Bulten AB (publ) (3FB.F) Q4 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to today's webcast with Bulten were President and CEO Axel Berntsson; and CFO, Anna Akerblad, will present the year-end report for 2025. [Operator Instructions] And with that said, I hand over to it to you, Axel.

Thank you very much, and welcome, everybody, to our Q4 call. As we said, we will have some Q&A in the end. And -- but before that, we have a few different points. We will go through the key things from Q4 and then also cannot touch on what happened for the full year before Anna goes through the financial results, and I'll give you a few words on where we are heading going forward. So that said, let's have a look at Q4. In Q4, for those of you who read our Q3 report, you know that we kind of projected that our Q4 will be impacted in the same level as Q3 from the cyberattack of our largest customer. They did recover faster as they have communicated in the press as well, faster than expected, and they have remained on a good path with their recovery, which for us was very positive, and we are quite happy and proud to see their work on this. But for us, it meant that for the last half of the quarter, our volumes were kind of more or less back to where we expected them to be before the cyberattack. So that is quite nice. So we're happy for that. I think the only thing that is really deviating where the currency is, where the Swedish SEK strengthened more than we expected, so that did have a fairly large impact on our top line. other than that, I think we did fairly well. For those of you who have followed us also during the past year, you have noted that we have worked a lot with our costs. We have streamlined our organization a fair bit. We cut quite a lot of cost in the business and this continued margin discipline and operational focus has supported that we were able to have a positive result despite these volume drops in the last quarter. If we can take a little bit more of a helicopter view on the full year, the story is still fairly similar because on a full year level, I think currency is a major thing that affected us. I mean it's a couple of hundred million that we dropped on top line from currencies. But we also had a few kind of really disturbing events. We have had the Swedish customs authority enforcing antidumping fees on us that we do not agree with and that we are disputing in court, but that has had a quite large effect on our profit for the year. And then, of course, the cyberattack itself had a major impact on us, and that has put a quite negative flavor to our year, but the underlying performance is actually reasonably doing reasonably well. And we have finalized now the reorganization that we plan to do, and we have decentralized the business into quite a few self-sufficient and independent business units. And we do believe that the centralization and increased focus on making money will have a positive result for us going forward. And obviously, having a lower cost base makes us resilient to volume drops as well. So that is nice to see. We continue to work with our strategic review of the business, and a lot of that has to do with shifting Bulten away to other customer segments such as consumer electronics and medical equipment and so on, where we see better profit pools. But we're also moving further towards having more value-added services in our business. And obviously, if you can have more value-added services, you can provide more value to your customers. There are opportunities for us to also make more money in that. So we are quite happy with the overall development of the business. So with those kind of noteworthy items, I hand over to Anna to walk us through the financial results of the fourth quarter.

Thank you, Axel. If we start looking at the sales, we can see that the year-on-year decline reflects lower volumes following the cyberattack in the second half of the year, while we can see a stabilization towards the end of the year. And when we then look at our mix, the shift in the mix reflects lower automotive volumes during the year as well as continued growth in nonautomotive segments. While Automotive remains our largest customer group, the development supports our strategic focus on broadening the customer base. And even though we faced negative external factors, the fourth quarter delivered an adjusted EBIT of SEK 37 million, which is equal to 3% EBIT margin and this shows that the underlying business is heading in the right direction, and we continue to work with efficiency in our operations that is having a positive effect. Our adjusted key indicators for rolling 12 months are affected by the customer's cyberattack, and we judge this effect is more short term and that we will be back in 2026. And the adjusted net debt in relation to adjusted EBITDA is in line with last year at around 2. Now back to you, Axel.

Thank you. So a few short notes before we move into our Q&A, which I assume is the highlight of this afternoon. If you look at what we're going to do going forward, I think we are not -- when we are in the type of industry that we are. We're never going to get away from the importance of being excellent in operational execution and be very, very disciplined in our cost management, and that will continue. We will spend a lot of time and effort to make sure that we are as streamlined as we can be as a company. We will also continue our shift towards consumer electronics and medical technology and so on. And as Anna said, we have increased that share, but I would like the ratio to be kind of the opposite if you compare out of the OEM business to these kind of other businesses to be reversed where this is the majority of our business in the future. And obviously, that means that we need to take quite a large grip on this growth, but also be very, very disciplined in what type of automotive business that we go after. We need to have a clear value add in it. We need to know that we do create the right customer value when we quote and then probably then win a little bit less business, but the right business when it comes to automotive. When it comes to nonautomotive, we need to scale up. We need to invest more in sales resources and probably also do a fair bit of M&A to grow that bit of the business. Furthermore, we will continue to explore footprint reductions across our manufacturing base. In my opinion, we have too much under-absorption in our factories and given the fact that we are focusing most of these business -- factories on, let's say, a more slimmed down type of business, meaning the automotive type business we go after it needs to be the right one, we will probably then add less volume to the factories as well in the future. So we don't need a full footprint, and we don't foresee that we will fill it. And thereby, we need to probably shrink it down. And we are exploring opportunities to do this both by divesting manufacturing but also closing and consolidating factories. We do have a lot of customer relationships that we value and we will continue to work intensely with those. We do believe in close collaboration with the key customers, which, of course, is a given. But you can do that in a different way, and we know that we can improve. We know that we can deliver more value and increase the trust with these customers as they will give us more business over time. And there are a lot of value for us in that. And obviously, the last point is also given, is we need to work quite a lot with our capital efficiency. For those of you who do analyze our numbers over time, you will see that our cash flow is not strong. It hasn't been strong for years, and this needs to be fixed. We need to have a space to invest and we need to be able to acquire businesses. And for that, we need cash. And therefore, obviously, the cash-generating activities are very high up on our agenda going forward. So with that final note, I do leave over to some Q&A and see if anybody have any questions they post during the presentation today.

