Bulten AB (publ) (BULTEN) Earnings Call Transcript & Summary

Welcome to Bulten's Capital Markets Day 2022. My name is Ulrika Hultgren, and I'm in charge of Corporate Communications and Investor Relations here at Bulten. When we planned for our Capital Markets Day this year, we didn't know that the restrictions would be lifted by now. So we decided to stick with a virtual event this year. Anyway, we hope that you will find today's session and presentation interesting. And next time we have a Capital Markets Day, we hope that we will be able to meet you in person. The agenda for the following is like this. We will start with a presentation given by Anders Nyström, Bulten's President and CEO, and he will give an overview of how Bulten will continue to reach a sustainable growth over the coming years. Thereafter, we will hear from Markus Baum, Bulten's Chief Commercial Officer. And he will talk about how he and his team are working, what they will focus on in order to meet the Bulten's strategy and the set targets. Emmy Pavlovic, SVP, Technology and Innovation, will explain how she and her team is working to develop tomorrow's fastness in order to stay a leader in our business. Our Chief Operating Officer, Fredrik Bäckström, will then go into how manufacturing will support the overall Bulten strategy. Also, we'll hear from Claes Lindroth, SVP Purchasing and Quality, and he will explain how Bulten is working in order to keep having a strong supply chain even in a more challenging environment. At the end, we will also get a financial overview presented by our CFO, Anna Akerblad and then we will end with a short summary given by our President and CEO, and then we'll open up for a Q&A session. We will soon begin. But before doing so, I just would like to encourage you to send in your questions. Even if we don't have you here in the studio today, we really would like to take the opportunity to answer as many questions as possible. [Operator Instructions] But having said this, I now would like to hand over to Bulten's President and CEO, Anders Nyström.

Thank you, Ulrika. My name is Anders Nyström, I'm the President and CEO of Bulten. I have the honor and pleasure to lead this great company, which is turning 149 years this year. And to pave its way into the future, a future which is guided by the vision that we create and supply the most innovative and sustainable fastening solutions. Today, we will lay out to you the strategy for fulfilling that vision and delivering ever-improving returns to our shareholders. As most of you know, Bulten is uniquely positioned as a global manufacturer of fasteners. We manufacture locally in all our major markets. Typically, fastener suppliers in the world are either small local manufacturers or regional to global distributors with little or no in-house manufacturing. In Bulten, we actually cover all of that. Last year, we grew by almost 17% while our main markets were basically flat. We delivered an operating margin of 6.2%, which we weren't happy with. However, we need to recognize that the rapid and unprecedented cost increases for raw materials and other cost elements were extreme in the year of 2021. So under the surface of this, there are some really heroic efforts made by the global team around the world. In the financial targets that we set and presented in our last Capital Markets Day almost to the day 2 years ago now, we aimed for a CAGR of more than 10%. We made that announcement a few weeks away from COVID shutting down the whole civilized world basically. And quite honestly, we didn't know that at that time. But over these 2 years, we've actually delivered on that, despite that headwind. I think that if you look at the last 2 years, you can clearly see that we've consistently outperformed the market in terms of sales. We also said that we'll reach a steady 8% EBIT by 2024. Since then, the vehicle industry has had basically 2 quarters of normality, with no restriction from either COVID or semiconductor shortages or ships stuck in the Suez Canal for that matter or any of those factors. And in those 2 quarters, we actually reach that level of profitability. So it is very much within reach in the strategy period. 2021 was a year of records for Bulten, and we also did set a record for new contract wins of SEK 775 million per annum at full pace, gradually being rolled out over the next 2 years and a fantastic achievement by our enhanced sales organization under the management of Markus Baum. We will listen to him in a few minutes. What's even more important with that is that when Markus started and took over as Head of Sales, he wasn't just given a number, but also challenged with some strategic flavor to the business win target as well. We said that we should win a new FSP customer, somebody that didn't subscribe to the idea of FSP before. We should also win a major electric vehicle program because we want to secure our share in that growing portion of the market. And we should get significant wins outside of the vehicle industry. All those 3 priorities were achieved. And on this slide, you can see an example of the wins that we recorded last year and those that we actually published. As I said, our growth trajectory has been and still is in line with our last published financial targets despite the depressed car market. We've decided not to revise our financial targets, but to stay determined to deliver on what we already communicated. But of course, we also see continued growth even after 2024 that goes without saying. The primary customer group for Bulten is and will continue to be light vehicle OEMs. There are numerous good reasons, however, for us to diversify that customer portfolio. And recently, we have done that successfully. From 0, we have grown our nonautomotive customers to just under 10% as we speak. And this is a fast-growing sector for us, the fastest growing. And Markus will explain a bit more about how and who, but this is one of our top priorities. Also, we still have our center of gravity very much in Europe. Europe will continue to be our biggest market for a long time. But with the acquisition of PSM, being a real door opener for us, we are now also growing organically and rapidly in Southeast Asia. Now we also have to fix North America. We're too small in the North American market and climbing up that ladder and gain critical mass only through organic growth is going to be too slow. So that's why we decided that we need to acquire scale to give ourselves the boost to become relevant and competitive in that market. So we're actively looking for target companies for acquisition in North America. Being determined to be the most innovative also means working hard on innovation. The last time we held our commodity -- our Capital Markets Day, we're just starting to accelerate these efforts. We unveiled then our new sustainable product family called BUFOe. Since then, BUFOe has been further developed. And that new sustainable product offer is winning us new business. And we've filled the innovation pipeline with many more exciting products, which we will present in due time and I'm really excited about the opportunities we see in bringing unique new products to market. The acceleration comes much thanks to building a very dedicated team under the leadership of Emmy Pavlovic, which who will tell you more about that shortly as well. So in summary, the strategic building blocks to reach our targets are still very much valid. We have added a few elements to that, which are somewhat new to you. The first one being that we're actively pursuing acquisitions in North America and that we are actively pursuing growth outside of the vehicle industry and also stepping up our efforts when it comes to innovating and to offer even more premium sustainable solutions to our customers. So with that, I will hand over to Markus.

