Ferronordic AB (publ) (FNM) Earnings Call Transcript & Summary

Welcome, everybody, to Ferronordic's Capital Markets Day. Welcome to all of you that join us here on site in Stockholm, but also to all of you that join us online. We're very happy for your interest in our company. My name is Erik Danemar. I'm the Group CFO at Ferronordic and also the Head of Investor Relations. I want to start with presenting today's speakers. We have our President and CEO, Lars Corneliusson, speaking with us today; and Henrik Carlborg, our Head of Business Development. We also have Vic Green, the President of Rudd Equipment Company. He's joining us online, as is Koen van Imschoot, who is our Aftermarket Business Director in Germany. And then, of course, yours truly as well here on site. Today's program is about 3 hours. After my opening remarks, I will give the floor to our CEO to give an overview of what Ferronordic is today. Thereafter, Henrik will delve deeper into our thinking on M&A. Thereafter, we'll move to look more specifically at the markets and operations. We'll start with the U.S., and that will be presented by Henrik together with Vic Green joining again online from the U.S. Thereafter, we will have approximately at 2:20, we'll see how that moves, but a 10-minute break for refreshments. And then we'll reconvene. And at that point, Lars and Koen will start to present our German business. And thereafter, I will come with the last section, which is the financial performance and our financial objectives. We have 2 people joining online. And to make things easier, after their respective presentations, we will take questions for them. So for those of you who are here, please consider questions that are more specific for them at that point. For those of you who are online, please consider this also as you file questions on the registration page. Great. You can help me a bit as the moderator, if you market U.S. or Germany, or even Vic or Koen, it makes it easier for me to find the question for them. Otherwise, the rest of the questions will lead to the end of the session for the last 30 minutes. And with that, I'll give the floor to Ferronordic's CEO, Lars Corneliusson.

All right. Thank you, Erik. And also from me then, very welcome to this Capital Markets Day, both here in Stockholm and online. I want to present a little what is Ferronordic today, a little about the background, but mainly how we look like and what we stand for. And also, first of all, I would like to explain Ferronordic as an investment. This is a theme, these things that we are looking at here, we will come back to, we will revert to them throughout the presentation. Why is Ferronordic a good investment? We have a robust and scalable business model. We have a strong brand portfolio and very good OEM relationships. Sustainability is an integrated part of our business model. We are very well positioned to benefit from trends in electrification, infrastructure investments we will talk about and shared assets models we will also talk about. We're poised for organic growth and bolt-on acquisitions in the U.S., a strong market with growth potential. Germany is a turnaround case that will capture recovery and obviously, the network brand product extension and opportunities. We're open for strategic M&A, and we have a very experienced management to execute this. We are certain that this will create value and dividend potential. We will create a stronger balance sheet. We will improve the cash flows, and we will improve the growth and the margin. So very quickly, we were founded in 2010. We're headquartered in Stockholm since 2017. We listed on NASDAQ Stockholm. We have today 814 employees across 3 markets, which is then Kazakhstan, it's Germany and the United States. We have 40 sales and service locations, and we have a long-term revenue of roughly -- last 12 months, sorry, revenue of roughly SEK 5 billion. Kazakhstan is part of our business. We will not talk too much about it. It's a smaller part. It only represents today 4% of our revenue. So we will focus on the big revenue drivers, which are United States and Germany today. Some other background for you that have been with us since the start. You know that we were founded in 2010 when we acquired Volvo Construction Equipment Distribution in Russia. We expanded a lot. We developed a lot. We started with 6 outlets. We ended up with more than 80 outlets. By the time the war came, we had 1,500 employees. And during that time, we developed into a very, very performing company and a performing dealer for the brands that we represented. We were awarded the Volvo Dealer of the Year, et cetera, et cetera. And we had a good run in Russia. And thanks to that, obviously, that made it possible for us to make an IPO and got our shares listed in Stockholm in 2017. It also gave us an opportunity to move outside of Russia. We became then the authorized dealer for oversea in Kazakhstan in end of 2018. And then we expanded to become the biggest independent dealer for Volvo and Renault Trucks in Germany. In 2020, we had roughly 18% of the German market. So basically, the base for what we have been doing for many, many years as Ferronordic was based in Russia. But something happened in Russia, as we all know, and we were forced to leave the market unfortunately, and we did that very successfully, I would say. I mean we did that by selling. And now I mean selling the assets we have, we got the net asset value out from Russia. Not only did we sell the business, which was one thing, but the most difficult thing was actually to get the money out from Russia, and we did that. It took -- it was a very intense year in 2022, believe me, before that happened. But the day before Christmas, in 2022, we got out. And we then already, of course, before that, we embarked on a mission to see where should we go next. We had the capabilities. We had the experience. We had the relationships with our partners, suppliers. And we then in less than a year actually concluded the acquisition of Rudd Equipment Company, which is one of the largest dealers for Volvo Construction Equipment in the United States. So that's where we are now. And the business model is very simple. I mean it's not rocket science. We create new population by selling new equipment, new trucks and renting them out in order mainly to be able to do service and part sales to them with service agreements overhauls. And then concluding the cycle with -- either used sale to customers or major component rebuild sales. But also, we do rebuilds. This is mainly for Volvo Construction Equipment when we actually rebuild old machines and make them new, giving them a new life. Obviously, we are buying used equipment from other markets into our sales area, and we are buying used equipment that we're trading out of our sales area, for instance, if we go and buy -- make a trade-in of a competing brand, we would like them to get out of our area, we would like to keep our brands in our territory. Now so let's go back again. So this is not -- this is how a dealer works. So it's not how you do it. It's not what you do, actually how you do it. And we have a very, very strong vision, value and strategic cornerstone mentality. We -- everybody knows this pyramid, even the customers actually, which is good. And our vision is to be the leading service and sales company in our markets. And here, there are two words that are more important than the others. And the first one is service, which comes before sales. So service, we do the sales in order to be able to excel in the service side in order to create customer loyalty in order for us to have repeat customers that are giving us more business, both when it comes to aftermarket, but also, of course, repeat sales. The second one is leading. We want to be leading. It doesn't mean that we need to be the biggest, but we should be the best. Our customer deserves that. We represent strong brands, but they are only as strong as the support and the relationships that we have with our customers. And again, who is the referee when it comes to deciding in our industry who is leading? Well, obviously, it's the customer and the customers. So in order for us to reach our vision, our mission has to be to support the growth and leadership of our customers. We will talk a lot about that today how we do that and how we can support our customers to grow and by that, grow ourselves. And our values and operating principles are respect. And by that, we mean respect for within the company and of course, towards everybody outside the company. We work with quality, meaning that we perform very, very high standards towards customers every time. So we actually live up to customers' expectations. But the most important thing is that we work with excellence, so we actually overperform on customers' expectations. And our strategic cornerstones are a great team, customer centricity, building our strong brands and operational excellence. Our strategic objectives, service and parts absorption rate of at least 1, meaning that the gross profit that we make selling parts and service should cover our fixed costs. That has been with us since we started. We've been in volatile markets. We've seen ups and downs and handle that in a good way, I think. But it means that we need to make sure that the aftermarket and the service and parts business is covering our fixed costs. We should be able to survive without selling a single new equipment or truck. Again, leadership in the market for construction equipment and trucks. Again, the customer satisfaction is what we talk about. Expansion into related business areas. Obviously, we want to use the network that we have to be able to add complementary brands to the brands that we're already representing. Sustainable transport services, we will talk about that more what we mean with that. But we see new trends in the industry where this is clearly something that is something we want to catch and actually drive that development. Industry-leading digital service and sales platforms meaning that we should be in the forefront when it comes to how it relate and how we proactively service customers, how we proactively not only service, but also sell machines and trucks to our customers and geographic expansion. So for those of you who have been with us for a while, you've seen those strategic objectives, but sustainable transport services is something we've added now. So a great team, we are a people's business where we are dealing with people. This is the most important thing that we do. We want to have experienced management. We want to have agile sales teams that can react to different trends that can see opportunities where others don't. We want to have top industry technicians. Technicians in our industry is rare and difficult to find and difficult to keep, really. And this is one of the most important challenges that our industry is facing is how do we attract, how do we keep technicians. And out in the markets, we want to have a flat and flexible organization. And in order for that to happen, we are following a circle of recruitment selection and onboarding, performance management focused a lot of training and development, talent management and succession planning in our industry. This is extremely important, succession planning and how we deal with that. And obviously, reward management, which looks different from an environment that we were used to, to the environments, some of the environments where we are in today, we have to deal with that differently. But it's extremely important. And obviously, putting that all together into designing effective organizational structures. And if you can do this in a good way, you actually create a great team, and that's what it's all about. It's the people out there that is doing the businesses, the people out there that are keeping the contacts with customers and making sure that they can develop and grow and so will we. We have -- definitely, we want to be in the forefront when it comes to everything about sustainability. We have conducted a double materiality analysis in '24. We're now preparing for the ESRS reporting line, and we make a footprint and impact analysis to set our sustainability objectives. Just a few examples, 16 out of 22 workshops in Germany were certified for renewable energy in 2023. Now e-trucks -- electric trucks accounted for 2.7% of the sales in Germany in '24, 6 months '24 versus 1.7%. I might say it's not a lot. It's not, but we're moving in the right direction. We're focusing a lot on that. Where we are focusing more on the ESG focus, obviously is the environment helping customers decarbonize important part on our job, driving operational efficiency contributing to a circular economy. We want to, for instance, drive and develop further rebuild, et cetera, and of course, building an efficient infrastructure. And we put a lot of focus on health and safety, a lot of not only measurements but also training on that in general, but also on safety aspects. So I think that has been with us for a long time, and we are very, very driving. We want to drive this, and we want to -- we see this as a huge competitive advantage for us if we can really handle sustainability in the way we want to do it. Now building on strong brands we talked about. So these are the brands that we represent today. We represent Volvo CE in the United States, in Kazakhstan, Volvo Trucks and Renault Trucks in Germany. We also have Hitachi Excavators and Rigid Haulers in the U.S., Link-Belt Cranes in the U.S. Sandvik, Bergmann and Mecalac Backhoe Loaders. So these are the brands we represent. We're very proud to do so, and it fits in to our vision of being leading to be the best. We have very good products that we are representing, and we want to represent them in the best way we can. Now what we see in the industry, clearly now and going forward, is the green transition. There's a lot of talk about what's going on, but it's clear there is no way it's going to not happen. There is a strategy to reduce CO2 emission and to transform the mobility industry, and no doubt about it. We -- as you know, for instance, in the U.S., a lot of focus on infrastructure investments, demand for investments is driven by the need to upgrade existing infrastructure and by using new technologies. We will talk about that when it comes to the U.S. section. And we also see a strong shift in ownership models that customers demand when it comes to machine ownership or not ownership, rather which is called Equipment-as-a-Service we can call it, which is slight flexible models where we offer trucks or equipment on flexible rental subscription, methodology or pay-per-unit and sometimes even pay-per-tonne, pay-per-kilometer, et cetera, et cetera, which is something that we see coming and we want to drive that as good as we can. And the executive team to do that is myself, Henrik, you will soon see talking Nadezhda Semiletova, who's our Human Resources Director, Erik -- Dan is our Head of General Counsel and Head of Treasury; Commercial Director, Onur Gucum; and Anton Zhelyapov, who is Director of Rental and Used Business and the names that are -- have a Russian voice to them, they are mainly working with the Germany market. This is the Board of Directors, very diverse, very good, engaged Board of Directors. We have Staffan Jufors as the Chairman. He used to be the head of Volvo Trucks for many years. Annette Brodin Rampe. She's got a career in communications. She's also the Chairman of the Board of Storskogen, for instance, myself, Håkan Eriksson, who is our main -- representing our main shareholder. Aurore, tech sustainability personality and a great member of the Board; and Niklas Florén, who is working -- he's the Managing Director of WirelessCar. So Henrik will talk now a little about our M&A strategy. So please go ahead, Henrik. And I'll leave that there.

