Elanders (Stockholm:ELAN B) Q2 2025 Earnings Call

0:01 Hello, and welcome to the Elanders AB conference call. My name is George. I'll be your coordinator of today's event. Please note that this conference is being recorded. And for the duration of the call, your lines will be in the listen only mode. However, you have the opportunity to ask questions towards the end of presentation, and this will be done by pressing star one or your double keypad to answer your question. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I'd now like to turn the call over to your host today, Mr. Magnus Nielsen, to begin today's conference. Please go ahead. Thank you. Yes, welcome, everyone. It's Magnus here. And together with me, Elsa Wilson, our CFO.

0:49 Okay. I'm going to start with our presentation, and I will now go direct to Slide five and talk about our second quarter. Demand decreased for the majority of our customer segments, which resulted in a negative organic growth of 5%. And if we look at our different regions, it was only Asia that performed better than previous year with an organic growth of 2%. Remaining regions came in lower and with negative growth. Despite the lower sales in the second quarter compared to the first quarter, we managed to improve our adjusted EBITA margin to 5.5% compared to 4.1% in the first quarter.

1:36 And this was a result of our cost saving measures that we implemented in the first quarter. To meet the soft market, we continue to focus on sales, and we're also taking additional actions on the cost side. And during the quarter, Florian Beek replaced Dan Svenger as CEO for Elanders' largest subsidiary, LGI. If we then go to Slide six and look at our cash flow and cash conversion development, we can show that we continue to deliver very strong cash conversion, which ended at 106% in the second quarter. We also managed to continue to reduce our working capital, which went down with SEK189 million in the first half year.

2:26 The decrease in working capital, combined with the strengthening of the Swedish krona, reduced our net debt excluding IFRS 16 by DKK254 million in the first half year despite dividends of DKK147 million in the second quarter. Including IFRS 16, our net debt was reduced by DKK888 million in the first half year. If we then go to Slide seven, look at Supply Chain Solutions, you can see that organic growth slowed down compared to the first quarter and decreased with 4% compared to 1% in the first quarter.

3:12 Europe was in line with previous year in the first quarter came in with a negative growth in the second quarter and also North America remained weak. As I mentioned before, Asia showed growth. And our new site in Thailand continues to grow as planned. And in terms of customer segments, was it only Electronics that could show organic growth in the second quarter? Our adjusted EBITDA margin improved compared to the first quarter, but came in lower compared to last year. And but our cash conversion continues to be very strong in the supply chain and came in better than last year. Structural measures of SEK 18,000,000 were implemented in the quarter with a focus on additional cost savings in Germany and also the change of CO at LGI.

4:07 If we then go to Slide number eight, look at Print and Packaging Solutions, you can see that our results recovered very positively compared to the first quarter with an adjusted EBITA margin of 5.4% compared to 3% in the first quarter, despite continued negative organic growth of 5%. This was a result of the cost savings we executed in the first quarter, and we were also successful in our strategy to be part of the consolidation of the German print market and managed to take over yearly print volume of €5,000,000 from an external print company that was forced to close it down. If we then go to Slide nine to look at the development of our different customer segments in the quarter and we start looking at electronics, the picture continues overall to be very positive, and we could see an organic growth of around 7% in the quarter because of continued increased demand both in Europe and Asia.

5:15 If you look at fashion, fashion continues to a recovery in Europe, but at a slower pace and couldn't compensate for continued soft demand in North America, and this resulted in a negative organic growth of 6%. But as reported before, continuous pipeline with both new prospects and gaining new customers look good, but the uncertainty in the market makes the closure and implementation process of new customer projects slower than normal. If we now look at automotive, they continued a negative trend and showed a negative organic growth of 13%. It looks like European market is now stabilizing, but our customers continues to see negative growth regarding exports to both North America and China.

6:08 Also, other that has been stable previous quarters showed a negative organic growth of 5%, mainly as a result of lower demand from our customers in the food and beverage area, but also online print was slowing down in the second quarter. In industrial, that showed a stable demand last year and some negative growth of 3% in the first quarter, continued a negative trend and came in with a negative growth of 12% in the second quarter. When it comes to Healthcare, we can see a negative growth of 8%, But overall, the segment continues to look positive going forward with lots of new requests from both existing and new customers.

6:56 If we then go to Slide number 10 and look at how things will be going forward, you can see that the ongoing trade negotiations create a great deal of uncertainties, which affects the majority of our customers very negatively and it also slowed down potential new prospects in the decision process. But it's, of course, very hard for them to make strategic decisions in a market that constantly change. And this makes it also very difficult to see when there will be an improvement in demand from our customers, and we can also see that their forecast are, for the moment, very uncertain. To meet these challenging markets, we continue to have a high focus on lowering our cost base, but also to improve our efficiency and increase the share of optimization, both in our administrations and in operations.

7:51 The appointment of our CEO of Berg and Charles Ichkis to the new role as Group CEO is a very important part of this process. Charles is already today heading the development of our internal warehouse management system, CloudX, and he and his team have, last year, added several AI functionalities that increases our internal efficiency, and it also makes us offer a much more attractive offering to our customers. With this new role now, we will speed up the rollout of the system and these functionalities in the whole group. And we still think that over time, will trade barriers create opportunities for global logistics players like Elanders by partly breaking up the global supply chain and then replace them with a combination of more global and regional logistics chain.