Thank you very much, Anders. My name is Markus Baum and I'm proud to be the Chief Commercial Officer of the Bulten Group. I'm 43 years old, and based in Germany and for nearly 1.5 years now within the company. Today, I would like to give you an overview about a strong sustainable offer we offer to the market, and I have prepared this presentation into 2 major sections. First of all, I want to dive into the market trends we see from a global perspective, but also automotive trends in particular. In the second part of my presentation, I would like to give an answer to the question how we as a company act in this competitive market field and what our customer strategy is going forward. So let's start with the market section of the presentation. There is global trends in the market, which most of us are aware, and we picked out 3 exemplary here to dive a little bit deeper in. First of all, digitalization. As the world gets connected, and we see that in our business lives, but also in our private lives and new business models are arising, especially when artificial intelligence comes into play. Secondly, sustainability is really key for a lot of companies and organizations. The understanding is really a key driver for the success of the future. And we see that, for instance, in stricter regulations, when we talk about emissions going forward. Another trend I would briefly dive into is urbanization. We see more and more people living in megacities and a growing number of those all around the world. And this obviously has a big impact on mobility and new ways of transportation are entering the market, things like car sharing, autonomous driving or total new types of vehicles will enter the market. And what you see here already is that it's difficult to have a look into these trends isolated. They are really connected. So if you are having new customers for urban transportation vehicles, those vehicles will obviously be very sustainable. And of course, they will be very much connected and maybe also drive autonomous with artificial intelligence. So you need to see those trends really connected and not isolated. Now from these more global megatrends, going 1 step deeper into the automotive industry and we picked out a couple of trends here on the automotive side, which we would like to talk about now. First of all, CO2-neutral mobility. We see currently various different technologies, all striving for the target to be CO2 neutral when it comes to mobility. This can be battery-powered electric vehicles, this can be hydrogen fuel cells or biofuels or e-fuels. Key is that new investments and technologies are rising, and we really see the automotive industry developing rapidly. And we think and that's not only us, that the development in the next 20 years will be faster than, for sure, the development that has been in the industry in the last 20 years and maybe even within the last 50 years. For us to stay ahead in the game, this means we need to have new applications, new products, new materials, new processes, and new customers and partnerships are rising going forward. And we need to offer special products for this CO2-neutral mobility. Now another thing we would like to elaborate a little bit further is platforms. The platform itself is not really new in the automotive industry. However, what we see right now, and that's a bit the challenge, the OEMs can't take just the platform from the past and translate it into the future. That means new skateboard type of platforms are arising, and are in development phases everywhere around the world. And due to the fact that volumes of new cars might be low, there is also a trend of sharing those platforms amongst OEMs. But it's not only amongst OEMs, we also see an increasing amount of suppliers, Tier 1 suppliers, that are developing those platforms as well and sharing them. And these are suppliers within the automotive industries, but also players from outside the automotive industries are developing these platforms currently. And for us, that's great news because at the end of the day, it's a fantastic extended market potential and customer base and new players within that ecosystem of the automotive world. Now again, going a little bit deeper in this. We believe that there is a high number of -- growing number of new players in the automotive industry, and that's OEMs and suppliers. And on the right side of the chart, you see a few of the names which were maybe 5 or 10 years ago, really new for most of us. And new things like car sharing, autonomous driving, generate really new customer needs, which we have to reflect in our business. We also see an increasing number of collaborations amongst the players. And with that, the decision-making power from the OEM is also shifting to suppliers or also to networks. As the collaborations between OEMs and Tier 1s or Tier 1s are basically generating networks and collaboration networks you will see more networks competing in the future rather than only single companies. And again, for us, this is a fantastic opportunity because a lot of new opportunities arise right now and on the horizon and all of these need fasteners. Now I would like to move to the second part of the presentation and give an answer to the question if we want to further outperform the market like we have done in the last years, which customer strategy do we adapt going forward? And I have structured this answer to this complex question into 4 categories. First of all, I would like to dive a little bit into the customer section, which customers are we focusing on going forward? And what are the players we look for? Secondly, products and services. Number 3 is operations and regions. And last but not least, an answer to the question, if there is also a different way of working within this changing landscape? So let's start with the customer first. Here, you see an overview of our targeted customer approach right now and going forward. First of all, as Anders said, the automotive industry is where our home base is and where we are focusing on, of course. But when you see within the automotive industry and starting with the OEMs, we are very strong in a couple of OEMs, but we still have potential to grow at OEMs where we are underrepresented today. And secondly, there is new OEMs coming up on the market, which is offering an opportunity for us to grow as well. So we will keep on focusing our existing customers but also develop new OEMs. But when you look, and we have put it here on the screen, this automotive pyramid, when you look into this, you see that only 30% of the whole value chain of the automotive industry is basically with an OEM. The vast majority of the value comes from Tier 2s, Tier 1s, Tier 3s. So from the supplier side of the business. And maybe in the last years, we haven't focused on these potential customers so strong, but we are definitely going to do that right now and we do. So automotive supplier is a strategic growth area for us within our business going forward. This is the automotive section. Now if you talk about adjacent industries to automotive and new industries, we will focus on that as well. And those are industries like consumer electronics, agricultural, recreational vehicles, wind power, household applications and many more. And as some of you have maybe followed our press releases, we were already very successful in 2021 and already 2022 with business wins in these businesses outside the automotive industry. And from a regional perspective, we will, of course, increase our market share further in Asia Pacific. And as Anders said, especially in the North American region. Now with that, we strive for a more balanced customer portfolio. And I think it's important for every company in the world to have a balanced customer portfolio. When you look here on this chart, in the blue section of the pie it is the automotive section. So within the automotive section, we will keep on our existing