Thank you, Lars. So the financial objectives that we have there based on our business as it stands today within the current geographies. But of course, we also consider other opportunities to grow through acquisitions. We are open for -- to enter completely new markets. We don't really hide away from anything, and we will look at opportunities in an opportunistic way. But the main idea is to leverage what we have. So the focus at the moment is really to dig where we stand and look at bolt-on acquisitions in the markets we're operating in today. I will start to talk about, say, the softer criterias when it comes to evaluating targets, potential targets. The, key one being really a common culture and shared values. Lars talked about our value pyramid, where our vision is to be the leading service and sales company in our markets. Our mission is to support the leadership and growth of our customers. We can build a culture over time, but it takes a lot of effort and a lot of time to do that. So we don't particularly mind if the companies that we buy would not be very sophisticated when it comes to commercial processes or personnel structure. But that's something we bring to the party and something we can fix, but there needs to be a high level of customer centricity in the companies we buy. There needs to be a potential to add value, meaning, I mean, we are -- with our history and our experience, we are experts in running dealerships. We need to be able to use that experience and we need to be able to use the resources we have to benefit and professionalize the companies that we would acquire. There needs to be growth potential in the companies we look at. The key now is really to find companies that generate profit and generate cash flow. So they would be more or less mature. But there needs to be an upside in these companies for us to be interested, and of course, scale advantages. Scale is important to reduce our per unit cost as we grow bigger, our purchasing power improves and the cost for every piece of equipment we purchased and resell will logically be reduced. We have great teams centrally and in our markets. And we need to use these teams and the resources we have to professionalize the acquired companies that we look at. By getting scale, we also improve the utilization of the existing resources we have. Some examples of this when it comes to Rudd this case. In the U.S., we have 2 amazing training centers with full-time training personnel. We use them to run institutionalized apprentice programs for entry-level technicians. We use them to develop the technicians we have and all the way until they are certified masters. This is something that Rudd has that other dealers don't have. If we acquire further more dealerships in the United States, we can use these training resources to train technicians from these dealerships as well. So we benefit the acquired dealerships. At the same time, we get a better utilization of the training resources we have, and we reduced the cost per training hours. And the entire cost of the training center as a percentage of our total business will go down. In the U.S., we also have a central parts warehouse and an in-house freight system. We have this to get a very high parts availability without the need to storing too much parts locally in our branches. It also enabled us to share tools, very expensive special tools between the locations we have. So you don't need to have the special tools in every location, but we can share them and ship them around easily. If we add more brands to our network or if we buy more dealerships, we can use this central parts warehouse and the internal freight system to benefit those dealerships as well. And this means then more business, higher utilization and the lower cost for this whole setup as a percentage of our total revenue. Looking at the harder M&A criteria. They should be -- if we buy companies, that should be value accretive to our total business, meaning that the return on invested capital and the earnings per share should increase when we do an acquisition. Now the target from the onset is at least at the ROIC from Day 1 should be higher than our cost of capital. Within a 2-year period, we should at least have a double-digit ROIC on the businesses we buy and within a 3-year period, the ROIC we look for should be higher than the ROIC we have in our financial targets. The businesses we buy should have high free cash flow to deleverage and support further growth. This means that at the moment, we are looking at mature companies predominantly, and we are less interested in turnaround opportunities. Now why did we enter the United States? We looked at several geographies during this time. I mean, we have as our strategic objective to grow to expand geographically. And we looked at several geographies, and the U.S. really stands out as super interesting to our industry. First of all, there is a consolidation of the Volvo dealer network going on in the United States. So that's why we started looking at this from the beginning. There is also -- I mean, it's the second largest construction equipment market in the world after China. The demand for machines is expected to remain high. I will talk a bit more about that shortly. But the demand for machines is expected to stay high more or less regardless of what's happened to the general economy. And we felt that this is a market where our experience and our history can really make a difference. So coming back to why we believe that demand for construction equipment will remain high in the United States. One in five miles of highways or larger roads in the United States is classified as in poor condition, so is over 43,000 bridges, the need to upgrade the United States infrastructure is immense. Now there are political programs in place to enable this type of infrastructure investments, the most -- the largest and probably most known is the IIJA, the Infrastructure Investment and Jobs Act, which in total provides $1.2 trillion over 5 years. An important thing about this program is that it's also bipartisan, so it's supported by both political parties. So it's expected to remain regardless what happens in the elections. In total, as of today, there are a little bit under $600 billion in announced federally-supported projects. And in our territory, the territory covered by Rudd, the corresponding figure is $81 billion. These programs typically require matching by the participating states or the companies that are running the project. So the actual amount to be available for infrastructure investments should be much larger than these federal programs cover. So we will not speculate here today how much this means in terms of additional market potential. But it's fair to say that, I mean, this is where we based our expectation that at least the demand for construction equipment in the United States will remain as high as it is today. So why did we buy Rudd Equipment Company? Coming back to our soft criteria and our harder criteria. Rudd has a culture that is matching the Ferronordic culture one-to-one. It is a leading service and sales company in its market. It has a very high customer centric culture. We had strategic alignment. It's a large dealer with the new capabilities and know-how. I mentioned the training centers, the warehouse, a lot of really good things that are existing in this company. On the quantitative side, Rudd has a history of solid profit generation and solid cash flows, and we think we bought it for a reasonable valuation. There are significant scale advantages here. Rudd is an excellent base for continuing our expansion in the U.S. market. It's also a good network that we can leverage to add additional projects -- products and services going forward, and which Vic will talk about later. We see a lot of growth potential in Rudd today. Our market share for -- particularly for excavators is low, and we see a big opportunity to grow the market share for excavators for both Volvo CE and for Hitachi. We also don't think we touch nearly our full potential when it comes to the profitable service and parts sales. So now we will talk about the U.S. market and our U.S. operations more in particular. And this will be done by our -- the President of Rudd Equipment, Mr. Vic Green, speaking to us directly from our U.S. headquarter in Louisville, Kentucky. Vic?

