually, for continence products as well.
Other global trends are, like Christer mentioned earlier, we are getting older. We are not behaving in a good way. We are not exercising, we are eating wrong things, which creates a lot of need for new drugs. The drugs are accessible more on the global base today. Still, 50% of the market is U.S., 25% is Europe, 25% is rest of the world, but it's changing. Another mega trend or trend is also home care. States don't want to have you in the hospital. They want to treat you at home, and you want to be at home as well. There's a lot of new devices being developed that you can actually treat yourself in the home, such as autoinjectors, for example, or insulin pumps or patch pumps and whatever. There's a lot of new devices coming out on the market.
This is the generic spread on med tech devices globally, IVD, cardiology, and so on. That is the sales numbers or divided by sales today. IVD, cardiology, and drug delivery are segments that are growing rapidly and, of course, are of interest to us. I will come back to those segments later on. Our offer for Medical Solutions is divided into three. The first one, it's product development and volume production of new medical devices. The base is polymer products or polymer steel, but we add more and more assembly and automation into this. This is the future. There are so many new programs coming on. There are many new drugs coming into the market. They need new drug delivery devices to get entered into your body. Of course, the outsourcing or insourcing transfer trend continues.
That started up some 20 years ago when pharma companies wanted to outsource components. They wanted to outsource more complex automation and assemblies. Still, a lot of manufacturing is going on still within the pharma companies that will be outsourced. Also more and more service will be outsourced when it comes to product development and quality assurance and so on. The last one is our platform products. We have some platform products that we design on our own, but we only act in areas where we don't compete with our customers. Normally, our customer, they own the patient, they own the product, the IP, they know the demands, what does the patient need, what does the hospital need. We come in with our knowledge of manufacturing and assembly and, of course, product development. Today, we have broadened our scope.
We can today provide everything from initial idea to full-scale manufacturing. We can start really, really early with concept development. If the customer has an idea of something, or he has a new drug that he needs a new delivery device for, or a new diagnostic component, whatever, we can assist with our own knowledge and with partners in this. We add all the technologies that we have within the group, not only within medical, but we utilize everything we know within the Nolato group into this. Then, of course, R&D. Design for manufacturing and design for assembly. A lot of this is being done virtually or in computers. We will deep dive into this, with help of Kristoffer, in 15, 20 minutes, where you can actually see our capabilities or how we work in a modern way with product development and design and utilizing digitalization tools.
After that, of course, industrialization, that's where you add CapEx, you buy your equipment, operations. You have seen one of the best medical facilities globally today. That is what we need to be. We need to strive to be number 1, always. The way we do that is with continuous improvements. Today, when we interact with customers, we can enter into this in different stages. Of course, more and more start up early. Still, for example, outsourcing could start over here, where we transfer equipment into our facilities. Of course, this adds more value to our customer. They need to focus on their core business, which is not medical device development. That is often developing of new drugs. We have two units within Medical Solutions. We have the medical devices, and we have the pharma packaging. It's roughly 80/20 in sales.
The reason for having both is that we have the same customers on the pharma. Different ways into the customer, but in the end, the same customer. We do medical devices in, I would say, more or less all areas, but some of them are in specific interest for us. These are the top five areas where we focus. The first one is drug delivery. It's a broad area, but it's about getting the drug from a container into your body, and there are a lot of different systems. Diabetes is, of course, a huge area. There are 400 million patients around the world that has diabetes. There are 600 million that has a BMI over 30 and needs treatment. It's an epidemic more than a disease, I would say. It's a lot of devices, a lot of insulin being produced to these patients.
Of course, a lot of pen system, infusion device, pump systems. A lot of new development going on, especially with the pump to try to achieve closed-loop systems, and so on. Most of these devices end up in U.S. and Europe, or I would say almost everyone. The market in Asia is not yet established, that's a huge, huge market for diabetes. Other parts of the drug delivery and why that is in focus for us is there is a lot of new drugs entering the market. There is a trend going away from traditional chemical substances that you take in pills, instead, a lot of development into biological-based drugs. There you need some kind of drug delivery system to get that drug into your body. Auto-injectors are being developed, with us and on the market.
There are a lot of different patch pumps programs going on. Of course, traditional systems also for drug delivery, but it's once again home care. If you can take an auto-injector and administrate your drug yourself instead of going to the hospital, that's what everyone wants. A lot of activities globally in this segment. In vitro diagnostics is one of the fastest-growing areas. That started up, I think, back in the '80s when AIDS was, well, not invented, but it was a disease that appeared. Then you realize you need to test the blood. Then this industry boomed and started to expand. Today, you do seven different tests on every blood that is given. For example, not only for HIV, but also a lot of other diseases in the blood. Today, it's growing, and the technology has gone extremely far.
You can detect more or less everything from the human body with just a small sample. One of the major players in this field is doing 300 tests per second, 24/7, 365 days per year. This will increase rapidly. It's not only for diagnosis, it's also actually for developing new drugs. You need to do a lot of testing. It's an area which we focus, and that was one of the reasons as well that we acquired Nolato Treff in Switzerland from three years ago. They are mainly focusing on this kind of products. Cardiology is also one of the fastest-growing areas. That's everything about your internal, your heart, and lungs and everything. We produce a lot of different products and devices for this area. You have seen some today, very special technology for pacemakers, long-term implants, extreme demands on these products.
They will be in your body for the rest of your life. They will never take them out. Another big area for us is continence care. As I said to my group, it's not a fun category to be in, but there are so many people that are suffering from continence problems, from ostomy issues. That used to be a sort of a hidden disease until 20, 30 years when new devices entered into the market. Today, if you suffer from this, you can actually live more or less a normal life. Some 10, 20 years ago, you were sitting at home because you were afraid to go out and meet people. A lot of good devices actually helping people to get back to a normal social life. The last focus area here is pharma packaging, and here we talk about, I would say, high-end pharma.
Adding technology that we have in-house when it comes to tightness, for example, child-resistant packaging. We work a lot in this area as well with sustainability. How can we reduce the weight, the packaging? How can we work with green material? We actually have green materials on the market today in this segment. This is the share for Medical Solutions. You can see the same categories. IVD, drug delivery, cardiology, continence care, packaging, and then the others. Some years ago, we were a component supplier, and we were acting locally. Local, I would say, smaller med tech customers. It was injection molding of thermoplastic, PDs, and silicone. Today, we are a system supplier. We add on more value into the chain as automation, assembly, printing, packaging, whatever needed. We work with selected pharma and med tech customers.
We want to work with the biggest and the best, but we want to choose the customers. We have expanded our footprint. As I said, we have 12 manufacturing units dedicated for medical production globally. What we see tomorrow is that the outsourcing trend or the trend that the pharma companies need to focus on the core business, that will continue. We will add more value into the chain. We will offer more and more complete solutions. We will add electronics. Possibly that we add drug handling as a phase as well, because pharma companies are outsourcing drug handling as well. We will increase our global presence. U.S., of course, this will be interesting for us. In the end, to be a worldwide solution provider to our selected customers. Over the years, we have expanded our business. We started up as a business back in 1997.