customers, develop new OEMs, but especially also outperformed with growth on the supplier side. we will really maximize that growth. But on the adjacent industries, business outside the automotive, we will increase our share of wallet from 5% in 2020 to about 20% in 2025. And that means that there is an exponential growth happening in these areas, which we do. And customers like electronics, agriculture and adjacent to automotive. Now leaving the customer side a little bit and asking the questions which products and services are we offering to our customers. Starting with the products. We have really a fantastic product portfolio within Bulten. We are a large manufacturer of those products and have a strong sourcing know-how as well. And we will further broaden this strong product portfolio with new sustainable products and services going forward. And I don't want to steal the thunder from Emmy. She will elaborate on these products as well, but I can say we will further leverage, of course, our BUFOe offer. And when you think a little bit back at the beginning of the presentation, new customers arise with different needs in the markets, and for us, it's hence, very important to stay very close to the customer, listen to their needs and offer the right technical service and value proposition to those customers. And that's why we will strengthen our technical sales teams going further and have an increased focus on development phases. And being with the customers at an early phase when they develop new applications and new platforms. The whole EV ecosystem is very important for us with tailored products and services, as I said earlier before. And as the next 20 years will be very fast, and new players are very fast, they challenge us, and we need to take that challenge and be a response leader and be very agile in all what we do across the company. Now leaving the product side a little bit and talking about services. Most of you may know our FSP, but for those who don't know, it's Full Service Provision, and it's basically a one-stop partner for all the fasteners in the value chain. And what we do is we add value, addressing every step of a fastener's life, whether that is from the early engineering or until line feeding and logistics. And I'm proud to say that we are the #1 in FSP in Europe, and we offer a tremendous value add to our customers. And of course, we are also happy that we see that success with new business wins with major FSPs in 2021 and 2022 as well. On engineering, for instance, we optimize the usage of fasteners, we standardize them across applications. And thanks to our nearly 150 years, we can also produce what we say, and that's a big difference in the competitive environment. Sourcing. Our colleagues and Claes will tell about that more later on, we can offer with our sourcing competence a wide range of fasteners and more. And of course, we offer seamless logistics to our customers with that as well. But being the #1 in FSP in Europe is basically nice, but we don't want to stop here. We want to make the next step and we want to stay ahead in competition. And that's why I'm happy to say that today, we opened the next milestone in FSP. And from now on, we will offer a new service to the market. And add superior sustainability to the FSP concept, and we call this FSPS. And what does FSPS mean? And what's the difference to the existing FSP concept we have. So what we do, and we do that very close together with our customer, we address every element of the value chain again, but this time from a sustainability point of view. Together with the customer, we commit and agree to joint objectives in terms of sustainability for specific programs of a customer. We align activities together and align objectives together, and we commit to this. And this is really a game changer in the industry. An example may be the reduction of plastics in the usage and of course, the implementation of our BUFOe products. And I'm very proud to say that in one example, we were able from an existing base with our FSP initiative, we believe that we can reduce the carbon footprint by more than 50% points. And from my experience with the customer side, I can tell you that this is a very impressive number, and the customers are very interested in that. Now leaving FSP a little bit and talking about the regional balance. It's not only important for us to balance our customer footprint within the customers, but also from a regional perspective. We will, of course, keep our momentum in Europe and also in Asia Pacific. And within Asia Pacific, as you can see here on the chart, we have made a good step, and we increased our share of wallet within Asia Pacific. In Europe, we will further act and also enhance our sales activities and especially in Germany, where we are still underrepresented at this point in time. But the key milestone as Anders said, is to break ground in North America with our own activities and our own operations, but also with merger acquisitions going forward. Now last but not least, the fourth section of my deep dive here is the way of working. We have done a very good job on the integration of PSM. And I'm happy to say that we got a lot of business wins in the last year and already also this year, which we would not have done without this partnership. Both companies joining together had these leverage effects. And we have, in the meantime, 1 sales team and people are representing Bulten products and PSM parts in 1 person. And that's really fantastic. We will keep on using that leverage in that integrated sales team and having more synergies, thanks to that acquisition, opening doors at customers that we would not have done before. Now secondly, when you look back into the trends of the beginning of my presentation, there is a lot of activity going on with new platforms and applications and different customer needs with new customers and potential customers. And that's why it's important for me and us to stay very close to the customer and listen to their needs because their needs are very different maybe from classical customers. And that means we have to strengthen our technical sales and application engineering activities to explore those opportunities and be there with a technical consultancy to differentiate in competition. And all of that needs to be very agile. And the industry is changing rapidly and being a fast response time leader and having an agile sales team but an agile team in total is really important for us going forward in the way of working. Now with these activities, we commit to further outgrow the market. And we will achieve a net sales of SEK 5 billion in 2024, which means nothing else that we will have an average annual growth rate with more than 10% points every year, despite the challenging market conditions. Now I'm already at my summary. The automotive industry is in a radical change and undergoing an enormous transformation. We, as Bulten, are well positioned, and we will outperform the general market growth as we have done in the past, also despite the challenging market conditions. Our existing customer portfolio will be really balanced going forward. We will develop new OEMs, we will develop new Tier 1s and business outside the automotive industry as well. From a regional perspective, we will focus on Asia Pacific, of course, keep the momentum in Europe and have a very strong special focus on North America. And with the FSP, where we are the market leader today, I hope that we make a new chapter with FSP and the initial feedbacks we have from the customers are very promising. And with that, we will generate more needs on FSP. And I'm happy to say that we already have the first collaboration with a customer on FSPS and that is Ford. Focusing on the green line product, BUFOe, I don't want to steal the thunder of later presentations. You will learn about that more. And we believe we are very well positioned for these exciting market challenges.