Thank you, Henrik. It's a pleasure to be here and join you online. Good afternoon to everybody there. First of all, on behalf of everyone in Rudd Equipment Company, I would like to mention the excitement that is still in place from the acquisition by Ferronordic last year. We're 10 months into it, and you can still sense the excitement around the company. I would like to go through the history of Rudd, introduce you a little bit who we are. There's been a lot of talk about the culture. We believe it's -- that's very important who we are. And we also think that it's been a perfect match with Ferronordic. We identify with it, and it is some of the same values, a lot of the same value. So it's -- again, it's been a great 10 months so far for us. This year is our 72nd anniversary. Henrik, could you please go to the next slide? Thank you. This is our 72nd anniversary. Mason Rudd founded the company in 1952, moved his family to Louisville. And at that time, the Clark/Michigan product was the leading product for the company, kind of the flagship product, if you will. The picture you see below is the location that he moved the company to in 1957. We are still in that building. It doesn't look anything like that now. Those cars you see in front of it are not our cars today. But anyway, it's still where we sit, quite a bit larger and a couple more buildings then. Next slide, Henrik, please. So we started in the '60s to expand the company, both in offering and also geographically. We moved into Indiana and opened our branches in Evansville and in Indianapolis, also moved a little bit eastward of Louisville and Kentucky to Corbin, Kentucky, rigid frame haulers [indiscernible] trucks came on board. And we also were one of the first drill tech, drill blast hole dealers, which is now a Sandvik product. Next slide, please, Henrik. So as we move into the '80s, and I was going through the history. I started trying to identify which period of time was the most impactful. And really, you could argue as we go through this that they all really impacted where we stand today and here we are today. But in the '80s, it represents our largest expansion. And we moved into Pennsylvania. We moved into West Virginia. We opened up our St. Louis branch and our Fort Wayne branch as well. We also became a Hitachi Construction Equipment dealer at this time and took on the lines of Link-Belt and Tamrock Drills, which also would later become Sandvik. So we're in a growth mode, and it was a good period of time for Rudd and it did position ourselves for quite honestly where we are today. So as we moved to the end of the '90s and into the 2000s, and we look at who we are presently, an important move for Rudd. If you look at our geography that we cover, there was a hole in the middle of it. If you look at Ohio, we were west of it, south of it and east of it, but we had to get through from one side of the territory to the other. We really had to go through Ohio. So we moved into Ohio, opened up our Columbus branch, our Cincinnati branch. And then we moved into Cleveland as well and opened that branch. So that represents a large part of our market for Rudd Equipment Company. It was a perfect fit for us as well. And we also added Bergmann Haulers, which is a small 2x articulated hauler from 5 tonne to 15 tonne haulers. And then probably the most important thing and why we're here talking today is the acquisition by Ferronordic of Rudd at the end of last year. Next slide, Henrik. So as I mentioned in our footprint, you can see in this slide that we fill that gap where Ohio is. The shaded part represents 7 states. We do have a small portion of Tennessee and Maryland as well. In all of our territory, we are the exclusive dealer for Volvo Construction Equipment and Sandvik as well. We're also exclusive for Hitachi and Link-Belt everywhere, but the Ohio territories. A big advantage that we have, speaking of the footprint that we cover is, one, we have a lot of customers that will move from one state to another, doing work, and they're somewhat transient, and they have the ability to get consistent service from Rudd Equipment Company, where if they're looking to other dealers for other manufacturers, they have to go from one dealer to another dealer to another dealer throughout our territory. So that consistency is a value to them. Also, what it provides for us is being able to move our technicians. You've heard a couple of times about one of the challenges everywhere is finding good qualified technicians. Well, with our footprint, we can move all of our technicians on a temporary basis to take care of needs, other places in the company. But we also have specialized technicians that we can move throughout the company as well that have different capabilities than some others. So some big advantages that this gives us over our competitors. Next slide, please. If you look at the customers that we cover throughout the company, there's some major segments of the customer base. Primarily, you can look at all of the branches and the construction industry, the waste particularly landfill [ transportations ] are prominent across the territory. Stone aggregate producers as well. And we're in the forestry segment, too, particularly the sawmills. You'll see a lot of all the wheel loaders within the sawmills across our territory. In addition to these, there are pockets of mining within Rudd's area of responsibility. Next slide, please, Henrik. And also, there is some -- a presence of demolition that's primarily within the larger metropolitan areas, but there is demolition activities elsewhere. There's also a pretty good scrap industry. Again, as a general rule, it follows the rivers that flow, but you can see scrap yards various places throughout Rudd's area of responsibility. Next slide, please, Henrik. So Henrik mentioned some of the large projects and the infrastructure projects and some of the conditions. You can see here that we have quite a bit of large projects going on now within Rudd's geography. Just to mention a few right here in Louisville across the river into the Indiana that we are servicing out of this branch is a mega data center. We have a customer that is doing most of the [ door ] work, the site work out of the Columbus branch that's working. And again, I mentioned the consistent service that they see. Even though they're used to dealing with us out of Columbus, they're here seeing the same level and commitment to service out of the Louisville branch as well. You go just a little south of Louisville, and there's a BlueOval EV battery plant that the total investments approaching $6 billion, big site there as well. You go into West Virginia, and we have a customer, Nucor, that is constructing a sheet steel mill. We do a lot of business with Nucor already. We sell them a lot of Volvo products. And this is about a $3 billion investment, and it's about a 45-minute ride in a service truck from this new facility to our branch in West Virginia as well. Also, there's another large project that's getting ready to kick off in the Cincinnati area, which is the Brent Spence Bridge. It's part of the infrastructure money that Henrik spoke of. Right now, they're estimating that project is going to approach $4 billion. We have customers in that area that are set up perfectly to supply stone for the project and then other subcontractors as well. So we've got those large projects within our area that we cover. But if you go back to historically and you look at Rudd, the consistent contribution from the smaller contractors and the relationships we've established with them drives us as well, while we welcome these large projects, still the consistency of the normal small contractor is a part of our business that we embrace and we've built our foundation on as well. To give you an example of what I'm talking about, a couple of weeks ago, we made a trip from Pennsylvania through Maryland and down through West Virginia and traveling through those states in about a 5-hour drive. There were 11 highways, mostly bridge projects, different projects going on. And of those 11 projects that we drove through in that 5 hours, customers that we are doing a lot of business with and have done a lot of business with for a long time were the prime contractors on 10 of those 11 projects. So that's just that consistent business that we strive through our service and through our efforts and through our relationships to continue to drive them back to us. Next slide, please, Henrik. Something that we've talked about and Lars spoke about it, and Henrik spoke about it as well drives what I believe makes us special. Everything starts with our people. If you look at all the different items listed from the training centers to the sales to the in-house customer support center that we have to our machine rebuild, it all takes people. And over 32 years ago, when I came from a competitor to come to work for Rudd Equipment Company, the first thing that impressed me was then as a young man was the people that Rudd has. That's something that we built the business on. It's something that is in our culture. We have a can-do attitude, people just continue to chip in and do their part and understand our business and that the customers drive our business. And it's our people that makes us special. We have all of these things that make up the company that we do differently than others, but it's the people that drive these businesses and these portions of Rudd within us. Next slide, please. So we lead with service. As Lars mentioned, it is a fairly simple business. We sell a piece of equipment and then we provide the support that provides additional value to the customer, keeps their machines running and when they're ready to purchase their next piece of equipment, they come back to us. It's as simple as that. The reputation of Rudd Equipment Company is one of support, one of service, one of taking care of our customers, one of promoting uptime for our customers, and that's known through our manufacturers. Volvo routinely uses Rudd as an example on our capabilities to support our customers, and we lead with service, our other manufacturers do as well. That is what we're known for. It's our reputation. Next slide, please, Henrik. So training. This is the beginning. This is what it takes to drive our service business. One of the hardest things right now for us to do, as I mentioned earlier, is go out and try to find technicians to come to work for us, and that's difficult pretty much everywhere. We made the decision years ago that if we bring people into the company, we train them on how we approach the customer. We provide them with a continuous training that it works better for us. We have the two training centers, the one here is Louisville, we also have one in Cleveland. The classes that we put on are -- typically, we're like a max number of 12 participants. So it's small classes. We -- if it's 8 to 10, we're fine with that, but we don't want to go over 12 people because we don't feel like that we can properly train our people with any more than that. They're weeklong courses. They're customized, designed by our trainers, which our trainers, all of them, were in a service truck. So they have a great feel for what these technicians are facing every day and they designed the curriculum around real work site scenarios and try to address the immediate needs of those customers and in-house in our training centers also our technical call center. So we bring in calls from all the different branches if there's an issue that they are -- might be a little bit delayed in finding a solution for, and we keep that data in-house and use it across the company if we happen to see those same scenarios again. Our training centers use train the trainer Program, which means our manufacturers will train one of our trainers. And so then they're able to use that same training and certification to go back and train our technicians. And so therefore, everything we do is certified by the manufacturers as we train. Next slide, please, Henrik. So our apprentice program is where it starts. As we bring technicians who are new to the company and they're entry-level technicians. This is a program we start them in. It's a 2-year program. There's a good mixture of class room as well as field time, they spend no less than 2 weeks per month in a classroom setting being trained in these sessions, both are done in Louisville and in Cleveland. And they're also, as they return to their branches, they're monitored by the training department to see what they're working on to make sure that they are getting that on the field. We use our master technicians that are at the branches as an aid in mentoring these entry-level technicians. The idea is to get them in a 2-year period from the fundamentals of what it takes to be a technician through advanced diagnostics as well. Interesting comment from one of the apprentices that's in the class that will graduate in December, having a discussion with him about the value of going back to the branch and learning and the classroom learning as well. The branch he works at has a significant amount of master technicians. But he said that he tends to learn more from one of the newer, younger technicians who has been with us for 6 years, but have been in a service truck for 3 years. And when asked further about it, he said that the master technicians, the mentorship is great. But sometimes they're able to identify problems quickly and skip some steps to get to a resolution, where the younger people go step by step by step. So it helps him learn better to go through the proper steps of diagnosis as he works his way towards the master technician, quicker diagnostics of recognizing an issue and solving the problem. Next slide, please, Henrik. So speaking of our Master Tech program, this is something we're very, very proud of. In fact, we just had our Master Tech testing last week here in Louisville. And to get into the Master Tech to be at that Master Tech certified level is -- it's a challenge. So they start out at a certain level, whatever they test into and then they progressed throughout whether it shop or field mechanic level 1, 2, 3, 4, up to a Master Tech level. Again, they have to be nominated. And once they're nominated, they have to be proved to enter the program and to test as a Master tech. And part of the criteria for being entered into the Master Tech testing is they have to obviously be able to diagnose and repair quickly, but we also look at the attitudes and how they approach the customers. We look at their organizational skills. We look at how they work through processes of getting to an end result and solution. We go as far as to look at their service trucks and how organized it is and how clean it is. So then they get into the program and they come to Louisville, and it's a weeklong learning and testing period. It culminates with a day of testing. And what that encompasses is there's stations where the training department has bugged certain machines, and it's pretty difficult problems that they have to diagnose and solve. There's a judge at each station. They measure the time that they take to solve the problem, but they also look at the method, the steps that they took to get to the resolution of the problem. These technicians leave their branch and come to Louisville to do this, and there's a lot of stress associated with it. And as you walk back and you watch them study and then you watch them preparing for the test, you can sense the stress. But you have to understand that they leave their branch, everybody at their branch where they work on a full-time basis knows that they are testing to achieve Master technician status. And if they don't pass, then they have to go back to that branch. Now they can enter the program again and test again, but it takes them a year to get back into the program. So it's a great program. It's something, again, that sets us apart from our competitors, but we're very proud of how we bring technicians into our apprentice program and grow them through the Master Tech program especially with today with the difficulty finding technicians, but it also allows them to grow within the culture of Rudd Equipment Company. Next slide, please. Our rebuild program. We have several branches that are certified by Volvo to rebuild Volvo Equipment, but we don't only rebuild Volvo Equipment, we rebuild other brands of equipment too that we sell. Hitachi. We do several Hitachi rigid-frame trucks and excavators. Primarily, it is Volvo machines, wheel loaders and articulated trucks. And 2 branches will handle most of our rebuilds. We have others that will catch some overflow if need be. It's a customizable rebuild program. It starts with identifying a candidate. These are marketed and sold usually by our sales reps that market our parts and service capabilities. They also sell our rebuilds, but it starts with identification of a machine that's a candidate. We then prepare an estimate for the customer set down, showed in the benefits of value that is created by refreshing and creating essentially a new machine that they get a second life of their initial investment. We work through the scope of the work with the customer, agreed to the scope of the work with the customer. We bring the machine into one of the branches, and we start tearing the machine down. Once we get the machine torn down, we identify anything else that might be additional to the scope of work that we initially presented to the customer and he agreed to. The customer comes in, visits. We physically show them what we've done with the machine, and what we advise needs done as well. So then after that happens, we go back together with the machine and the customer has a finished product. There's testing done at the site and then one of the technicians from the rebuilding branch will follow the unit to commission it as well. This is a program that we actually help pilot with Volvo. Next slide, please. I think we have a quick time lapse video here that we can show up the rebuild process. [Presentation]