We had one site in Torekov, now it's called Nolato MediTor. We're mainly producing soft materials, not at all what we deliver today. A couple of years later, we added our site in Lomma. We entered into plastic production. Still component-based, we added plastic to the soft components. 2005, we started up in Hungary. Hungary today is one of our major manufacturing sites for medical, producing high volume medical device. We expanded a couple of times or many times. Back in 2006, probably heard that we acquired this Medical Rubber. That was mainly for technology to get the silicone knowledge of this facility. I would say also the reason for Hungary was actually we followed one of our bigger customers down to Hungary. That's why we started down there.
Back in 2007, we acquired Nolato Cerbo. That was our way of getting into the pharma business, the pharma packaging. That has actually been a way in for us, and to be able to attract big pharma. 2008, we followed a customer as well to Beijing, started up medical operations. 2010, we took the step over Atlantic, of course, geographical expansion, started up manufacturing in Wisconsin, or acquired manufacturing site in Wisconsin. 2011, we started our technical design centers, which Kristoffer is heading. Today, we have a big design center here in Hörby, and we have one that we are building up in U.S. as well with similar capabilities. Mainly focusing on early stage product development and design for manufacturing, design for assembly, supporting all the different manufacturing sites globally. 2012, we acquired Nolato Jaycare, which was a pharma packaging company in U.K., two sites.
We are now converting one of those sites into medical devices, concentrating pharma packaging to one of those, and then converting into medical device and clean room production. 2016, Nolato Treff. To get into IVD, as I mentioned earlier. They are experts in IVD. They are high quality supplier of IVD products for the major players globally. Switzerland, I would say, is not only our company, but Switzerland is the center of excellence globally for IVD. We also acquired Nolato Stargard in Poland, and that was to be able to get access to low volume assembly. Volumes that is very hard to invest in a lot of automation. That is the footprint as of today. What has happened, the last, I would say 18 to 24 months, is that we have actually expanded most of the medical sites.
You saw one expansion today. We have done the same in Hungary. We have done it in U.K., China, in Nolato Contour, U.S., these sites. Nolato Stargard is actually now being rebuilt. We are adding new clean room capabilities, and we are adding injection molding into that site and transferring knowledge and equipment from Sweden. We also expanded our IVD plant in Switzerland. Good. That was my last slide for the business perspective. Any questions? Yes.
Two questions, please. The first question is, first talk a little bit about the, you mentioned the high-end pharmaceutical packaging.
Just really, why is it high end? How is it different to your sort of paracetamol package, high end?
Well, what I mean is that we don't want to supply commodities. We want to add our feature. For example, tightness. You're not allowed to get air inside the bottles, for example. We have solutions to do that. If you want special caps, for example, or child-resistant caps, we add our technology around that.
What are examples of the sort of contents in those situations where it's vitally important to have airtight and
Well, it depends on the drug. If there is a sensitive drug in that bottle or in that pack, you are not maybe allowed to get air in or moisture or whatever. We have systems to prevent that, and we have solutions to really produce tight packaging, which is tricky. That is what I mean. We aim to do that and use our technology and our knowledge within the field. Perfect.
Second question is around the, I think it was Stargard.
Yes.
You made that acquisition for entry into low volume production.
Well, low volume, high value. We are located in a high-cost country, here in Sweden, for example, and in several places. If we want to do manual assembly, it's very difficult to be competitive, if it's really low volume. The customer maybe needs 10,000 per year or 20,000 per year. You cannot build a fancy automation solution. You need maybe some jigs or whatever, but you need a lot of labor-intensive. With the Stargard acquisition, we can actually attract this kind of business.
Okay. Poland gives you that opportunity, but Hungary doesn't.
Well, Hungary is more of a high volume manufacturing site, focusing on Yes. That's the reason why with Stargard. Yes. Of course, the labor cost in Hungary is much lower than here and most other countries as well in Western Europe. We see Stargard as the site in addition to Hungary. Yes?
I have a question regarding growth. Growth is at 3%-5%.
Yes.
Historically, organically, you've grown quite well above that.
Yes.
Is it possible to break down for what is what of the difference? Is it the outsourcing trend? Is it new clients, new product? Is it possible to get it spread out?
Well, I would say it's a mix of what you just described. The outsourcing trend has been very successful for us. We have been very good in attracting those kind of business. Now lately, we are attracting new customers or getting actually a bigger share of wallet at existing pharma and med tech, and especially pharma. We have been successful with the strategy we have, with the offering we have, actually to attract these kind of customers and to be able to grow faster than the market, year after year.
That's likely to continue. The historic levels are pretty much fair to assume similar going forward, that sustainable level?
Well, I would say, more than the market itself.
Yeah.
More than 3%-5% is the answer on that question.
Thank you.
Of course, you will find different quarters, single quarters, where we have less because it's not a continuous, just a line. There will be variations.
We see the growth. The medical business will grow globally. There's no doubt about it, and we will be a part of that.
Thank you.
Yes.
Could you perhaps talk about your M&A pipeline within the medical segment?
The M&A, maybe I will direct that.
Maybe it's for Kristoffer, or either one.
talk about the M&A pipeline. Right now, there's a lot of activity in the M&A market. We talked about this previously. We are very picky when it comes to acquisitions, and we always look for the best companies. We are not looking for just buying for buying. It has to have a synergy. It has to have the right culture. It has to have the right quality level of the company because we will not just buy companies. Those companies, we know the companies, we've been working on them, and we continue to work on them, and when they are for sale, we're going to buy them. That's it.
Yeah. Okay, another question.
Yeah, I have a question too, or regarding East Asia.
You have a plant in Beijing.
Yes.
We heard earlier that you've been there for some years, but it's a low volume. How do you deal with the advantages and with the disadvantages, secrecy of the company, for instance?
Well, how do we deal with that? Well, I haven't had any issues with that. I think we have been in Beijing since 2001. We have experience of doing business in Beijing. The Medical has been there since 2008, so we are probably taking a bit advantage of the Integrated Solutions knowledge of doing business in China.
We don't have a technical design center in China.
No.
If it's a completely new system, it's developed somewhere else and then produced.
Okay.
Yes. That's correct. Okay.
Can you say something about the selling process, how many sales employees you have and how they work? How they target customers, what you prioritize, and the pipeline also, maybe?
Well, the structure of Nolato is as Christer says. It's very decentralized. We have each and every site, the manufacturing site has their own sales staff to support the global customers and also the local customers. In total, sales, I cannot give you a number, but we are many sales reps in this. On top of that, we have key account managers, working directly for the business area, especially to support these big 20, 30, the biggest pharma med tech customers globally, who is requiring one point of contact and where we need to coordinate business. If we have manufacturing in different sites, we need one person to coordinate and support the customer. We have this global sales, and we have the local sales working together.
Can I ask another one?
Okay.
On page 33, I think you showed the five different product focus areas.
Yes.
You also showed approximately how much they are.
In five years' time, do you expect the split to be significantly different? Very many elaborate method products.
Well,
going forward.
Well, the biggest growth areas on the market is, it's IVD and it's cardiology. Those are the fastest-growing segments. Of course, we will follow that. We will grow in these segments, and we will grow in drug delivery.
In terms of outsourcing activities, is that the same there? Most activity is found in those areas or is it more towards the fresh?