[Operator Instructions] So we can start off here with a question that has been sent to us: What are the key highlights from the 2025 year-end report, would you say?

On the report itself, I'm not so sure. But if you answer it from a year perspective, I think what I'm mostly happy about is the reorganization that we are now decentralized, and we can drive faster improvement in our business. That is, for me, a key highlight. And the other key highlight is the wins of business that we have outside of automotive. I think we have won a lot of really interesting contracts and that will be beneficial for us long term.

We will now carry on with the first caller here, and that's Mats Liss from Kepler Cheuvreux.

Yes, two questions. First, you talked about -- well, the order intake is pretty good there. And you're talking about the growth in Non-automotive and it shows the sales mix there with the growing part of non-automotive, as I understood it anyway. Is the picture similar in the order intake?

I think overall, our order intake is actually not a very good number. I mean the number is SEK 1.5 billion order intake is fine. But one should know that the way we record order take is also that we take traction schedules in that we get from our customers, and that is recorded as order intake which is why that number can go up and down over time without really meaning that much. I just want to put that kind of disclaimer in there when it comes to people who analyze our order intake, it's not a good indicator overall. The customer mix of that, I do think is reflective of the way the business is developing. We do have a good order intake of non-automotive business, and that grows faster than the rest of the business in general. So I'm quite pleased with that mix development, even though we would, as I mentioned before, like to see a significantly bigger portion of other business.

Great. You also talked about this strategic review and measures you are implementing to reach the targets that you indicated of growing in nonautomotive. But what's the time frame there? Should we expect something to happen already this year regarding maybe your production capacity? Or is it more of a long-term target that you have. And well, could you give some more flavor there regarding this process?

We do expect to see quite a bit of impact in 2026. But as many of these things are not 100% on our racket, for example, when it comes to divesting a business, if that is what we do, we need to make sure that, that kind of process goes all the way through. If it is about consolidating factories and closing down and so on, that is also something that a lot of external factors impacting that. So I cannot guarantee that we will see the result. But in our plans, we should see a lot of this impact in this year.

Okay. And then you mentioned antidumping, well, charge you got from the Swedish authorities there. And is there any chance that you'll be able to sort of regain or get some -- well, more limited impact there? Or is it -- well, how does these talks progress?

Yes. So we haven't had a hearing in court yet for that. So it's yet to be seen. The good thing as we have taken the cost in 2025, it's only upside from here on. If we win, [ in the court record some ] upside in the numbers. I think that is good. There's no further downside on what we can be but we do expect to win all or parts of this claim and get that back. But you never know when the court rules is that it's not always about being as right, you also need to get them to agree with you on being right here. So let's see.

You also mentioned the opportunities to grow with acquisitions there. And is it sort of balance there, you'll need to free cash before you're able to make these acquisitions or could take the sort of targets be so interesting that you sort of have a case already to present and then maybe try to get external support from shareholders and other numbers.

I think if the case is strong enough, we would happily go up and ask our shareholders to contribute to acquiring the right business. But with the current state where we are today in the business, I don't see that we have too much headroom to acquire with our own balance sheet, maybe smaller stuff, but not anything of significance. So I think the top priority for us is to make sure we start to generate a lot more cash, so we can use that cash to acquire. But if the right case comes up, we're happy to go to the market and our shareholders to ask for money.

And where do you see those opportunities the most? Is it to free working capital? Or is it sort of make divestments of assets in general or -- Yes. Could you say something about that?

But I think it's both. It is both in divesting businesses that do not fit our strategy anymore. We do have a couple of buildings that we own that could be realizable assets as well that we could divest if needed. And obviously, then with operational performance where we could generate more cash.

We have received a couple of more questions that has been sent to us here. And the first one is: A very strong improvement in terms of inventory levels, current receivables and current liabilities, is this a work in progress or further improvements to be expected for 2026?

We do expect further improvement on this. But what is also important when one read those numbers in the right way, because it's also in -- if our inventory goes down 10% because sales goes down 10%, okay, then it's actually not really an improvement. It's just an adjustment of levels. I think you also need to read that into the numbers. So in my opinion, we have relative to sales, quite a large improvement to do on our inventories. And then obviously, our receivables are on a reasonable level, I would say. We have quite decent contracts with some of the largest customers. So I do not expect a large improvement of the receivables in relation to sales. Small ones, so you can always do more, but I don't expect any large adjustments of that.

Will there be new financial targets presented during the first half year of 2026?

I do not know yet. Our board needs to approve new targets, and we do not have any decisions on that yet. So I will leave that to my Board to approve actually.

Another question here. Can you provide a bit more color on how the business has shifted between regions and customer groups over the last 12 months?

Good. Obviously, if you look at the total mix, Asia probably has improved a little bit, but mostly what has improved is the consumer electronics business where we have seen quite a good growth during the year. I think that is the most significant shift even though it's not big enough, as I said before, we would like to see more because we're coming from fairly low levels that we're growing from. And we also see less business in North America overall and less focused on in North America at the moment.

Thank you. That was all the questions we had for today. So thank you so much for Bulten for presenting to you today. I thank you all for answering -- calling you with questions and viewing today. Have a pleasant day.

Thank you.

Thank you.