8:45 Okay. Thank you. That's everything for me. Time for questions. Thank you very much, sir. On your telephone keypad. That is star one. Just make sure that your line is not muted. So I'll just delete your equipment. Who who calls? Just a moment. Our very first question this morning is coming from Marcus Ahmed calling from D and B Carnegie. Please go ahead. Yes. Hi. Hi. Can you hear me? I can hear you. Hi, Marcus. Perfect. Just my first question is just a technical one, but the in the discontinued operations business that you have, the $140,000,000 is that what's rest of the buy and sell? There's no the road businesses, they will be closed down as of q three. Right?

9:42 Which will it is what what what will be closed down in q three? The road transportation business. Yes. Yes. Yeah. It was last month, we lost in June, so that will go away in the third quarter. Yeah. So it's what's rest of the buy and sell businesses in the discontinued businesses that you have right now. And that is also out, there's nothing left of that. So in Q3, it will only be the road transportation business that will be sort of closed down businesses impacting sales. Yes, it should be. I think also the subscription box business is going in mainly in Q3. It should be as a marginal adjustment.

10:27 But you're right, it should be mainly a DSP business. Okay. And then my second question is on fashion in The US. You still have new customers coming in, but what's can you talk a little bit about the status of these new businesses? I know there's hesitation and such, but what is the status on fashion in The US? Now we have secured, as we mentioned before, some new projects. There will be a couple of them will start in the second half year. And one bigger one will start, but that will start in January 2026. So we can see there's been some delay in the movement from the other suppliers, the existing suppliers, But we can see that we have secured more orders this year than last year.

11:20 And also, our pipeline is bigger this year than last year. But the process is a bit slower, but the customers are still a bit uncertain on waiting about they're looking to see how the trade negotiations will end up. Some of them will start now in the second half of the year and some will start in Q1 twenty twenty six. But the trend is much more positive than last year, but it's still a bit slow. It's a bit slow implementation and everything. Okay. Thank you. And then on automotive, which fell 30%. Can you talk a little bit about maybe the differences in that automotive segment? So you have the road transportations, is coming out as in Q3, but that's still part of it. If you look at kind of that part and the part which will be left, what does it look like then?

12:20 I think that the part that will be left will have a less negative decline, if I say like that, because in the GSP, the row business is also part of the negative growth in automotive. And that part is actually bigger than the part that we will keep. Because the part we will keep is lots of center around manufacturing in Germany. So I think and the European market now starts to look more stable. So for the car models that we are supporting that are not so much export driven to U. S. Will be more stable. Some of them go to U. S, that is still a bit up and down.

13:06 I think this trend around 12%, 13% will slow down. I think it will be more normalized step by step in the second half of the year. Because in the GSP business, we are solving all models that our customers are building because we are taking components from different countries. So you have a bigger organic impact on that one. So hopefully it will stabilize in the second half of the year. Okay. And then on the industrial, maybe if you can give us some granularity on that one as well. It was a bit sharper fall than I might have expected in Industrial. So if you could just give us some more granularity on the if there's anything sticking out there or is this across the board?

13:57 Yes. I must say Industrial was also bad surprise for us in the second quarter. But as you know, they've been very stable the last two years, not so much growth, but no negative growth. And then there was a slight negative growth in Q1. But you could see in Q1 that lots of it lots of a slowing down, lots of our customers, if you look at trucks, for example, but also other industrial customers were slowing down. Feels like they are more impacted now than before. It was yes, it was overall, I must say, it was yes, most of the manufacturing industrial companies that have customers slowing down in Q2. And maybe still, I would say, it's a trend, but I think they are also now feeling the pain of the trade war and they are slowing down some projects and things like that. So but it's hard to predict.

14:54 I think most of the customers of it was a bit surprised about the slowdown in Q2. Yes. And then finally, maybe on U. K, how is The U. K. Going? Are there any signs of any improvement or is it continuously difficult? No, U. K. Continues to be hard. We are gaining some new customers, especially on the CALMAC side. But we could see in Q2, it was slowing down again also for our more techno logistics part. It's really a bit up and down in U. Still we cannot still see a stable trend in improvement. So they one quarter, are improving and then it's down in another quarter. So it's still hard in U. K.

15:46 We are more positive going forward in Germany where we're very big. We cannot see it yet, but I must say it's much more positive atmosphere in Germany when we talk with our customers and their markets overall. I think Germany will be hopefully, we'll be driving more growth for us, maybe not this year, but next year, because you can see a lot of the investments that will be done in Germany. So that seems more positive. Okay. Okay, perfect. Thank you very much. Thank you. Thank you for your question, sir. Mr. Nielsen, we do not appear to have any questions coming in. I'm gonna turn the call back over to you for any additional or closing remarks.

16:43 Thank you. Okay. Thank you, everyone, for listening to our conference call, and I hope everyone will have a great summer. Thank you, everyone. Bye bye. Thank you very much, sir. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.