Well, I would say not in IVD, there is not that much outsourcing activity. It's more, in that case, into drug delivery, cardiology and the other areas as well. That could be both outsourcing and new product development, and probably more of new product development than outsourcing going forward. Good. Thank you very much. I would like to introduce Kristoffer Glowacki and try to describe how we work with the new offerings and how we work with product development in a little different way than others.
My name is Kristoffer Glowacki. I've been in medical industry for more than 20 years, working in different assignments from sales, business development, R&D, doing a couple of years in manufacturing. Mainly, most of the time I spent on the customer end of Nolato. Back in 2013, I met Christer, the chemistry was very good. I left the customer end and moved into Nolato. Since then, I'm really enjoying being part of this great company. What I will talk about today is how do we create a competitive position in terms of product development, project services. Why is that important for us is, of course, we have those two customers, pharma and medical device. Pharma, traditionally, always outsourcing devices. For pharma, device development is not development. It's just a small thing for them comparing to drug development.
They never had any focus on this or own capabilities. This is the biggest kind of opportunity for us as Nolato. Medical devices, although as they consolidate the business, they tend to outsource more and more compared to what it was 10, 15 years ago. Also, as Johan mentioned, the majority, the bulk of the new business opportunity coming to Nolato is really coming through new product development and then manufacturing. For us to gain manufacturing, which is our business model today, we need to provide attractive new product development services and project services. I would like to quickly give you some more background about what customer needs are, the traditional way of execution of those products, and how we see the opportunity based on current environment.
I will also walk you through a demo case of how our process is actually working based on the autoinjector we actually had to develop on our own just for demo cases, because we are not allowed to show any products we are working with our customers. If we didn't have it, I could not tell you anything about it as an example. As we do our own research on the customers, there are also other companies doing the same. In this case, Bain consulting group asked senior executives to prioritize the top concerns when it comes to the new product development. It came out as product innovation, reducing time to market, and efficient product development are key concerns for that. I will shortly explain why it's like that.
In our kind of industry, traditional way of execution still today is actually the development is based mainly on the brainstorming activities. There's a lot of work done like, let's try this, and if it not work, let's try something else. It's a lot of trying, testing, trying and testing. As we work with our clients, a lot of issues are surfacing in very late stages, which is very costly and time-consuming. We see, of course, project delays. There is never plan A working. At best, plan B, maybe even C, and so on. This is a big concern. Of course, overruns on the project budgets. Finally, when we get the design, it seems to be too expensive. This, of course, is built on many loops from design, building samples, and then testing them.
The only way to gain knowledge is actually to build something and then to test it. It never works after the first loop, you need to have several loops. As an example, an auto injector, which can have between 10 and 20 components, one loop will be between EUR 3 million-EUR 6 million, and time, 4 to 6 months. I've never seen a project ended in the first loop. There are many loops. FDA did also a research, and they have access to most of the information, actually, in terms of the new product developments. They summarized this, that where new drugs takes 12 years to develop on average, to move a medical device from concept to the market is between 3 to 7 years. The average cost is EUR 73 million. It's mind-blowing. We still talk about 10 to 20 components.
If you look at the car industry or mobile industry, it takes them between two to three years to develop a new car today. Why is it like that? Yeah, because medical industry is conservative, they don't want to change, and they still have affordance. When you look at the time, the lead time, and the project cost, it's interesting to see that when it comes to the lead time, the majority of time is spent on these continuous loops trying to find the solution. Just 26% of time is really industrialization to get the product out to the market quickly. This is based on our experience, so I don't have any source to this slide. When the development work is done, in 26% of time, the companies are spending more than half of that money on industrialization.
It better be good, because if not good, you waste a lot of money. Moving back to some other design, the cost will be very high. No wonder that top executives see this as a big issue. They really want to address this as industry moves forward. Out of this knowledge, we actually developed an idea of improving the situation, and helping customers to mitigate the uncertainties, risk, cost, and time associated with a new product development. It seems like a little bit low-hanging fruit. What we really do, we want to get away from this one, this very empirical trial-and-error activity, and move into the virtual environment and really use the technology, use science, and our experience to do all those expensive loops, based on the science and modern technologies.
Once we actually de-risk the product, once we identify all the issues and solve them, then we move into the factory environment and make one loop on the real equipment and the real tools, with a great knowledge. The biggest challenge of doing this is really mastering the skills. There's nothing else. Everything is already in place. What is very important to make sure that we have a good balance between analytical knowledge, empirical knowledge, and our work processes. Traditionally, Nolato is traded on very empirical knowledge. We have a lot of experts, industry experts, which understand and know the industry processes like molding, like assembly, and others. We really understand this. We just need to build this analytical team and competence, but we really utilize those experts, on the kind of empirical level and introduce them to analytical world.
Now we cross-bind those two together, and that works really well in the project world. Now I will give you a very quick tour of how we do a project based on Nolova. It's our autoinjector, which probably never hit the market, we need it for the demo purposes. The work process is very simple. We design, we mold, we assemble, and test. This is the most generic way. Today, actually, a lot of companies actually are doing modeling, doing analytical simulations, but all on the CAD models. CAD models are something you design in a computer and just represent the perfect environment, which is never the case in reality. What we do, actually, which is making us a little bit unique, although, even then, on the virtual design levels, there are not many which are using this today in our business.
There are some, I would not say that it's very unique. What we do, we add actually virtual modeling, virtual assembly, and virtual testing. This is unique. How do we do this? Let's have a short look into the virtual design. The key in every project is to really understand all stakeholders. It's end users, it's our customers, it's the DC centers, all stakeholders, and gather the data which is important for our ideation and concept creation process. There is a lot of interactions. We, as Nolato, we not necessarily would like to be very strong in this area, but we collaborate with our customers because pharma customers, they still would like to own this part, understanding customer needs. They are not interesting for executing this all the way. They would like to understand what it means.
We collaborate with our customers, with end users, and we create those concepts. This is a typical area where people would like to brainstorm. A lot of brainstorming and a lot of group power that some stronger people may influence decision-making process. We propose and try to break this early and see, do we have a physical space in those ideas and solutions which makes it even possible to get it done? Believe me, many times I've seen that people would like to fight Mother Nature, which is not the best thing to do. What we do here is we actually early on see, okay, our injector has to move fluid. It has to work based on certain principles, certain materials, technologies. We can early on see, is this design at all possible to get through?
Early on, we actually select the couple of designs which has the highest possibility to succeed. It's not only in terms of function, we also need to think about cost. It's easy to get something done and work if you don't have this cost parameter, then basically no boundaries. We can do anything we want. In every business case, there is a cost involved. If we cannot hit right cost, the business case is getting really, really bad. Once we select a couple of concept ideas, we move this back to the users. We test this even in a virtual environment, and we get the feedback, especially on the things we cannot calculate, like ergonomics, like user environment, and so on.
When we feel we have something kind of attractive, then we move into the next step and see, okay, is that possible in our manufacturing technology? Starting with modeling, and see, as Christer mentioned before, is this correct in terms of material choices, in terms of usage, and so on? We review all the materials involved and technologies, manufacturing technologies, to see if it makes sense to move on. Some early simple test shows us a lot of information, and then we can decide if it makes sense to move on or we have to move it back to a design table. At this stage, it's very cheap, actually. We haven't manufactured any tool at all.