Okay. Quick video. We don't typically move that fast, but we've got some really good technicians. That was a video Volvo put together. Parts availability. So Henrik mentioned our central parts warehouse in Cincinnati. And we utilize this, all of our stock orders go into our central parts warehouse and then our branches will pull from that. It supplements and makes our parts availability off the shelf next day. It's a huge competitive advantage for us. So we have our own freight system, internal freight system. And so I'll give you an example of what happens. The branch needs a part that's located at our central warehouse. They have a freight truck that will leave their branch that evening once all the orders come in. They exchange parts with all of our branches, heads back to their branch and is there early in the morning, usually by 5:00, 6:00 a.m. So our parts departments can unload the parts, get them on the service trucks or have them ready for the customer to pick up. A big advantage with us because of the footprint, again, that we cover. We also have a used parts department located at one of our branch. And the primary function they bring in, whether it's Volvo machines, Hitachi's that are -- have been decommissioned or should be decommissioned. And we park those machines out, clean the parts, put them on the shelf, a different solution for the customer that might have a different need and financially through used parts, they can purchase what they need. We do have a dedicated sales force that I spoke about earlier to market and sell our parts. They're trained and they're experts, and we -- the customers look at them as solutions providers. Next slide, please, Henrik. Componentry. We have the capabilities to rebuild a lot of the components. Most of the components that are on the machines that we offer. We can do this in different fashions depending on the customers' need. They have a component, then they have the time. There's a couple of different options that we can bring their component in and do a repair and return on their component. We can do -- offer a full rebuild on this machine. We can also -- we have exchange components in stock to where we've taken a core rebuilt it up, so the customer brings their core in, takes the component we have on the shelf. It's a quick turnaround, and then we rebuild their core to put it back on the shelf for the next customer that comes along. We also have a machine shop located at our Cincinnati branch. We can do multiple things, full machining capabilities there, but we also have the ability to reverse engineer and produce parts that are hard to find or no longer available. Next slide, please, Henrik. So we move forward to the day, what growth opportunities and where do we see immediate opportunity to grow. You can see the three areas that we've shown here from market share, rental fleet efficiencies and then parts and service growth. Next slide, Henrik. So market share. Essentially what this does for us is we get more machines out into the field. And when we get more machines out in the field, eventually the circle of life of the machine as we start selling parts and providing service for these machines. The biggest opportunity here to gain the market share and gain machines in the market are excavators across the board from our geography. Excavators every year represent 50% and then some years more of the total machines that are sold within Rudd's AOR. So the way to increase this share is through rentals. Next slide, please, Henrik. Rentals for excavators particularly are primary growth. That's how excavators go to market. That's how they're sold is through the rentals. We can make our rentals more efficient through a number of ways. But the one thing that it provides for our customers is a quick turnaround if they have a quick job and the flexibility for when they take it out or how long they're going to need it, the customers are willing to pay for this flexibility and this quick turnaround as well. What it does for us is, number one, we keep the utilization on our rental fleet, but also if a customer happens to take a machine out early in the year, whether that be February, March or April, and they have a short-term job and then they have another short-term job, then it turns into a longer job before you know it. They've had this machine all of the construction season, and they're able to take advantage of some of the rent that they've invested in this machine and turn it into a sale and convert it to a sale. If they happen to send it back, also gives us a machine that's ready to sell to other customers. So in terms of the efficiencies that how we can handle these rents -- these rentals better, we need to recognize quickly those machines that have low utilization and move those out of our fleet. And we also need to make sure that we build on those models or those particular machines that have the high utilization. We also need to tailor our rentals to become more flexible to stay on rent. So ways we do that is the terms of our rentals. So we have a set parameters of how we rent equipment, but the flexibility with -- to fit the customers' need is a way to create more utilization of our rental fleet. Also, if we look at investment in attachments that are needed, particularly with excavators to make them more of a utility machine, enhances our ability to keep these machines out on rent as well for the full construction season. So next slide, please. So that leads us to the service and parts sales. So everything that we really are focused on, we want to sell the machines, we want to give machines, increase our population, get them more and more machines out on the market, be aware of where the machines are and take advantage of these populations that we've created through increased market share and increased sales. At the end, we need to be proactive and make sure that the customer knows that when they have an issue, we are the ones to call to provide a solution to make sure they get those machines back up and running, and this will promote growth for our parts and service revenue. We will continue to be aware of our population, continue to build our population and continue to train and build our sales force as well. So with that, Henrik, back to you to talk a little bit about the business development side.