Thank you very much, Markus, and Anders, we will have on stage here as well. We have a couple of questions for you.

And there's -- and both Anders and Markus, you mentioned that you want to grow into new businesses. Could you be more -- a little bit more specific about which ones you want to enter into? Anders, could you answer that?

Yes. Markus mentioned a few of those, and we're already successfully growing in consumer electronics, which in itself is a very growing market. So it's very interesting for us. The other group where we think we're very well positioned in is -- so the types of customers that have very similar types of requirements to the automotive industry. And that could be construction equipment, can be agriculture machines, recreational vehicles, for instance. So there's a multitude of other sectors where we can grow successfully.

And also, Anders you or Markus said that you want to grow from 5% to 20% in industries outside automotive in only a couple of years. But do you think that Bulten has a capacity to do so?

Absolutely. Manufacturing capacity is not an issue for us. That's not going to be a limiting factor.

And Markus, do you see a decline in sales of fasteners within automotive long term due to the new drivelines and platforms and so on? I mean are they less fasteners in an electric vehicle? Probably not the first time you got this question.

Yes, thank you very much for that question. And I would say we have a lot of opportunities because you don't need to just look into the car itself. Of course, the engine goes away. But there is another engine entering the vehicle and batteries and EDUs with fasteners needs. And if you consider then the whole ecosystem of the automotive industry, then I believe that there is more opportunities going forward than we see today.

And the last question for you, Markus, before we continue. What do you do to withhold and increase your margins?

Yes. First of all, and I don't want to steal the thunder from the next presentation in technology and innovation. Of course, launching innovation is a natural opportunity to increase the margin position, whereas also winning new business in general is an opportunity because it's always important to refresh the product portfolio you have, sometimes our products have a very long lifetime. So it's good to bring in fresh business with fresh margin. And with the record we had last year, I think we are in a good way. And there's many more opportunities and things we can do. And I think with FSPS, there is another one which will give some more opportunities. And in case there is cost needs like on raw material, we also have to address that to the customer, of course.

Thank you very much, both Markus and Anders. [Operator Instructions] We will soon hand over to Emmy Pavlovic, but before doing so, we will watch a short movie. [Presentation]

Good afternoon. My name is Emmy Pavlovic and I'm responsible for technology and innovation. I've been with the Bulten Group for just over 1 year. And today, I have the pleasure of telling you about our ongoing product and technology developments. During the previous Capital Market Days, BUFOe was introduced to you as the main highlight from technology and innovation. This project is still one of our lead projects, but very much more have happened since then. In the past 2 years, Bulten have invested significantly into technology and innovation. We have opened a new innovation department in Poland, where we have a team of engineers focusing on design and rapid prototyping. In addition to this, we have ramped up innovation activities in our German plant where we are developing simulation for the Bulten Group. So all in all, Bulten have increased the innovation capacity. And with this innovation capacity, we are, of course, ramping up our development activities. So let's dive into our product development. The diagram you recognize from Anders' presentation, it shows the focus of our product development. Any product we decide to develop needs to increase the sustainability offering to our customers or the functionality offering to our customers, but preferably a combination of both, of course. And I will now talk you through a couple of the larger projects we have running, and I will, of course, start with BUFOe. As the video showed, BUFOe is a method for how to produce a fastener without heat treatment. By removing the heat treatment step, we are removing the most energy-intense step in our own production, and this is the sustainability gain when you make a BUFOe product. So at first glance, it is a conversion of existing fasteners, existing designs into a BUFOe version and thereby, reducing the carbon dioxide footprint of the fastener itself. And this is indeed the first step that we are doing. This conversion is ongoing now together with our larger customers. And much more is to happen. But I want to highlight the fact that our intention with BUFOe is not to stop at a simple conversion from one product design into the very same bolt. We intend to place BUFOe in the middle of this diagram and offer our customers a more sustainable product but also a far more functional product. The BUFOe production concept will allow us to do this because when we produce a bolt like this, we stare where to put the properties in the bolt, and that also allows us to design the bolt in a new way. So we are aiming to redefine how a fastener look even. So BUFOe is a journey, and you will have highlights to come for a long time in the future. However, on the note of sustainability, we, of course, have more projects running. And for my team, it means a high focus on our raw materials. Steel is, as you know, a raw material with a high carbon dioxide footprint and my team is looking into how we can reduce this. We are, of course, following the fossil-free steel developments carefully and closely. But we are also fully aware of that this production method of making steel will not be made available for the raw materials we use in our products, the bar and the rods. So in the meantime, we need to do everything we can to reduce the carbon footprint of the steels that we do use. And this, we are addressing by looking into how to increase the scrap content in the steels we are using as well as how to reduce the energy intense steps of making the wire itself. Making these process changes to a steel alters the way this steel behaves. So it is about building a knowledge for how to produce fasteners in a good way with such steels. But this is not enough. We are also looking into fully renewable raw material suitable for cold forging for the future. So we have pre-studies and concept studies running on this topic. Now before I will leave the product development, I want to also take the opportunity to introduce a project that focuses fully on functionality, and this is our TensionCam project. TensionCam is a small local start-up in Gothenburg, where Bulten bought a stake in 2020. It is a small company that has developed a sensorized solution for how to measure clamp force. And clamp force can be described simply as how well a bolt is tightened when it's used in an application. The technology developed is fully wireless and remote. So it allows you to measure and follow the clamp force in an assembled bolt from any office in the world. We are targeting large structures and applications such as windmills, bridges where you are today sending out maintenance team to retighten bolts on a yearly or a bi-yearly basis, simply to make sure nothing is coming loose. TensionCam would instead offer these customers to remotely follow the clamp force in the instruction and to measure the assembly health of their technology. And by this, being able to plan when to do maintenance and only do it when needed. And also in case you would have significant clamp force loss at any point you can also take the decision to shut down construction before you have a catastrophic failure. So that gives you a glance of our product development portfolio. And this portfolio is, of course, key for us to stay leading in our industry. But I dare to say that having a strong product offer is not enough for the future. As Markus points out, the automotive industry today is changing faster than ever before. And we also have new players coming into this market. Overall, it means that the expectation on us is to deliver our products faster than ever before. So we need to also take into consideration the aspect of becoming rapid response time leader in order to stay ahead in the market. And this is a challenge for the cold forging industry because historically, it has been a long lead time industry due to the tooling we are using when we are producing fasteners. So a traditional way of launching a new product would be to study your new product, design the tool based on experience from something similar that you do to order new tools, wait for 8 weeks. Once the tool arrive, you go to the machine and you test. And for complicated product, it can happen that the raw material doesn't behave the way you thought when you design your tool and you have to modify. In such modification, you go back to your desk, redesign your tools and once again, have to wait 8 weeks for a new tool to arrive. And this is, of course, unacceptable today. So we want to break this habit of trial-and-error design approach as well as breaking the lead times of 8 weeks. And for this purpose, we are developing 2 technologies. The first one is simulation. So we have, during the past year, done a deep dive into cold forging simulation and exploring how we can design tools where we are testing the tools virtually instead of trial and error at the machine. Simulation allows us to test different tool concepts as well as adjusting tools, and to do this in hours or days instead of sets of 8 weeks. So it's a key enabler to speed. In addition to this -- yes, we don't want to wait 8 weeks for a critical tool. So we have already invested and developed 3D printing of metals in our innovation center in Poland. And here, the team is now developing our capacity and capabilities of 3D printing and preparing tools for cold forging in-house. And by combining both simulation and 3D printed tool, this is really how we aim to disrupt the long lead times of our industry. And that will be key for us to stay leading. And with that, I go into a short summary before I hand over. So all in all, Bulten have increased the innovation capacity in the last years. We are developing products with a focus on sustainability and functionality. I want to highlight again, BUFOe is not a product, it's a family, and we are redefining how fasteners look and how they behave. And last but not least, speed is the key differentiator that will set us aside from our competition. And with that, I hand over to Fredrik Bäckström. Thank you.