When this is kind of looking okay for us, then we move and try to optimize the part from the dimensional point of view, but also from a material consumption point of view. As you see, there was red areas, although we have a lot of red in our logo, but we don't like red in design. We try to eliminate red. With a software which actually optimized this design, basically over the couple of nights, we can improve this and eliminate those red sections. Then we can see, okay, now we have design which will work, from the dimensional perspective. Then we do also in the virtual environment, measurement reports to our clients saying, "Here's the measurement report, and here's what we can expect from this design and available technologies.
If you want to have more, we need to do additional technology development project because we are getting outside of boundaries of current technologies. This is an early warning that maybe not so good to enter these areas. It's going to be expensive and difficult. Once we went through this, and we are happy with this, we have components to our virtual assembly process. We take those a little bit, I would say, ugly, because in reality, they are not perfect. They are a little bit not perfect like in CAD, and we test them in assembly process. Again, in assembly process, we get the complete assembly, and we break it down in sub-assemblies, define some key parameters to test on, and look in this in more detail.
In this system, we can really go inside the design, inside material, and see how it behaves during assembly process, see all forces, see all parameters, rather than at best today, take a high-speed camera and look that, my God, something is going wrong. Why? We don't know. In this case, we have a full knowledge about why it's working, why it's not working, which material parameters need to be improved, which design element needs to be improved. Early on, we are building a lot of knowledge about this design. When we happy, when we see that there is a room for us that we can use this principles for future assembly operations, we move on and put together a ready assembled product and move into the actually the testing.
The testing, it's extremely expensive in our industry because when we test, we need to test a lot of samples. We need to manufacture those samples. We need to build the test equipment, and the test equipment is very expensive for R&D purposes because it's custom-made for the design. That has to be built. We need a lot of samples. Also, another thing is that quite often when we build those test rigs, produce the samples, then customers say, "Okay, let's think about product requirements." At this stage, when you invested in molds, in test equipment, and you still discuss product requirements, it's also an early warning for issues. Before that, it is very difficult to force them to bring the discipline of delivering product requirements.
In this loop, we say, "We cannot go any further until you give us product requirements complete." We will force the important questions very early in the process. Once we get requirements, we can do testing. Then we say, "Okay, let's test." We do drop test, different orientation. We do a bend test. We do all kind of tests very quickly and very inexpensive. We immediately see where we have red areas, where we need to improve things. We can change test methods very quickly. We can build new samples if we need. When we understand the product performance, we move on and see, okay, what do we need to improve? We see, okay, how the product actually performs in different test settings. Maybe not a flat surface, maybe a little bit angled surface. You see some red areas. You see some damages.
You cannot see things like that in a real test because it goes too fast. We can run this in a slow motion and identify what needs to be actually improved. We implement some design changes, and then we go back immediately and test. We don't wait for a new set of tools until we can build this again. We immediately do design changes and test again and see how far we get with those improvements, if we are happy or we need to do some additional changes. As you see to the left, it's still some red, but on the right-hand here, the design starts to work much better, and the same on this side. We can do many loops quickly, inexpensively, and actually come to, I would say, 80%-90% of ready design. There's always something left to do based on the real tools.
I don't want to eliminate this 100%, but at least we are taking out major showstoppers early on. When it's done in the virtual environment, of course, we move on to the factory environment and do the final testing. We don't expect showstoppers at this stage. This is really it. In summary, why Nolato virtual design and prototyping? As you heard before, we really eliminate all the design risk in the early stages. We can understand manufacturing processes much better. We have very deep knowledge about design, about materials, and why it's working, why it's not working, what is most critical for this design in terms of design performance. I think in most of the cases, we will be able to reduce time to market by 50%. Environmentally friendly designs. The carbon footprint is linear to the amount of material used in the design.
If we take out 30%, we take out 30% of carbon footprint. It's the easiest way, actually, today to provide environmentally friendly products. Of course, cost-efficient execution. We don't need those expensive tools and expensive assembly equipments and test rigs, to get majority of project work done. How unique is this? Are we really very unique on the market? This is not about flying cars, really. I think as Kristoffer mentioned before, there are other industries solving similar problems, and we really take advantage of this. In the automotive industry, this is a reality since many years back. They cannot afford to crash the car several times and find out that it's not working, especially when they have 36 months in the design process. They've been forced to do this much earlier.
Through our portfolio of different industry areas, we've been able to learn from other industries and develop this model for our industry. Any questions?
Kristoffer, yeah?
Sorry. You mentioned it's not unique, in that this is a process that's been executed in the automotive industry before.
Yeah.
Is this process now the norm for all competitors?
No
within the medical devices?
We are quite unique with this. It's not going to last forever, of course, as we start to market this, and our customers which will find out about this. Of course, they will follow because it's addressing a real needs of customers. It's about being first.
Best
Best. It's about people also. Actually, it will be very easy to say that it's possible today because aerospace industry is doing this even before car industry was doing this. The hardware, the software, everything is in place, but to put the people together around this and get the skills right, get the work processes right, that's the challenge, and that takes time. It's not like you can do it in one year. To find this good engineers is very difficult. Yes?
How do your customers respond to this? Do they embrace it or pull it or resist?
I don't know what to say now.
Of course, everybody wants to save money and time.
Yeah.
From that perspective. Then again, it's a conservative market. You have the struggle there.
Sometimes they would say, "My God, how hard it is. A simple injector. Why do you need all this heavy stuff?
Of course, yes.
It's simple. When we move with the project, we run into the issues, we suggest them, "Could you consider to use some of the tools we informed you before?" They say, "Okay, do it." We do it shows quite often, in the meetings, that we can modify designs as we speak with them and calculate and prove to them that their intuition is telling them completely wrong, what is the world of science and physics actually is telling. In those designs, the linear relations are not existing. We all would like to have a logic of linearization. More horsepowers, higher speed, things like that we love very much. In this world, the truth is in the double curved surface.
You need to see the surface and to see, okay, how the surface is shaped, and there is a small peak. This is the optimum of the design. You cannot see this by using a normal intuition. There is no way to find that.
Industrial Solutions. My name is Johan Arvidsson. I've worked for Nolato for the last 25 years, so I have quite some experience here. Mainly doing a position as managing director for different Nolato companies, in both industrial and medical, in Sweden, in Hungary, where we actually started up in Romania also. Since 2012, I'm also the business area manager for Nolato Industrial. I will talk about our position offering, what our operational focus is, and I will comment on a few efficiency measurements that we do at the moment. When we look at Industrial, our average growth the last 20 years is 8.2%, as you can see in the last four to five years, that growth has been quite much higher.
Part of it is because of the acquisition of Nolato Treff, which has a part that is industrial and another part that is medical. We also have had a heavy organic growth in the past years. Can everybody hear Johan?
No.