Thank you, Vic. So I want to talk a little bit about the projects that we have been working on since the takeover, starting with automatic lead generation. I will talk more about that on the next slide. Other digital tools. This would be anything from barcode scanners to make our parts management more efficient to looking at digital solutions for field technicians to prepare their time reports and their work orders. We are also working on developing the CRM system in Rudd. Network improvements. I will talk about that more in depth. We are looking at additional services and products that we could add to the network and we are evaluating further U.S. expansion. The automatic lead generator. I think those of you who have followed us throughout the year, you are familiar with this. It's a way to use AI to make our sales more efficient, particularly the service and parts sales, but also new equipment sales. The way this works is that, well, first of all, all the machines through their telematics systems provide an enormous amount of data all the time. Now we also are in position of large amounts of data through our service history. So we are in a good position to know that when something is about to break down depending on the signals that the machines are sending. So the amount of data created by the machines is just so immense that there's no way for a human being to work with this on a manual basis. So we need to automize this. So what we do is, in essence, to connect then every machine out in the field with a specific customer, and that customer is connected to a sales rep, be it for parts and service sales or for new equipment. And then based on our service history, we create rules that when a certain signal is generated by the machine or a series of signals occur within a specific time frame, that immediately or automatically triggers a sales lead. That goes through the CRM system to the mobile phone of the sales rep, who will then be prompted to contact the customer to make a specific offer. This is something we did work with and used in real life in our previous business in Russia and that we are now bringing to our new business in the U.S. A very important part of this is then to ensure that we follow up that the sales reps actually do, what they are prompted to do by the system and also analyze are we generating a lot of leads that don't result in sales because then we need to go back, change the algorithms so that these leads no longer appear. So we are now in a phase where we are cleaning up databases, and we are about to start creating the rules. But this is something we look at launching within relatively, well, not short time, it really depends on how long each step takes, but we are working actively on this and for the future, this is also something where it will be very interesting to see how we can enhance this even further when we use AI and so on to make the rules even more efficient or to analyze leads to find out how they can be more effective. Looking at the Rudd network, there are some improvements that need to be done to reach our growth objectives. We need to be closer to certain customers to gain this market share in excavators and to capture this full potential of the service and parts business. We have 2 existing locations that I think need upgrading. But there is also an opportunity to add smaller satellite branches in large market areas. On this map, you have a few locations that we think are potential locations for satellite branches in order to increase market share and get high penetration of service and parts sales. I don't believe that these investments will be significant. They are more within the framework of maintenance CapEx. So looking at further expansion opportunities. I think our main focus now is really to grow Rudd organically within -- with the existing business and existing customers. Vic talked about the opportunity to gain market share for certain products, particularly then excavators and to grow the service and parts business. We are looking at possibilities to add additional brands to the network to increase the business as a second focus. And thirdly then, continuously analyzing and looking at opportunities to grow further in the United States through acquisitions. Right. I'm ready with my part.

I think we have a short time for some Q&A. So I would then, largely on time, maybe first give the chance to the floor. I have a few questions online. But specifically on the U.S. business and while we have Vic with us from the U.S. First, I'll ask if there's any questions from the audience.

Adrian Gilani here with ABG. Just First of all, has Rudd's strategy changed materially since you became part of Ferronordic? I mean, did you run things differently before? Or are you doing more or less the same thing now since before the acquisition?

