Elanders AB (publ) (ELAN-B.ST) Earnings Call Transcript & Summary

Hello, and welcome to Elanders AB conference call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] I will now hand you over to your host, Magnus Nilsson, CEO of Elanders Group to begin today's conference. Thank you.

Thank you, Laura. Welcome, everyone, to Elanders phone conference. And together with me here is also Asa Vilsson, our CFO. I will now go directly to Slide #5 and talk about our fourth quarter. Our underlying demand improved in the quarter. And if we adjust for declining prices in the Air & Sea, we could -- we had actually an organic sales in line with previous year. Our adjusted EBITA margin continues to improve and came in better than both the previous quarter and last year and was reaching 8.7% compared to 6% last year, which is a result of all our actions we have done to lower our cost base, also to improve our efficiency and also with the help of recovery in sales. We also improved our adjusted EBITA result and our adjusted result before taxes came in 38% better than the previous year. Also positive in the quarter was that North America continued to have organic growth and also Asia came back to growth in the fourth quarter. Europe had a negative organic growth, but that was mainly because of lower prices in the Air & Sea. If we then go to Slide #6 and look at the cash conversion, we can show that we continue to deliver very strong cash conversion, which ended at 92% for the full year. If we then go to Slide #7 to look at Supply Chain Solutions. Our organic growth was negative 2% compared to a negative growth of 4% in the third quarter. But if we adjust for Air & Sea, organic sales was in line with the previous year. If we look at the result, we can show a very positive development with both improved EBITA margin and EBITA results. And our adjusted EBITA margin actually came in at 8.5% compared to 5.9% last year, which is the highest ever for Supply Chain Solutions. Very positive in the quarter was that LGI, our German subsidiary, could show a strong improvement in their margin after all the actions they have done during the year, which helped to improve the margins for both Supply Chain Solutions, but also the group as they represent almost 50% of the group's total sales. If we look at the outlook for Supply Chain Solutions in 2026, is overcapacity in warehouse space still our biggest challenge, but also our biggest opportunity. Of course, if we in 2026, we will manage to fill up the space step by step, will this be a very important driver to continue to improve our results. If we then go to Slide #8, look at Print & Packaging Solutions. You can see that our organic sales for the first time this year didn't decline and actually came in at the same level as last year. Traditional printer products continued to decrease, but was compensated by strong organic growth of 10% from the strategic important product segment Online Print. Fourth quarter is the absolute most important quarter for Print & Packaging Solutions, and it was very important that we managed to reach the same level as last year when it comes to both EBITA margin and EBITA results. And the adjusted EBITA margin came in at 9.1% compared to 8.9% last year. If we then go to Slide #9 to look at the development of our different customer segments in the quarter and start to look at electronics. The picture continues overall to be very positive. And in the quarter, we could see an organic growth of 2% because of stable demand, both in Asia and Europe. Fashion had a negative growth of 4%. But if we adjust for Air & Sea, we had an organic growth of 1% instead, mainly driven by continued recovery in North America that had an organic growth of 7% as a result of lower churn, improved new sales and new customers. The demand in Europe was in line with last year if we adjust for Air & Sea. If we look at Automotive, they continued negative trend, but improved compared to previous quarters. and showed a negative growth of 3% compared to around 10% in the last 9 months. At the moment, it looks like demand is starting to stabilize from our customers, and we can also see that their forecasts are now more accurate than before. If we look at other, other showed a negative trend with a negative organic growth of 7% compared to 3% in the previous quarter, and it was mainly FMCG volumes in U.K. that decreased together with traditional print products in this customer segment. Industrial showed a strong recovery in the fourth quarter with an organic growth of 9% compared to a negative organic growth of 7% in the third quarter and it was mainly Germany that was an improvement, but also increased volumes in Air & Sea. When it comes to Healthcare, we can see a negative growth of 11% as a result of 2 discontinued customers, but the underlying business remains stable. If we then go to Slide #10 and looks at how things will be going forward. We can see that the market continues to be very uncertain. But after seeing the positive result in the fourth quarter as a result of all the actions we have taken in 2025 to lower our cost base and make our organization more efficient. I'm carefully optimistic when it comes to 2026. And as I mentioned before, it's overcapacity still both our biggest challenge, but also our biggest opportunity in improving our profit which means that new sales and organic growth with existing customers continues to have the highest priority. Parallel with these actions, we continue to have a high temp in our rollout of the group's global warehouse platform, CloudX and also the implementation of AI solutions, which over time will lower our cost base even further and increase our efficiency and create very competitive solutions for our customers. We also still believe that trade barriers over time will create opportunities for global players such as Elanders by breaking up global logistics chains and replacing them with regional and local logistics chains. Okay. That was everything from me. I open up for questions.