No. A little bit louder. A little bit louder. Okay. What we do, we are a leading developer and manufacturer of products and product systems in certain market areas. If you saw Johan Iveberg's picture, it was the same, developing and producing polymer products and polymer product systems. We do it for different markets, like the automotive, like the hygiene, like forestry and garden. The main focus from our side is, of course, as in medical, the customer itself. We are not a broad automotive supplier. We are not a broad hygiene supplier. We have certain customers in those areas that we would like to focus on. I will come back to that when I discuss partnerships with selected customers. I will also come back to technology, where we discuss that, and our footprint today.
What we have developed is that we have a strong base in Sweden. We have heavy rain outside at the moment. We have four facilities in Sweden. We have in Hungary, we have in Romania, we have in Switzerland, and since this spring, we also started our production in the U.S. within the business area. I will come back to that also. You see a few of our customers. In our business, quite some customers that we have, they don't allow us to mention that we are their supplier. We believe it's because they don't want to tell the competition who they use, so that's a good thing then for us. You can see well-known names, big players, some of them with a Swedish heritage, of course, since this was our home market, and this is the market where we still are really strong.
If we look, we divide the business area into two segments. It's the general industry that contains things like hygiene, where we do products for washrooms, both public and what you have at home. You see some products that you might recognize that is used in the garden and forestry business. You see a chair also, an office chair, so you might imagine there's a lot of plastics and a lot of parts in that Nolato Industrial could do. When we look into the automotive, our main focus is technical details. It's not too many visual details we do in the automotive. It's high-tech details that sustains heat, sustains pressure, sustains part of the construction of the car.
If we take our last 12 months' sales and divide it into the different areas, automotive is roughly 40% and has been that for quite some time, it's not growing faster than anything else. We have the hygiene. It's 15%, 16% of this picture. We have the forestry and gardening, and then we have the others. That is more or less the picture where we have our customers. Our direction and strategy. We are positioning ourselves as a global high-tech partner. If we look back a few years, we were a product manufacturer. We had a leading position in Sweden, and we started to develop our position in Central Europe. We had customers, that was the definition, so to say, and we had a focus on technology to gain productivity. That has been our scope all over the years, focus on technology to gain productivity.
If we look today, we are a solution provider to partners and customers. We have still a leading position in Sweden. We have created a strong position in Central Europe, and we are developing our position in the U.S. Today, we have partnerships with a number of customers, and we are really benefiting. Both we and the customer are really benefiting from these partnerships. We still have a focus on technology to gain productivity. If we look for the future, we will be solutions provider to partners. That's our scope, that's our mission, that is what we are doing.
We will keep our leading position in Sweden, keep our strong position in Central Europe. We will then have established a strong position in the U.S. Our business should be built on partnerships with the customers. Still focus on technology, also to be even more of a development partner. If we look at the journey we made, we started up, had a strong position in Sweden, a lot of customers with a Swedish heritage, at least. We decided that we want to expand the business, to grow it. We wanted to go to Central Europe. We did that. We now have a strong position in Central Europe. Lately, we have had an idea for quite some time that we want to establish something in U.S. Lately, we also did that. I will come back a bit more exactly how we did it.
We wanted to do this, let's say, expand our global presence to be able to grow even further. The next step for us as well is to be a worldwide solution provider for our customers and partners. When we talk about deliver growth with customers/partners, when we select our customers that we want to create a partnership with, it could be an existing customer, or it could be someone that we want to supply to. What we then look at is the revenue and growth potential. If it's an existing customer, we look at the relation. Normally, we have very long-term relations with our customers, but we also try to look in meetings and say: "What's the corporate culture here?
Will it match with our corporate culture? We also have seen during history, if you don't have the same culture, it's very hard to create partnership and work good together. We also want partners that have a global reach, and there should be a geographical match. That's also a hard word. That's also then beneficial for us to do things together. As I described in the previous picture, the expansion of our footprint, by doing that, then we expand our addressable market. If we are at a new geography, we can supply to another market. It also gives us the opportunity to have a further share of wallet with existing customers. Things we couldn't supply from Sweden, we now suddenly can supply them from Central Europe or from U.S.
Once we established ourselves and start to get a name on a new geography, there is, of course, potential to attract new customers into the Nolato facility at that geography. This is what we are trying to achieve when we create partnerships and when we expand our footprint. The partnership approach. What do we do to be regarded as a partner to our customers? First of all, we have to establish extensive relations on all levels of the company. It's not only purchasing and sales, it's projects, it's management. It's all over the place that we need to establish relationships. We get involved early in the projects.
If we have a client in the forest and garden industry, for instance, if they're going to develop a new product, they will contact Nolato even before they start to do the sketches or have the ideas to have us on board from the beginning. There is a need for transparency, honesty, long-term approach, and shared values. I'm coming back to the values again. If you don't have the same mindset that we should really do this together, then it will never work. We do everything from components to finished product systems. Again, as early where we are involved, the more we can contribute to supply systems instead of just the components for the partner. We do more than just the product. We have logistic solutions. We have the right geographical presence and so on. We are making the life easier for the customer, the partner.
Because at the end of the day, our task is to support the partner to create the most competitive supply chain on the market. If you are in the forest and garden industry, there are more companies in the forest and garden industry than our partners. If they fail, we also fail because it's not our product. We are really dependent on our customers' success. This being a part of a competitive supply chain, it's really to our heart to do that, and that is what we have to convince our customers about also. When we do this, we become the customer's first choice of partner, which is, by the way, the vision for the group. As I said before, we wanted for quite some time to have something in U.S. It would be good for us.
This spring, discussion started, of course, before, with a win-win situation with one of our partners. We started up production on the U.S. market, and then we are prepared to take next steps on that market. Then, of course, if you strive for partnerships, then, are we doing the right things? Then, of course, we are really proud to get these kind of acknowledgments from customers. You can read it yourself, but for the second time in four years, Husqvarna Group, best supplier worldwide. You can see we got it '14, '17, and actually, we got a nice prize also in 2018 from Husqvarna. What is written here in red, for me, that's the most important thing. That's the best feedback I can get that we are doing the right thing.
They listen to the customers and proven to be proactive at all time on all company levels as a true partner. The spirit to exceed customer expectation is part of the all employee DNA. When you get that from a customer, I'm proud to say that we are partners. Added value by production technology. There will be a few more pictures. You have seen injection molding, you have seen some nice robot cells outside that do assembly. We do the same thing within Industrial. Why do we do it? First of all, it's to support the customer to get a better product. That's, of course, again, our main focus. They get better quality, they get less processes in their own factory. Yeah, they get something that really works all the time. What do we get out of it?
We get a higher added value than just doing the injection molding. This is a sketch. It exists in reality, but still a sketch. The injection molding machine, it could be 1 component, it could be 2 components, it could be 3 components, it could be 4 components. When I say component, it's in the same machine you can manufacture up to four different materials at the same time in the same product. Then you have robot handling. You can insert metal things into the mold to get bearings or other things from the beginning in the part. You can do welding together with other parts, and at the end, there is a lot of cameras in the cell. The leakage, which in this case is very important, it's tested on the product, and everything is clear to go into the customer's production line.