Vic, I leave that to you.

Primarily, we're running things the same as we did before. There's some enhancements that I spoke about in the presentation that we're actually looking at for growth. For example, the excavator growth, market share-wise and also the parts and service, the population growth as Henrik talked about, the lead generator. Those are things that are going to enhance and build on what we're already doing. But in large, we're functioning as we always have as a company. We feel like that we do things pretty well. We can always do things better. But there's been some things that I just mentioned that Ferronordic has brought to the table to help enhance what we're already doing.

I understand. And a second one from me. With all the sort of training and apprentice programs you talked about, presumably those exist because there is an underlying issues of finding technicians, can you talk about sort of how big of a problem that is? And is that a bottleneck for growth for you?

I don't want to underscore that it is difficult at times to find technicians. But the apprentice program and how we develop technicians is much about developing the way that they would fit into Rudd. So we still can find technicians as well, but through the apprentice program, we have an organic generation of technicians every year that we can put into our services. And I don't think it's a bottleneck to growth if we handle it properly.

[indiscernible] Smith. I wonder what is the market share for excavators? And why is it low? And what could and should it be?

To start with, I don't think we will say what the market share is or what the exact aim is. But Vic, you can talk about the history.

So I think it's been more past of a focus of where we were looking and the direction where we're going as a company in terms of how we handle our business. The excavators are more of a rental tool and it's not been an area historically a focus for Rudd Equipment Company in terms of a rental fleet. So that's something that we've looked at in the last probably 4 to 5, 6 years to start gradually growing and participate more in the rental market, which in turn will grow our share in excavators.

Can you talk about your exclusive brands, Volvo CE and Sandvik Drills, if I remember correctly. And is that guaranteed by a certain amount of time? Or is it a period when -- how does that work, that exclusivity?

Well, that is based on the dealer contracts we have with these brands, where it's said that we are the only dealer in our designated territories, meaning that other dealers are not allowed to sell there nor are our supplier partners allowed to sell directly in those territories.

My question is more how long time is that guaranteed for?

Well, until they would be terminated or something would happen. I mean, these contracts are lasting for without -- they don't have an end period, so to say.

And can you also clarify kind of market share development for Rudd for the last, let's say, 6 to 8 years overall?

Vic, in general, market share-wise?

In general, if you look at by product line, we've grown in certain areas within the Volvo line. Link-Belt Cranes continues to grow our market presence there, continues to grow, as well as Sandvik Drills. Both of those have primarily grown through the rental market, something that we didn't necessarily enter into in the past in a big way, looking to rent those products, but we found the need for it, and we entered into it, and it's really helped our growth with those products.

Maybe we can take one more question, then we'll leave the rest of the questions to the Q&A session at the end.

Just a quick question, maybe more for Vic. So you mentioned kind of the -- Anders Akerblom from Nordea, by the way, sorry. So you mentioned kind of the consistency and contribution from the smaller businesses historically being kind of the bread and butter, if I interpret it that correct. But now, of course, we're seeing an influx of larger projects. I mean, how should we think of that in terms of kind of pricing and kind of your ability to maintain healthy margins going forward. So just anything there would be helpful.

So I don't want to marginalize these large projects. But a lot of the contractors or the customer base that is -- are going on to these large projects, that's been a course of business for a while. There tends to be more and more of them now. So I don't think the mix of our customer base nor necessarily the margin is going to be affected. I think what it presents for us is increased opportunities. And as Henrik spoke about earlier, reasons for the market to grow. So the mix of the customer base and ourselves should remain constant. We're dealing with a lot of these customers already. There just seems to be more and more of these projects coming out, which will enhance opportunities for us.

Then thank you very much. I think here, we break for 10 minutes. And I would ask everybody to be back in their seats at 35. That means that we're 5 minutes behind schedule, which I think is okay. When we start after the break, we will start with Lars and Koen will join us from Germany online, so we will then look at the German business segment. So thank you very much. Let's all break for about 10 minutes and be back by 35 minutes past. Thank you. [Break]