Thank you, Emmy. My name is Fredrik Bäckström, I am the Chief Operating Officer of Bulten Group. I've been with the company for 2 years now. So Bulten has a truly global footprint manufacturing in all the major automotive regions. And our strategy to produce where we sell enable us to derisk our supply chain as well as minimizing the logistic costs. And in regional disturbance like we are seeing now in the world, it also gives us the ability to contain this to the region we produce in the region for the region. And our FSP contracts, then they enable us to maximize the utilization of our most expensive assets by flexing the mix from in-house production and outsourcing. And this is leading to effective CapEx usage and increased margins. We can go cherry picking in the outsourced segments and finding the sweet spot for our own production and delivering that to the customers. And this gives lower cost for the customers as well as increased margins for Bulten. The pandemic and the following shortage of semiconductors have, of course, been a major operational concern for us since the last Capital Market Day just before the pandemic outbreak. We have handled these disruptions without adverse effect for our customers. Despite the turmoils, we have done significant improvements in this period. A new value chain management process has improved lead times by 20% and reduced our logistic cost, helping us in this disruptive environment. In-sourcing, as shown in previous slides, of SEK 300 million has led to increased equipment utilization and increased margins. And our journey towards lower carbon footprint continues at all sites. And I'm happy to say that the CO2 emissions intensity has been reduced by an impressive 54% since 2018. To further support our regional growth strategy during 2020 and 2021, we have increased our manufacturing footprint in our targeted growth region, Asia and the U.S. So in Taipei, we relocated to a modern facility. And with that, we have the possibility to in-source production with higher margin, and the facility is also superior to the old plant from a sustainability perspective. In Wuxi in China, we expanded the existing lease with an additional 30%, allowing us to expand our business outside the automotive sector, and the additional space is mainly used for the consumer electronics manufacturing. And in the U.S., we have consolidated our 2 legacy sites into one brand-new facility. So combining both the legacy Bulten and the PSM going into a joint facility with sufficient space to support our growth ambitions in the U.S. market. And I'd like to add that all the investments for that are already in the book, so taken care of. The project of building a new surface treatment plant in Poland was announced at the last Capital Market Days with fen fur and trumpets. However, the pandemic caused us to cancel the project, and it was put on hold. And I'm happy to say that it's now restarted and well underway again. This will most likely be the world's most sustainable surface treatment plant. It will contain all sub-processing after heat treatment, including all major types of coating supply to customers, both electrolytic and flake. We will also co-locate our Polish logistics operation into the same building for further cost savings. And the plot has also room for further expansions in the European market with other types of manufacturing capabilities, like, for instance, cold forming. So what will this give us then? It's a large undertaking and the largest project ever undertaken by Bulten. And we see several business improvements to be gained from the project. Improved margins due to in-sourcing and state-of-the-art processes, this will be the most modern surface treatment factory in the world. We will have shorter lead times and lower inventory due to the proximity. And lower CO2 emissions due to shorter transportation routes and the fact that we will be using 100% renewable energy. And in-house control of product quality, which is always a key factor in the automotive industry. Markus talked a lot about our sustainability efforts, our FSPS. And this comes, of course, with effort from our side in order to support that business growth. And to show a few examples of what we've done so far is that we have now renewable electricity in all our U.S. and -- EU and U.S. plants. We have new state-of-the-art solvent-free cleaning processes in Taipei, and this eliminates solvent emissions. Our new German warehouse, which is currently under construction will have a roof with solar panels and it will be then energy neutral, which is a very big step forward for us in our building constructions. And our new Polish plant is planned for solar panels, and we have an additional space in the plot for additional solar farm or wind turbines. And of course, what Emmy already showed, our industrialization of the BUFOe in our plants will give a significant saving of CO2 emissions and cost savings due to energy expansion. And with surging energy costs, this is a key enabler to retain margins in this challenging environment. So when we are looking at manufacturing focus ahead, we will support the business growth plan and our overall strategy, of course. Our Industry 4.0 efforts will continue with increased machine data capturing as well as factory automation, simulation, 3D printing. The new products we are introducing into the market will require new types of manufacturing capabilities like nuts or special types of coatings for EV applications, for instance. We will continue to develop our manufacturing footprint in our targeted growth regions in the U.S. and Asia. And the integration of Bulten and PSM will continue to gain further synergies. The early stages of the integration did the low-hanging fruits of economy of scales of material sourcing, for instance. But now we have some nice business wins where we are combining the technologies from PSM and Bulten into new product offerings, and we would like to strengthen that type of capabilities. And as the backbone in every automotive industry, our continuous improvement work is really important. So the operational excellence work will be strengthened and enhanced. And that's what the future for Bulten's manufacturing look like. So -- and with that, I'd like to thank you for your attention and handing over to Claes Lindroth.