This is not unique in all industries, but as Kristoffer said as well, it's quite unique in our industry that you really make those solutions and integrated processes. Current situation. Growth has brought us some challenges. We have challenges for one entity within Industrial Solutions. The growth was stronger than anticipated over an extended period of time. Our main focus, when things happen very fast, is to focus on deliveries to the customer. That has put some pressure on our margin. We will not fail on the relationship. We will take any cost it would take to be able to supply. That we have done, and of course, that put some pressure on the margin. The current situation, it's gradually improving. We have still a very strong customer relation. They never suffered. Also, we see a better machine utilization.
We have more time to improve things instead of just starting up things. We see then also improvement in the KPIs. We measure a lot of things to measure progress. That is the short comment to the current situation. Questions to Johan? Yes.
I have one question. Now with the automotive industry moving much more into electrical cars-
Yeah
will that have an impact opportunity for you?
It will have an impact, but it's an opportunity, I would say. On the things we are doing in this business for certain customers, if it's a hybrid, full electric, for us, it's still a car, and they would need the kind of competence that we could provide in this business. Yes.
If you were to just elaborate on that a little bit more.
Yeah
just say what types of things are you providing to cars? It doesn't matter whether it's electric or combustion.
We're not only making engine parts. That's the first thing. We're making parts for cars, under the hood parts, covers, things like that you will use in an electric car, you will need it in, let's say, combustion engine car. You will for sure need it in hybrids. Again, if you have seen a battery pack, it's a lot of plastics in a battery pack, and it's a lot of, let's say, engineering that has to be done to make a battery pack work also. We kind of see as much possibilities in that.
Does your historic relationship with the auto OEMs still hold you in good stead given that they seem to be outsourcing their battery manufacturers somewhere else?
I don't know.
The battery manufacturer will probably not be done by the OEMs themselves. Probably not. We have an interesting company starting in Sweden called Northvolt that will supply the auto industry and other industry with batteries. The cars itself, of course, there will be differences, but there will still be a lot of, let's say, need for our competence into those cars. Every time there is a new platform from the car producers, there are a lot of changes into the products, but we can follow that. Okay. No more questions for Johan? My name is Jörgen Karlsson. I've been with the group for 24 years, having held different positions. Since 2009, I'm responsible for Integrated Solutions, and I've been located in Beijing since 2007. No, I don't speak Chinese.
You have to give yourself targets that are easy to achieve, and I chose not to learn Chinese, and I'm very happy with the result so far. There are quite many Chinese speaking Swedish now. Okay. All right. Integrated Solutions has had a quite bumpy ride. This is the nature of the business which we have chosen to enter, which has mainly been the mobile phone industry since 1997. As you can see here, it has been quite flat. The reason for that is that we I wouldn't say that we chose to have a strategy which wouldn't support growth, but we were quite cautious doing a lot of investments. Why, you might ask. I have no idea. It's before my time.
The reason was that we have been involved with Ericsson, going into Sony Ericsson, and now Sony Mobile, which is, by the way, the longest relation between a sub-supplier and a mobile phone manufacturer in the world, which says something about our achievement, especially since they are now fully Japanese-owned. We have also been involved with Siemens, BlackBerry, Motorola, Nokia, and maybe a few more. What they have in common is that they don't exist anymore. After several years of thinking, I came to the conclusion that this might not be the best area to work with only. We are still in the mobile phone industry. The last years, we have diversified our business into other types of consumer electronics. We have put a strong focus on growth for our EMC business.
Today, we have a more safe situation, which makes me sleep a little bit better during night, also during daytime sometimes. What we are doing is mechanical modules and up to the level of box packing, which is something which we are quite proud of because this means that your customer has given you the responsibility of delivering directly to the end customer. When the end customer opens the box, you yourself know how happy you are on Christmas Eve when that bloody electronic consumer device doesn't work. That is not supposed to happen. We also have developed during the years with mobile phone industry, a unique expertise when it comes to cosmetics. This is not mascara, even though Kristoffer thinks about it immediately. This is paint, this is print, this is making the product look excellent and makes it stand out amongst its competition.
If you look at our customer base, diversified, of course, because it belongs to different kind of our offering. I don't think that Ericsson needs any further introduction, neither does Huawei. I can pronounce that in Chinese, actually. Fitbit is something completely different, but all these companies are very successful, and they have a very good offering. I guess you know Sonos, for example, Sony Home Entertainment, they are actually doing quite well these days. Delphi, Harman, huge first-tier companies within the automotive sector. For us, it's not the same as for industrial. This is for our EMC and thermal offering.
We have seven production units. Our main base is in China, and it will be so also in the foreseeable future. That does not stop us from expanding our operation in Malaysia to also have an alternative in Southeast Asia. However, from a cost point of view, there is very few alternatives which are better than China. We have divided our business area into two parts, is consumer electronics, and here you can see that we have diversified from the mobile phones, yet mobile phone remains. VHP is, of course, something that many of you know quite well that we are involved with. Consumer electronics, different kinds, interesting brands, Sonos, Fitbit, Google, and so on. In EMC and thermal, which I will come back to, we have our own brands, our own Nolato-branded products.
Here it says consumer electronics, and I already explained a little bit how this is distributed. We have the VHP, of course, as a big part. We still have mobile phones. We have different kinds of other consumer electronics. We have EMC, steadily growing, not least since we added one acquisition yesterday. As mentioned, we would like to a little bit get rid of the volatility in the mobile phone business. For those of you that are following our quarterly reporting, you might be able to make a conclusion that also our new segments have some volatility in itself. That is the name of the game with consumer electronics. You have to feed the market when you introduce something, when people are prepared to pay a premium price.
If you don't have volume on stock, then you're screwed, because someone that would like to buy something like a mobile phone, VHP, whatever, they will not wait, especially not the customers for VHPs, because they would like to smoke immediately. Over the time, spreading out risk, widening our scope will make our stability much better. Also, what we have learned, the very hard way, not least with Japanese customers, is within how to deliver in terms of project management, introducing new technologies, cosmetics. There is no area whatsoever that are even close to the mobile phone industry. When we bring that knowledge and our way of working and our offering to new customers and prospects within other areas of consumer electronics, they are heavily impressed.
What was new in the mobile phone industry 10 years back, we can still introduce as something really exciting to, for example, Sonos. The VHP market, we think, will be a long-term potential. Why is that? These guys are smokers, and they have found a much less harmful way so they can continue to smoke, so they will not quit. Looking at the development within VHP, especially this goes for all industries, of course, but we have to focus on cost out in the supply chain, which means that it's not necessarily possible to translate number of shipped devices into the same movement in sales, because the unit cost must come down. This is something for automotive, medical, it goes for everything. We have quite high purchased content in the VHPs. We are buying PCBAs, batteries, heater elements, and so on.
We, with increased volumes, of course, we push our suppliers down in cost only. Otherwise, we try to keep them up. When it comes to our customer, it's one of the three global market leaders. These companies, they are enjoying all tobacco companies. It's like turnover as a GNP of an African country or something with a high profitability. They have had that for many, many years, and they need, of course, or at least their shareholders would like them to maintain that kind of delivery. They are now, all of them, focusing on new product areas, so changing the way of consuming tobacco or nicotine. Of course, that kind of development will bring further opportunities to us. The projects that we are now involved in started up as a development project in 2015, and we began volume production in 2017.