Germany, so I took my jacket off. I should do like this maybe as well, but let's keep that. Why Germany? Why on earth would a dealer go into the most competitive market in the world where you have the two of the biggest truck manufacturers home country when you sell in Volvo and Renault. So why did we do that? First of all, we wanted to expand geographically, as we talked about. At that time, we had a very, very strong fundamental base of positive cash flow and a fantastic profit coming from a big country in the East, which helped a lot. So when Volvo asked us, do you want to go into Germany and become a large, probably the largest dealer, we were hesitating a lot. We looked into it, and then we saw big opportunities to do so. Germany is the economic powerhouse of Europe. It's the largest truck market in Europe. If you're anywhere in Europe and you need to transport something from one part of Europe to the other, you have to go through Germany. That's how it works. We saw that Volvo had an intention to improve and consolidate the German dealer network, and we wanted to be part of it. It was a clear turnaround opportunity. The business that we bought from Volvo had been losing money for 20 years. So we knew that it's going to be tough, but we saw an opportunity to gain market share. We saw an opportunity to get better synergies between truck sales and the aftermarket. We saw an opportunity to make a difference and use the knowledge that we had from Russia, where we were the biggest actually independent truck dealer also in Russia. And we wanted to expand our truck business and get a foothold in Europe. So that's why we did it. And we did that then in late 2019 and in 2020, we purchased from the Volvo Group the assets related to sales and service operations for Volvo and Renault Trucks in an area of approximately 13% of the German market. At the same time, we also acquired an independent dealer Auto-Haas, who was responsible for another 5% of the market. So at that point, we then had 200 employees and 11 workshops. Now the strategy was to expand and improve the dealer network in our sales area, okay? Meaning that we saw an opportunity to take control -- full control of the service and parts sales in the sales area that we have. So at the time, there were a lot of independent workshops doing only aftermarket, whereas the Volvo part of it, they sold the trucks and did service. But these guys, they only did service. We saw a possibility to gain control of the service and parts sales in our area. And again, as you all know, it's in the service and parts business that our industry makes the money, I mean, particularly in Trucks business. We also saw, by doing so, by increasing efficiency on the organization, by enhancing the network, getting more stringent delivery to the customers in the area, we should grow the market share and population. And obviously, we did this in collaboration, the plans with our partner, Volvo. So what are the results? We -- since then, we have acquired another 5 authorized Volvo and Renault workshops of these workshops that I mentioned. We have opened another 4 new workshops. The existing workshops we have renovated, we have upgraded them, including a greenfield flagship facility in Hanover, which you're all very welcome to visit whenever, it's beautiful. We have a service and parts sales, which is up 126% since 2020 to 2023. We had -- our ambition on market share was partly impacted, of course, by supply constraints following COVID. COVID unfortunately came to Germany 6 weeks after we took over the operations in Germany. That obviously halted a lot of the measures and the actions that we wanted to do, but that was what it was. And clearly and importantly, reorganizations and personnel changes to boost the efficiency of the operations. A lot of challenges. The strategy took longer to implement than we had expected. It was complex to acquire and integrate these new businesses that I talked about with different cultures, systems and processes. COVID, as I mentioned, disrupted supply chain. And not only that, but the most important thing, I think, was that it slowed communication and changes. It's difficult to implement a new company culture on Skype or Teams. It is. And then came another thing which hurt us a lot. We had to exit the Russian market. And that in earlier than 2022, and that took enormous amounts of retention from top management, more or less 26 hours a day for a year. We're trying to get out of there in a decent way, unfortunately. Anyway, we also had German administrative hurdles and very rigid organizational structures. It is hard to restructure and reorganize efficiently. All right, it's Germany. What takes an afternoon in Russia takes half a year in Germany, roughly to change. That's what it is. And again, it's hard to attract new technicians. We talked about it. In Germany, we also -- Koen will talk about it. We also have an apprenticeship program where we are working to developing, which is actually also the state is part of that. But it is hard to attract new technicians. So we ran into a lot of challenges and things have not turned out the way we wanted them to do. Clear. No question about it. It has taken longer time than we expected. We knew it's going to be hard, but not that long as we expected. However, we have increased total sales by 132% from '20 to '23. Service and parts sales of total has been relatively stable at 27%. Obviously, the higher that share the healthier the gross profit. Obviously, there is a limit to it because you also need to sell trucks in order to have something to service in the years to come. So there is always a balance there. The organization we had, we were doing fine, as you can see on the revenue side, where we're growing, growing, growing. We expanded the organization. We trained the organization. We changed the organization. And we then grew the SG&A by 120% in absolute terms, but it declined as a percentage of revenue. And then it was poised for further growth and then the market stalled in '23. And we ended up with having too high costs for the market that was there. So we had to embark upon an efficiency program, which we did. We launched it in '23 end of -- beginning Q4 to make the German business more efficient and resilient. Coming back to what we talked about, we service and parts of absorption rate of plus 1. That's the aim we're targeting. And the program then, it's a reduction in both horizontal and vertical administrate units. We reduced the number of regions. We made the organization more flat. We removed the number of middle management roles, and we analyzed our cost structure across all functional areas without hurting the possibility to sell more hours in the workshop. So to do all this with minimal impact, both on the service side but also on the truck sales side. So we depict here roughly where we've taken the costs. And as you can see, by far, the biggest is general and admin costs and admin costs. So we are now confident that we've achieved the level of SEK 60 million per year savings on a rolling basis, annual cost basis in late Q2 '24. So where are we today then in Germany. We have 20 service locations throughout most of Central and Eastern Germany. We have a sales area that covers approximately 18% of the German market for heavy trucks. The expansion of our service network and integration is mainly completed. I'm not saying it's fully completed, which it never will be, but it's mainly completed. There might be some spots here and there where we might need to add, change, but we have a good network in Germany now. It's taken a long time to integrate to make it one team. But we have a good functioning network now. We have professional teams for service sales and support. We have a service organization that is well positioned for growth. And we see a potential for a substantial increase of market share and population growth. And again, population growth and the correct population growth is important for our ability to have a profitable business in terms of making money on the aftermarket. You need the right population, and I will come back to what that is. And we have a more resilient platform than we used to have. So what are then the opportunities ahead that we see. First of all, the initial plan that we had, it stands. But a lot of work remains still to be -- make it happen. And what we need to do, again, we need to create a bigger and long-term profitable truck population by growing market share. So we need to grow the market share, but we also need to make sure that we increase the share of rigid trucks in our sales. And what is a rigid truck compared to a truck tractor? A truck tractor is a tractor that drives on highway with a semi trailer. It's 4 x 2, 2-wheel basis in the semi trailer, run very efficiently on the highway, either inside Germany or from Germany outside here and there over Europe. It's in the territory for 3, 3.5 years, and then we tell the customer now it's time to sell it because it's time for you to make more money to invest into a new one. So we will buy the old one back and then we -- that's the circle it goes. It's good. We need those trucks. But a rigid truck would be a tipper truck, would be a garbage truck. It would be trucks that are staying longer in our population with more axles and there are simply better trucks for our service and parts business. And they stay longer in our population. And obviously, the longer a truck stays in a population, the more parts and service per year it will require it to keep the same productivity. And we have traditionally not been strong, if I put it mildly, on selling rigid trucks in Germany anywhere. And this is clearly a very, very good sign that we've seen in the last quarters when our market share has dropped in total. But our rigid truck sales has not. Actually, we're strengthening our positions in that very important segment to create a profitable aftermarket. It's the same as selling arctic hauler for Volvo CE. I mean they use 24 hours a day, they work all the time, and they need to run and they need to be serviced in a proper way to give that profit for the customers that the customer deserves and creates and wants and deserves and demands. So this is, again, to grow the parts and service sales to increase productivity. And one very, very important part of the German expansion plan is leadership in electric trucks and sustainable transport. So I'll talk a little more about that. Now this is the biggest truck market in Europe. And 55% of the market is tractors. That's our strength. We are strong. We are relatively strong in selling tractors, 45% of the market. Half the market are rigid trucks where we have opportunities to grow. In 2024, we're only expecting 2% of the total truck market to be electric. Now we expect this to grow significantly in the coming years. And one other thing with the truck market in Europe, there is no seasonality and registrations are evenly distributed over the year. So as you can see then, these columns or heavy truck registrations, the line is average truck toll mileage index. This meaning how many kilometers are they driving on the autobahn -- per year -- as an index back to, if I'm not mistaken, 2008, yes. And it follows roughly more or less. And as you can see, no question about it, it's dropping LTM by 15%, 20%. And that's what we are experiencing and have experienced in the numbers you've seen in the last quarter. We're probably quite early into that cycle, earlier than others. So that's where it is. It's a very -- still a very, last 12 months, very strong market. But it's, as we said in the beginning of the year, it's likely to not be that strong in the -- come the end of the year, and you've seen our numbers. So there is no secret there. But it's fairly stable. It will come back. Now the shift to electric is something which is talked about a lot. Nowadays, it has been talked about a lot for many years, but nowadays it has maybe another tweak on it. But the EU law is still there. Manufacturers must cut CO2 emissions by 45% by 2030 for new trucks sold in the EU compared to 2019 levels. So what we assume quite conservatively, I think. That's 20% of all trucks in Germany by '28 will be electric. No doubt Volvo and Renault Trucks are market leaders, first movers in electric trucks. The amount of investments that have been made and the market positions that Volvo and Renault Trucks have are there. And of course, that will help us growing overall market share. McKinsey says that prices for e-trucks will be lower than today, but still 50% higher than today's conventional trucks, which logically then would mean that revenue will grow significantly when we sell more electric trucks. And what we see from subscription data, which is something that is interesting, I think, is that repair and maintenance costs for e-trucks are similar or higher than for conventional trucks. So potential for service and parts should remain fairly stable. There's a lot of information. There's a lot of things going around this, but this is what we see. Koen will talk more about that in a few seconds. But what we see also, obviously, moving into electric, we talked about this Equipment-as-a-Service. We see other models of ownership. We see other subscription methods, et cetera, coming into play here. And the assumption is that the transition will generate multiple new opportunities. And we have started already. We have an electric rental fleet, and we are well situated to capture new opportunities. So we placed -- already in December '21, we placed the first order for 34 -- 32, sorry, fully electric medium trucks from Volvo and Renault. In the meantime, after some time, to be honest, and a lot of work, we were awarded EUR 23 million in government subsidies to promote electric transition. And we want to develop the rental business to help customers in the transition to battery electric to [indiscernible] as export ourselves in a sustainable transport solution. And we want to go as far as to develop in-house sustainable transport services capabilities ourselves. If you remember, we did that by using contracting services when we said, okay, let's do it ourselves. In order to not only sell a service and take an extra cake of the value chain going upwards, but also to learn a lot what is it to be a customer operating these machines or in this case, then electric trucks. Now our rental fleet, we're expecting it to be 100 trucks by the end of this year in our rental fleet. So we're growing that. Of course, not. And as you all know, the electrification has not taken off as was planned, discussed, hoped for, but it's coming. So what is the sustainable transport solution? What we see in the market is that we see the customers of our customers, they increasingly want and need to procure 0 emission transport solutions because they want to reduce their footprint. But our customers don't want to take the step to buy electric trucks because it's a big shift. It's a big new thing. And we potentially see a potential for lower TCO, total cost of ownership of the truck and high profitability. Certain of the customers' customers are even prepared to be higher rates for customers that actually run electric. But customers are -- there's a lot of reasons for that claiming -- infrastructure, charging infrastructure, claiming new technology, et cetera, et cetera. So what we see an opportunity to do here is to fill the gap by providing sustainable transport services to transport buyers and use the experience that we have gained in other markets being contracted services to actually becoming a leading service provider. I'm not saying the biggest, but again, a leading, meaning, and then use that knowledge to leverage for selling and promoting electric trucks in general. And we have a pilot project that we expect now to start in the second half of 2024. So that's something we're working on. And we believe this will -- this is -- it's a bumpy road. It's not going the way everybody expected, but we want to be in the forefront and we want to drive this development as much as we can. And so far, so good, I must say. So that's about it. And now I want to hand over to Koen, are you with us?