Thank you very much, Fredrik. So good afternoon. Next on the agenda is an introduction to Bulten's supply chain. And my name is Claes Lindroth and I've been with Bulten for 4.5 years. And my team is responsible for making sure that we ensure supply of material and services in right time to the right cost in the right quality for our customers but also for our production units. We operate on a global basis, and our total purchasing value is roughly SEK 2 billion per year. Last 2 years was a real pressure test on our ability to manage our task. And I'm sure that you will all recognize most of the disruptions that we had to deal with during this period. Starting with Brexit, and with U.K., one of our biggest markets, that was a challenge. And there were also increased political and financial protections, and then came the COVID-19. And that had also some consequential effects like border closure, sea freight, turmoil, we had container shortage. And on top of that, we also had a block Suez channel. Then came a rapid restart after the first COVID wave that was also giving us a lot of challenges. I'm thinking about raw material shortage and price peaks. Also, the lack of components came with that, and most famous is probably the semiconductors that were hitting our industry quite hard. So all this, plus the normal incidents like floodings and fires we had to deal with in this period. I think we sailed through the storm, and I'm quite happy and proud to say that we managed quite well to keep our customers happy with a continuous supply during this period. And there were some critical success factors that I want to mention. The first one was that we managed to be quite early in identifying the risks coming and act direct and if possible before our competitors. But secondly, also, the strong and long-lasting relations with our suppliers, that really was crucial to give Bulten the priority needed when we had critical situations. It's not over yet. And we have learned a lot during this period about where we have opportunities for further improvements. Our priority and focus has now shifted as we enter the next chapter of our strategy. This picture in the middle, the scale is trying to illustrate the balance we have between risk and reward with remote sourcing. Historically, it has been a good business for Bulten to source from remote locations like Taiwan, mainly driven by a competitive cost structure. Even though we were aware of the risks with long lead time, lower flexibility, transport potential issues, increased inventory, but it has been good in the past. But after the last period here, we have seen and claim that it's a shift on the scale on more to the negative side. So that has led to that. We now take a number of activities to change approach and reduce the risk in the supply chain further. Overall, Bulten has a very strong position on a global scale, not being too dependent of interruptions related to long distance transports. Looking at the world map, I would claim that we are better off than most of our competitors in this area. And if you look on the slide here, the middle pie shows that of our total sales, we have roughly 60% in-house production and 40% traded goods. And out of the in-house production, it's only 5% that is originating from overseas production units. So that's a very low number. Also looking at the traded goods, there we have about 18% originating from overseas production. And this is now something that we attack and try to reduce further. Examples of these activities are in-sourcing to own production that also gives the advantage to better utilize our existing production capacity. We also expand, invest in machining and equipment to broaden our in-house production capability to bring in more type of products. On the supplier side, we expand business with regional suppliers, including also entering new strategic partnerships with selected sub-buyers. And then we expand with more licenses to be able to produce more products, the protected kind of products. Okay. And another key focus area is to reduce the CO2 footprint from the supply chain. And referred to as our Scope 3, we have calculated the CO2 emissions intensity out of the supply chain to 3.3 tonnes CO2 per tonne delivered material. This includes raw material, subcontracting, transport and some traded components. This, we will reduce with 25% until 2030. Mainly, this will be done by converting our wire rod steel material from iron ore based into scrap-based steel. And this is an effort that we will have to do in close cooperation between our engineering community and our wire rod steel supplier. And we believe and are convinced that we can have a larger project range, including products with a more complicated forging geometries also to be made by scrap-based material that will significantly reduce the CO2 footprint. And we also reduced the CO2 emission footprint by continuing the insourcing. While we have, within Bulten, a lower CO2 emission footprint for producing fasteners compared to our component suppliers. Then I come to the summary. I think we have managed serving our customers well during challenging times, and this we will continue to do. Regional supply is a key for derisking the supply chain going forward. And our global footprint enable us to successfully balance the regional versus global supply. And to reach our sustainability goals, focus on the supply chain is needed as purchased goods accounts for most of our CO2 emissions. And our target is to lower the CO2 emission intensity by 25% until 2030, primarily by converting more material from iron ore-based into scrap-based. And I think that concludes my presentation. Thank you for listening.

Thank you, Claes. And we have a couple of questions here for you, Emmy and Fredrik. Emmy, you mentioned TensionCam, it's a plan that Bulten will sell TensionCam's products or services? Or how does the business model look like?

Yes, we are currently discussing several possible business model. But for now, our main focus will be on verifying and validating the technology and to running the field test and pilots we have out outdoors at the moment to make sure that the technology is secured.

And Fredrik, you have insourced some of your previous purchased products. Is it a plan to continue this journey?

Yes, absolutely. And like I said, the FSP is giving us a unique opportunity to find exactly the right products where we have spare capacity and can further increase the utilization of our existing CapEx. So yes, that will continue.

And Claes, do you hedge any of your purchases, for example, steel?

No currently, we are not doing that directly. However, we are constantly looking over, let's call it, the indirect hedging by making sure that we have a good balance between currencies to purchase value in sales values in the same currencies as much as possible.

Thank you very much. I think we have a couple of more questions for you, but we'll take them later on. And next up will be Bulten's CFO, Anna Akerblad.