So far, Japan is the biggest market by far. Just to give you an idea, first of all, the Japanese, they like to smoke and they like gadgets. This is like a Kinder Egg. It's two in the same. It has become quite popular in quite a short time. This segment was introduced in Japan back in 2014. In this product, you are using a type of a cigarette. It's much smaller, but it's still a cigarette with a filter and the tobacco rod. Normal cigarette, combustible cigarette, is quite much bigger. From a volume point of view, today in Japan, the number of VHP type of cigarettes represents 25% of the total volume. In just five years, this kind of behavior or smoking behavior have changed 25% of the users' consumption in Japan.
Given, of course, the idea that these people believe that 95%, and which is communicated by the producers, 95% of the harmful substances are removed, or they're not getting created, because at 250 degrees, the nicotine vaporizes, but you don't get the harmful substances as you get from a normal cigarette burning at 1,000 degrees or more. Of course, these suppliers and our customer are rolling this out on a global base. In some countries, the legislation process is quite time-consuming, but it's ongoing. Again, just to emphasize, the VHP uses tobacco, which is vaporized. The vapor or e-cigarettes is using nicotine oil. We have been slightly involved in that, but we are not now. Everything you read about nicotine oil, with different kind of additives to create taste, whatever have you, we are not in the U.S. market.
The product we produce, it's mainly in Japan, Korea, Russia, Italy, so forth. Not U.S. and not e-cigarettes. We might, if we get the opportunity to start all over again with e-cigarettes. For now, we are not doing that. Consumer electronics, what have we done since 1997 or 2000? It feels like this is 100 years ago. At that time, we had production in Sweden. We moved into China. We had sales in Europe and in China. Main focus, mobile phones. Production according to customers' specifications. Today, we have expanded our footprint to three different places in China, Beijing, Suzhou, and Shenzhen, where we have four factories. We are in Malaysia, in Penang. We have added sales on a more global basis. Not global, but since we are focusing on consumer electronics, we don't have sales people in Romania, but U.S. West Coast, Japan, Europe, so forth.
As said, we try to diversify, and we are looking for growth segments. It's much easier to get into the supply chain if there is someone who needs to add volume. Home security, for example. We also try to collaborate with successful customers because we have also learned that it's easier to have rich customers than poor customers. We are increasing our presence in Southeast Asia, with sales R&D and increased production. We are focusing on further sales, Europe, U.S., we also start up different kinds of collaboration with design houses where we approach new customers together, supporting each other. Maybe we have some contacts, need a design house or vice versa. Again, growth segments, connected devices, environmental tech, Internet of Things. These are the things that we are looking for. The same map for EMC and thermal.
Back in 2000, and also after that actually, we were quite a very basic company in Hallsberg, Sweden, making components, pretty much for Ericsson. Components manufactured from conductive silicone, electrically conductive silicone, which give you electric magnetic compatibility in electrical systems when you use it as a gasket or a component. This was pretty basic. The management in that factory, the MD, especially, he's still with us, he came up with the idea that we should sell the material instead, rather than making the material and convert the material and sell the component. We make the material, we have some supporting patents. We provide the customer with the application equipment, and they use our material in their production sites, and that came out extremely good. With that as the base, we have added production. Actually, this is a little bit wrong.
We started in Malaysia, outside of Sweden. We started up in Beijing. Now we are in the process of establishing also in Suzhou, because Suzhou, or the Shanghai area, is one of the main areas for the Chinese automotive industry, which means e-vehicles. Means need for thermal management and EMC. Sometimes it comes out really easy. Follow the customer, have a good enough offering. Focus, of course, remains on telecom, that we have added on automotive, and we are continuously developing new products, which are Nolato brands. I said yesterday, we went to the U.S., New Jersey, with an acquisition, with a very interesting company, which we will come back to. We continue to roll out. We have a very powerful sales organization within EMC and thermal. Of course, Internet of Things, connectivity, everything needs to be shielded from electromagnetic interference or high temperatures.
Consumer electronics, again, fast-growing. Our customers should have a unique offering. It's much more easy, a strong financial position. What we can provide is high technical competence, agility, and excellent project management. Again, BHP, our customer who we think is pretty good. Sonos, they are pretty good. Sony Home Entertainment, they are pretty good. We can grow together with them. We also have a niche company, you can say, making small adhesive-based components. The unit cost for each is not that high, but it's a very interesting offering to bring to the customer, because you don't necessarily need to go through the front door. These customers, they have a very strict supplier strategy, they don't just invite people to the right and to the left to do the mechanical modules. For a tape, special thing, laser-activated bonding, something special, there is always openings.
By moving in with this company, getting a vendor code which says Nolato, building the relation, then we can add on offerings from mechanical modules point of view, but also from EMC and thermal, of course. We are, of course, collaborating very much. With this offering, we have managed to find customers like Google, which are going extremely aggressive into hardware. It's amazing. These guys have too much money. In some areas, they are very successful. For this Google Home speaker, first generation has been sold in 50 million units over two years. This is the kind of customers you would like to have, and they pay very well. Not always. It's very interesting volume. Today, we are involved in the second generation. We are starting our production now, ramping up.
For these bits and pieces which we are making, we are shipping 100,000 per day. Gore, I will not try to sell you a jacket. Gore's venting materials are being used quite heavily in electronic systems, like in PCBAs and so on, to protect certain sensitive components from moisture. Fitbit, number 1 in these kind of sport watches. Xiaomi, I said that we are not approaching mobile phone customers that much. Actually, Xiaomi, they have been approaching us, we cannot say no. They are very interested in our offering for laser-activated bonding systems. Dyson. Very successful. You have to admire a company that can get people to pay 3,000-4,000 SEK for a hair dryer. Even Kristoffer would need one because he's so cool. Okay.
EMC and thermal, already mentioned, but the important thing here is that we own this product with our brands. We have a price list, we have the data sheet. People come to us and ask to buy, and we charge them heavily and say, "It's okay." Trishield, Compashield, Compatherm. We are market leaders in telecom. We have a very good opportunity in automotive and in other growing segments. From a customer point of view, Ericsson, Nokia, Samsung, Huawei, ZTE, and a number of contract manufacturers, this is what exists, and we are there all over the place. High quality, we are driving innovation, we have thorough application engineering know-how, we have very well-accepted products and brands, high market share, as said. We have growth potentially in thermal, and that is because we just started up our thermal development a couple of years ago.
The reason behind it a little bit is that at least when it comes to telecom, it's the same buyers almost often that buys EMC, that also buys thermal. The products end up pretty much in the same place in the product, and the way of produce the silicon is quite similar. It was quite easy decision. In the automotive industry, we have learned that they need the same solutions. Of course, the applications are different. Already today, before we have autonomous vehicles and so on, you have cameras, you have radars in all new cars, and all of these system requires shielding. All these systems require some sort of heat management. If it's getting overheated, the component on the PCA, this PCA will collapse, and then the car will not. Well, you shouldn't trust the radar anyway, if that happens.