[Operator Instructions] We now take our first question from Gustav Berneblad of Nordea.

It's Gustav here from Nordea. I thought maybe just to start off here on the cash flow. Just curious, the dynamics of working capital, has that changed following the strategic initiatives you have made? Because when I look at the last 3 years in the Q4 report, we have seen a quite solid working capital release and now we saw a quite significant tie-up. So just curious about that one.

Yes. No, I think the different was that this year that the fourth quarter was starting pretty slow and the demand was really improving in the second half of the quarter. So it means that we build it up more working capital than normally that should be released in Q1 in this year instead. So it was a delay in timing, you can say.

That's perfect. And then, I mean, is it fair to assume -- I mean, also there, when I look at the last 3 years in Q1, we tend to see a working capital release. But is it fair to assume that we can expect a stronger release here in Q1 then or...

We had a pretty strong release last year. So -- but it should be at least in the same level, but hopefully, a bit higher. So it should be a bit higher.

That's perfect. And then next question. When you now have shrink the business through the strategic initiatives, exiting the road business in Germany, phasing out the buy and sell, I mean, should we, when we look at the cash flow, expect that amortization of lease liabilities continue downwards from here? Or do you see that Q4 now is sort of a good proxy for what to expect going forward?

I think also, I think it will be roughly the same. I think we get rid of some more trucks now in Q4, but...

Yes, but roughly the same, I would say, also.

Yes, because we will have same rental agreements and contracts and so it should be roughly the same going forward.

Okay. Perfect. And then, I mean, looking into 2026 now, if we compare now to the end of 2025, are there any additional strategic initiatives or cost savings or similar that is sort of not visible in -- or is visible in numbers now and will become even larger here in 2026? Or could we see additional margin support, if you understand my question?

Yes. No, I think because we are taking lots of actions during 2025 on the cost side. And we are getting -- we are going into this year and, of course, much slimmer, especially in the personnel costs and admin costs. So -- but it still also depends on the demand. We are carefully optimistic. We don't see a big increase in demand, but now we're going with lower costs. So we are counting on improved margins this year compared to last year, of course. We don't give any forecast. But overall, all the things we have done should continue to give us positive effect. And if you look at our Q3 and Q4, there was a good improvement in our margins, and we continue -- we should continue to see improved margins in Q1, Q2, Q3 this year.

That's very clear. And then just -- sorry, the last one here as well. In terms of the online print, I mean, showing 10% organic growth, would you say that this is mainly driven by easy comps? Or are you seeing actually a general better demand picture here in the market?

No, I think the demand was very strong. And -- but we also still continue to add new customers in that area. But I must say the customers that we have since the year before was performing really good as well. So overall, very positive. It was very important for us. So we hope to continue to grow this business area even further this year. But it was a really good quarter. 10% was very good growth.

We currently have no questions coming through. [Operator Instructions]. We'll now take our next question from Markus Almerud of DNB Carnegie.

A couple of questions on the end markets to start. You're talking about the recovery of industrial where you saw growth. Kind of a similar question to what Gustav was saying. Is it -- the growth that we're seeing, is it on the back of easy comps? Or is the market actually recovering? And if so, are there any end markets which are sticking out?

I think for industrial, it was mainly Germany that was driving the growth especially our customers in thermal technologies. So it looks like construction is starting to recover in Germany and also that people invest more in heat pumps and things like that. So it was -- there was lots of Germany driving the growth for us.

And it feels like it's underlying demand, which is driving this rather than any easy comps or anything like that?

Yes, yes, it was, yes.