My name is Anna Akerblad. I joined Bulten as CFO in March last year, and we do have a strong financial platform and a position to support further growth. We showed a strong performance in Q4 2020 and Q1 2021 and have applied strict cost and cash flow control. Bulten has continued distribution of dividends and invested in growth and efficiency. We have secured additional financing with solid equity asset ratio. Bulten will become a SEK 5 billion company in 2024 as already stated at our last Capital Markets Day 2 years ago. We stick with this target even though we have been through the pandemic and other disruptions. With SEK 3.7 billion in net sales today, we will continue to grow sustainable both organically and through acquisitions, and we are becoming a truly global company. We will continue the journey to exceed sustainable 8% in EBIT margin through technology and operational excellence and strengthened position in Asia Pacific and North America as well as benefit from acquisition synergies. Margin expansion will, of course, support return on capital employed and to reach a target of 15%. In addition, we will continue our focus on net working capital structure and distribution of dividends. Bulten has a dividend policy to distribute at least 1/3 of net earnings after tax, taking into consideration the company's financial position. We have a historical high outcome, and 2021 dividend is proposed by the Board in accordance with the policy at SEK 2.25 per share. Bulten recently secured additional financing with Handelsbanken in December. The financing was increased with SEK 550 million and now amounts to SEK 1.3 billion. This enables further growth and expansion in accordance with our strategy. And now I will hand over to Anders Nyström again.

Thank you, Anna. So just to round off and summarize. I hope that these 90 minutes or so have given you a good perception of where we're taking Bulten in the next few years. We reiterated that we stand by our targets that we've already communicated, but that we have a number of new tools in the box for us in order to deliver that. And those are, among other things, what you've seen today, you've got a flavor of a lot of detail really from the various management of the company. But above all, the new elements that we're adding is we're pursuing on organic growth by acquisition in North America, along with the organic growth that we're already embarked on, that we are actively also seeking new customers outside of the vehicle industry. And that we're further stepping up our charge when it comes to innovation, technology and to provide premium, sustainable products and services to our customers. And that will help both ourselves as Bulten to reduce our emissions and our environmental impact as well as helping our customers become successful in that respect. So by that, I think that concludes our presentations, and we can go into Q&A.

Thank you, Anders. And Anna as well. We have a question here for Anna. How will you finance a possible acquisition in the U.S.?

We have already secured additional financing. And if potential extra financing is needed, I'm confident that it will be secured. We have a strong financial platform, and we have a good relationship with our bank.

And Anders is the sales target of reaching SEK 5 billion based on the assumption of a more normalized market condition without the current disruptions?

Well, I think we can see that the market is in a state of recovery, and we're counting on that to continue. So the normalization of the market is, of course, a prerequisite. We have a lot of geopolitical tension right now in the world and the impact of that, of course, we cannot model. But the answer to that -- the short answer is, yes.

Thank you. I would like to ask the rest of the team to come up here on stage and we will continue a Q&A session where we have the entire team with all the presenters. Maybe -- we have a question here from one of the analysts. Mats Liss, maybe Anders, you can answer this. I will read the questions. You mentioned the U.S. expansion. Do you only consider acquisition or do a greenfield operation be an opportunity as well? FSP contracts are not common in the U.S., do that limit your opportunities in the U.S.?

So 2 questions in one. Well, we actually do have a pretty fresh greenfield operation in North America. And we're leveraging that in order to boost organic growth as we speak. I think the new element that we're adding to that is the inorganic. So I'm expecting the primary growth pace in the next 2 years to come from an acquisition once we made a deal since organic alone is really not going to be quick enough.

Okay. We continue. You have a strong market share in FSP contracts, but they still represent a more limited part of the total market. Will the trends of electrification and entrance of new car producers in the electrification increase the FSP part of total fastener consumption?

I would say, yes, because many of the new players that we see in -- especially in the EV market, they are focusing on completely other parts of the vehicle. I mean, for them, it's battery range. It's developing autonomous drive systems and that's really where they're focusing their effort. And they don't have sort of an inherent mass of engineering competence to spend on the fastener-type products and the more simple products in the vehicle. So they will be natural next steps for us. And we see that tendency for sure. So yes, I'm pretty confident that it will.

We continue. What kind of cost savings do you expect to see of the surface treatment plant? Is the plant only for treating your own products? Or could it be used to take on external business as well? Do you want to take that one?

We've disclosed the investment amount for that project. It's SEK 300 million. And I can assure anyone in doubt that there is a solid business case behind that. So we'll have a nice return on that investment. The absolute savings per year or per tonne or whatever, we haven't disclosed and would be wrong for us to do so at this point.

Fredrik, anything you want to comment?

Yes, maybe about the -- if we're going to be a third-party surface treatment provider, and I'd say probably not. There is lack of capacity in Europe for surface treatment right now. And we also see that the resourcing over into Europe from ourselves will lead to a capacity usage in the plan for our own production that is sufficient for that. But we -- so we will live and see.

Could you please give us a rough figure on your market shares for your main product categories?

It depends on how you categorize it. We have one main product category, and that's fasteners. It's divided into external fasteners and internal fasteners of which we are manufacturing nearly everything that's externally threaded, that's bolt. And we're trading most of the rest of it. And I think the simple answer to that question will be to look at the in-source/outsource distribution, which is 60% in-sourced, the classic bolts. And 40% outsourced, which is a little bit of dimensions, externally threaded dimensions, we don't do, but primarily the other types of fasteners.

Another question from Kenneth Toll Johansson. Have you sold any BUFOe products yet? Or what price compared to similar products have you been able to get?

Well, the -- I think Emmy was alluding to that a little bit in her presentation. But the way this works is that we make BUFOe a part of our product offer. And this in itself wins us business and it has actually won us a couple of very significant contracts in last year. And once we've done that, the work starts together with the engineering community of the customer to replace traditional hardened, traditional heat-treated bolts with BUFOe bolts instead. And thereby, sort of booking a CO2 save for each application that we're specifying this into. So it's not -- the dynamic of this market is not that we necessarily sell a BUFOe part number. But that we -- based on our offer then win a major contract and then we work with the customer to replace the traditional bolts with BUFOe.