It will not happen if they use our thermal solutions. Customers, we are not going for OEM. The reason is that they are not developing these kind of things themselves. They are relying on these huge global first-tier suppliers like Hella, Bosch, Delphi, Harman, Veoneer. In China, we have four really good sales guys, strategically placed in Shanghai and Suzhou area, in South China, and we are chasing a lot of these new upcoming automotive suppliers, e-vehicle automotive manufacturers. There are so many. It doesn't have to be a car manufacturer. For instance, the world's largest, sorry, Northvolt, the world's largest battery suppliers for e-vehicles is a Chinese company called CATL. They are at the moment building a factory for BMW in Germany. They're also building in the U.S. The Chinese car manufacturers will rewrite the map for cars.
Maybe not next year, perhaps in 10 years, absolutely in 20 years. You will all sit and dream about BYDs and Geelys and the what have you. No more V8 engines. Besides this, especially for thermal, already mentioned about charging stations, of course, buses, very quick charging put extremely high requirements on EMC. Also street lights, LED lamps, digital billboards, so many new applications coming up. From a future picture to a factory built back in 1965, or maybe a little bit later. This is Ja-Bar, our recent acquisition. We have known this company, of course, since many years. There are not that many EMC companies on the market. We have been approaching them for five years plus to gain interest. It's a family-owned company. As I said, it's very old, so it's a long process to convince the family to start thinking about selling.
We have negotiated most of this year. It will, of course, be a part of Integrated Solutions. Nolato Jabar, the transaction is not ready until we get some more regulatory approval from the related authorities in the U.S., but we don't believe that this will be something very difficult. When we look into this company and what they have, it's more than 500 customers, but they barely haven't had any sales function. They have been on the market for a long time, and their customers, they call to them and ask if they can buy something. They also have standard products. What we think is very interesting for us is to be able to cross-cultivate what we have in our portfolio with their portfolio, bringing our offering to Jabar's customers and vice versa, of course. We believe that this has very strong potential.
Of course, this company, being on the market since 1965, has a very good reputation. Together with our reputation, it should be a super reputation. We are very happy about this. We are very positive about this. This will be good. We come to the support. We need to pay for it. I leave that to Pablo.
Okay. The annual sales of this company is SEK 150 million. We expect it to have a marginal positive effect on our earnings per share already this year. It is, of course, based on the assumption that we will gain these approvals and get into the company, and starting consolidating the company. We foresee to do that from the 1st of November. The purchase price is approximately SEK 95 million on a debt-free basis. It would be an EBITDA multiple of four to five times paying this price for this company. It has a good profitability. That is the financial situation. We intend to use existing credit facilities to pay for this company. Any questions on those numbers?
We go down.
Yes.
I have a question with regards to the pie chart that you showed earlier with the consumer electronics versus the EMC. In the next about three, five, 10 years, how do you see that pie chart evolve and the mix of the two different types of products?
I would like to have it look the same, just bigger.
Yeah.
Because both
Proportions will be-
both are interesting growth opportunities.
The proportions will remain-
Are the same.
It will change a little bit because what you saw is the latest 12 months.
Yeah.
In 12 months, it will be a little bit different since of the Ja-Bar acquisition.
Again, these are consumer electronics, and one year can differ very much from the other. While, of course, EMC will be much more stable.
Any other questions to Mikael?
Yes. You mentioned a few customers there, Google, for example. Can you tell us a bit more what you are doing there?
For now,
Is it only one part of the product, or is it everything?
No, not everything. They are using huge contract manufacturers for this, with those volumes. What we are doing is elements to help with the assembly, like tapes and gaskets, sealings, these kind of things. Bits and pieces costing maybe SEK 0.25, SEK 0.5 something, each. We have a number of them, and the volumes are hopefully quite interesting.
Okay.
Of course, along the way, something might appear in Google where we can bring our offering from the mechanic and module part, where we have a special technology. Not just simple, because these things are very cheap and very simple. This is something for Celestica or Foxconn or those guys.
Yeah. Okay. What about Sony Mobile? I couldn't say, must have bought those of your customer still or?
They are.
They are.
They are stuck on Japanese. Japanese, I hope that we don't have any Japanese here, but anyway, this is a good thing about Japanese. They are a little bit afraid of making decisions. It's a very long process for them. What they have done with the mobile phones is they have reorganized. This mobile phone now is a part of home entertainment. They are hiding a little bit, this little bit uncomfortable part. At the same time, they are adopting the way of working from home entertainment, which is much smarter because these guys doesn't make things as complicated as Sony Mobile did. Complicated means expensive. Normally when we buy a Sony Mobile phone, we are a little bit astonished by the price. This is something which they try to do something about now.
Also, they are supplying, Sony supplies different kind of components for mobile phones too, for example, Apple. They believe that it's a great advantage to be in the business, to be able to develop that kind of components. They also are very in frontline in 5G, and 5G is something which will not only be mobile phones, it will be all kinds of connected devices. By being in the frontline in that technology, they can bring those things to other Sony parts. Sony as a whole is quite successful these days, and they think that the mobile phone part is still important, regardless of that they might not make any money. We are hanging in there, for sure, and we are getting our share of the projects.
Can I ask a couple more? You had a slide on prospects in China for these sealing solutions. Are those your own thoughts, what you can do with those things, or are they actually discussions with customers ongoing right now?
We have discussions with the customers ongoing. We are also working with agent companies which are already inside, in order to speed up the process. Definitely, we are talking face-to-face, not only with the local Chinese, but also all these global OEMs. Of course, they are present in China. The business opportunity is great. If you have a big battery module, it needs around about five kilo thermal paste in order to thermally connect the batteries to this big rack, which needs to be both heated and cooled depending on the season. There is a great need for the kind of products which we are making. We are not alone, of course, but this is booming. For some reason, Chinese government, they have handed out 480 production licenses to e-vehicle manufacturers. Of course, many of these are just dreams. Most of them, of course.
These are ideas out in the smaller cities in China, because building a car, an electric car, is not that complicated, actually, if you don't try to compete with VW or Tesla, maybe. Now they cool down this, because it's been overheated. There is a huge interest in China for this, and they are flooding in money. There will be things happening.
Thanks. Final one, how do you ensure or secure your market position in the VHP category? You're exclusive right now and can you elaborate on?
This is, of course, there's no difference between VHP and those and the other customers. Maybe a little bit because they're a little bit immature still, because this is quite new to them. We have managed to build a good position by helping them. Actually, without knowing it, the VHP is now using the same project process as Sony Mobile, because we implemented that to them, because they had no idea. Of course, we have built relations and so on, but there will be competition. Absolutely. We have 22 years with Sony Mobile.
To summarize a little bit, we talked about the business environment and the mega trends. We tried to explain how we can cope with these mega trends and benefit from them. I hope you got an answer to that today in the three different business areas and how it all supports together creating value for the customer and for Nolato, of course. This was our journey. We explained how we took the company from a mainly mobile phone company back 20 years ago with a lot of activities in Sweden and some geographical journey. We tried to explain how we, in the different business area, are going on this technology and geographical journey, creating value for our customers and also growing Nolato as a company.
Going forward, we will continue to go on the solution provider path, building strong footprint on the three continents, and continuous growth across the three business areas. We think these three business areas is creating value together by the technology transfer that we are getting out of the different segments. That's what was on the agenda for today. Any final remarks or comments from anybody or questions? I would like to thank you all for coming, and I hope you thought it was worthwhile coming and a lot of attention, I think, so we're very happy.