Maybe this is a question for Markus. If you want to increase sales to automotive suppliers, do you need more salespeople?

Yes. I would say yes. And where we have made an initiative this year to hire new salespeople across the world. And a lot of those are focusing right now on these new growing customers for suppliers, but also for other customers outside the automotive industry. So yes, we have put resources into place.

Or maybe I should even add a little bit to my previous response that is there a willingness to pay for sustainable solutions, I think was the essence of the second part of that question. I think we conclude that, yes, there is. I mean, there is a growing awareness in the vehicle industry that CO2 emissions in the value chain, this life cycle CO2 that's going to be the basis for any tax penalties. And there is a commercial interest in reducing emissions. So I think the short answer is yes. We see that there is a willingness to pay a premium for those types of products and services.

And will the competition change in any way with the trends you mentioned with electrification and trends are more local sourcing? Markus, do you want to comment on that?

It's a good question. I need to give it a thought. So I don't have a right answer immediately. I would say we are in a very competitive environment. And I believe that we are focusing on our strategy and being a strong manufacturer, having factories all over the world and a large distributor at the same time, offering superior sustainability premium solutions, I think this will strengthen our position to stay ahead in competition. And if they get weaker or stronger, we will focus on our activities.

Why is North America -- why is the North American market more attractive than the European to the acquisition you're in? Are you following existing customers there? Or are you targeting new customers in North America?

Good question. We are already very European-centric. We have a very nice market share in Europe. And we have -- by the way of strategy, we've said that we will be and continue to be a global player. And in order to be profitable and relevant in all the markets that we're targeting, that's North America, Europe and Southeast Asia, you have to have a certain scale, both to be competitive and to be visible and relevant to the customer base. And we've realized that a couple of years ago, and we started with Southeast Asia. And we made an acquisition that was very, very heavy in Southeast Asia, and it gave us a base to continue to grow from -- gave us much better customer exposure and it gave us economy of scale. And now I want to sort of repeat that in North America. It's not going to be sort of a copy paste, but we realized that in order to be visible enough to the customer base in order to get economies of scale on raw material and on toolmaking and all those elements that are cost elements, it is important for us to gain more scale. And the quickest way, of course, of doing that is through an acquisition.

Could you say something about the mix between organic growth and acquisitions to reach SEK 5 billion? How much is price and volume?

We haven't really divided that up in a way that we're sort of ready to expose. But of course, those are elements that will all contribute.

And then we have a question here, I think maybe Anna can answer that. What's the focus regarding your liquidity? For example, the suppliers and customers' credit periods?

We are constantly focusing on our cash and liquidity, and an example of that is balancing the customer and supplier payments. And of course, also looking into inventory levels.

U.K. is an important market to you, will the upcoming change in the U.K. corporate tax affect you in any way?

I'd say, no.

No, no.

Markus, do you see a market for FSP outside Automotive?

Yes, absolutely. We have various customer discussions going on and as Anders said, a lot of customers are focusing not necessarily on seaports and fasteners. And they are happy that we are the experts because we offer so much more than just the screws and the bolts. We offer the entire value chain. And yes, there is a market growing. And especially with the FSPS we launched today, I'm confident that we add another attractive value proposition to that as well.

And Fredrik, you have factories in Russia and Taiwan. Could the geopolitical situation in the world affect the supply from base? And are you taking any precautions?

Well, yes, we are definitely following the geopolitical situation right now with concern. But as I explained in my initial part of the presentation, the beauty of our manufacturing strategy that we produce in the region for the region, gives us a unique opportunity here to tackle these difficulties. So I'd say that we are producing in Russia for Russia. So it's going to be contained. So the -- from a customer perspective. What we are doing is looking at alternative routes for raw material in to have more locally sourced raw material, and to keep that supply chain rolling if there will be embargoes or anything, border closures towards Russia. And the financial impact of that is very hard to judge, of course, for anybody. When it comes to Taiwan, Claes already talked about our resourcing. And we do have spare capacity in other plants in order to localize production, to localize sourcing, and a combination of that is a way of derisking that situation as well. So -- but it's, of course, the geopolitical situation is a concern, and we're monitoring it closely.

And Claes, how does your business differ from a company such as Bufab?

Well, probably the biggest difference is that Bulten is, to a larger extent, a producer of fasteners. We also have some trading as I have shown in my presentation, but we are not that dependent as Bufab on the trading side.

I think we have 2 more questions. What share of your sales within automotive does FSP stand for?

It's slightly more than 50%.

Okay. The fasteners market is fragmented. Do you think it would be more consolidated in the future?

To answer that question, you probably need to look at the regions. So I mean, in Europe, the market is actually fairly consolidated already. There are small players left, of course, but there are more consolidated bigger suppliers in Europe than in Asia and in North America. And I think, yes, especially in North America, I think we can expect that there will be a consolidation in the near term.

FSP contracts represent some of 16% to 17% of the total fasteners demand in European auto industry. What is the blue-sky scenario? Could it be 50%?

We would be happy if there is a demand for 50%, and we are ready to tackle it, yes. I mean, bottom line, we see a stronger demand for FSP. And as Anders said, because a lot of these players, they have other priorities at this point in time like autonomous driving and developing total new vehicles or mobility solutions, and we are happy to handle the whole world around fasteners for them. And -- so I believe, yes, there is a growing market for this. And if it's 50%, we would be delighted.

We don't have any more questions now. So if you have a question, please send it in right away. So we have time to answer it. But if we don't receive any new questions, we would like to thank you very much for attending this event today. There will be a recording and also the presentations will be available on bulten.com. And also if you have any further questions, please reach out to us. We hope that you enjoyed Bulten's Capital Markets Day 2022. And once again, thank you for attending today. Bye.