Can you hear me?

Thank you, Koen. He's our aftermarket director for Germany will talk a little more about the very, very important service and parts business in Germany. Thank you.

Okay. Thank you, Lars. Let's start then, please, with the first slide. Right. What we aim for is to deliver productivity to our customers. And with that, we aim actually for a win-win situation. So our business model in aftermarket is such that we advise our customers about the timing of a service, but the type of service we provide, of course, the service with the best possible quality. And as such, we secure a maximum uptime of the truck and the longer life of the truck. It's a clear win for the customers and it's also clear win for us. Because by doing so, we provide or we secure a steady inflow of preplanned workshop orders. And that is basically summarized how we plan to secure an organic growth for the future. Whereas in the past, our growth, our aftermarket growth was a mixture of growth by acquisitions and organic growth. Now the question is, of course, do we have potential to grow? And for that, please, the next slide. The answer is clearly yes. Even with a nongrowing population, which is obviously not a target, as Lars explained, we want to grow on population. But even with the population that we have today, we have a clear potential to increase our sales because our potential based on the current population of 8,500 Volvo and Renault trucks, we only grasp a too small percentage of this potential. And our target is to capture 23% more of that potential that we currently have by 2026. So we have a clear potential to increase the sales. We have a clear target to increase the sales to aftermarket sales. The question is, do we have a plan? Or do we know how to increase these sales? And the answer is yes, and that I will show on the next slide. This organic growth, we -- it will be based on two cornerstones. First is population, know your population, know our population, identify each truck in the population. And based on this knowledge, offer tailor-made solutions and offers to the customer. And the second cornerstone is dynamic pricing, smart pricing even. But let's first talk about population on next slide, please. Yes. So how do we plan to capture the maximum of our population? What we have done in the past 3 months is that we have identified each and every truck of these 8,500 trucks in our population. We know how old they are. We know how they are used and what segment they are used. We know how often they come to the workshop or not come to the workshop. And based on this extensive data, we are able to produce the best advice on when and how to service these trucks. We're also able to prepare and tailor-made offers for each and every of these trucks. And this toolbox of knowledge and recommendations we give to our aftermarket salesmen to go out to the customer and try to convince them to come to our workshops. So that's basically step #1 in how we capture our population. Whatever offer we make, the first and best offer we always make is a service contract. And more about that on the next slide. What is the service contract? It means a customer pays a fixed monthly fee for 3, 4, 5 years. And for that fee, for that monthly rate, he buys actually peace of mind. The only thing he has to do then is wait for our call. We call the customer to say, yes, your truck, the service is due or a preventive repair is due. And there is absolutely no reason for the customer to decline this invitation because the workshop visit will be for free. It's covered already by the monthly rate. So -- and by doing so, by these regular workshop visits, of course, we secure then the maximum uptime and the longer longevity of the trucks. So a clear win for the customers and a clear win for us because we secure again a steady inflow of preplanned workshop orders. So it's very important that we sell as much service contracts as possible together with the trucks. And we are doing so by making this already attractive offer of a service contract even more attractive by offering some extra goodies specific for Ferronordic. We offer free replacement trucks when the customer truck is in the workshop or we offer free pickup service for the customer and his trucks. The second way to increase this service contract penetration is we are preparing very professional marketing material, focusing on the total cost of ownership of the service contract. And with facts and figures prove that it actually financially makes sense for the customer to buy a service contract. Another tool to increase capture of the population is connectivity. Here, we have specialists in our workshops who receive signals coming from the trucks early warning signals. And based on these signals, we contact also the customer and advise him to come to the workshop for a service or preventive repair. It's a less powerful tool as service contract because the customer, of course, has to pay for this visit. So we have less guarantee that the customer will indeed come to the workshop. But anyway, it's a very powerful tool to contact the customers and try to convince him to the workshops. So all of this population, knowing the population, or service contract and connectivity will increase the share of potential that we capture and as such, the aftermarket demand. And then the question is, can we meet that demand? Do we have the enough mechanics? And do we have enough hours available for -- to meet that demand? Please, the next slide. And our first thing that we do is that we have been doing that we continue to do is to increase the productivity of our mechanics. Now what is productivity? What defines productivity of a mechanic? It's basically 3 factors, it's availability, is the mechanic in the workshop. Of course, he is not when he's on holiday, cannot really influence that. What we can, what we will try to influence in a positive way with positive measures is the sickness rate. By providing a healthy and safe work environment and then also a pleasant work environment, a good atmosphere, team spirit and soft issues like that. We're actively working on these things. Second factor is utilization. I have been talking a lot about preplanned workshop orders and why? Because that is the best way to avoid idle time and the less idle time, the higher the utilization of your mechanics. Last but not least is efficiency. What we have done, our mechanics or technicians, I should say. They all have tablets these days. And in these tablets, they enter all their information on what type of work they have been doing on the truck. And that information entered in a tablet automatically flows into our systems and means that no information got lost. In the past, when everything was documented on paper, papers got lost or the text was not readable. And not every minute that was worked, not every job that was performed on a truck was invoiced because the information got lost. This is now history, thanks to this paperless digitalized way of working. So that's how we increase productivity to meet the increasing demand. Second cornerstone to increase our organic growth is dynamic pricing, smart pricing. So it's obvious that some work is more complicated than others. And then for that complicated work, you need highly skilled technicians, highly trained technicians with specialized equipment. And that type of work cannot be done in non-authorized workshops. And obviously, you can charge a different rate for that type of work than for the more -- the simpler tasks that can be done by a trainee or can be done in a non-authorized workshop. So this dynamic smart way of pricing will allow us to capture more work -- more of the potential than if you would just have a flat price increase, for instance. So that's how we work with pricing to capture the maximum of our potential. That brings us to the next slide. A word about electrification of our population. The key word here is, at least for me, is uncertain. We don't really know by when the majority of our population will be electric. We don't really know when that will happen. We also don't really know exactly what the effect of electric trucks is on our aftermarket potential. Studies coming from the car industry suggest 40% lower parts consumption for electric trucks. Now our own experience does not confirm this figure. On the contrary, in the last 12 months, 1% of our workshop visits was done by electric trucks. But this 1% represented 2.5% of our aftermarket sales, meaning that we actually have double or more than double as much parts and service consumption for those electric trucks and for the traditional diesel trucks. But again, 1% is, of course, probably significantly -- statistically not relevant yet. So it's -- again, the keyword is uncertain. But there are a number of things that we do know. And for that, please, the next slide. What we do know is that working on an electric truck is much more complicated and requires a different type of mechanic. The mechanic working on electric truck is actually more an electrician or even an IT consultant than the traditional mechanic. And that means -- and this mechanic also needs a special equipment provided for by Volvo in our case. They need special and regular trainings also provided by Volvo. And that means enormous hurdles for non-authorized workshops to work on the electric trucks. And that gives us a comfortable feeling that, I mean, probably the parts and service consumption potential per truck is lower, but we will capture close to 100% of this potential. And that will more than compensate this lower potential. On top of that, because it's such a specialty work and done by a new type of mechanics, electricians, IT consultant, we, of course, it's justifiable to charge then a higher rate for this type of work. And those 2 positive factors, higher rate, capturing 100% of the potential gives me comfortable feeling to say, yes, I don't see electric trucks as a threat for our aftermarket business on quite the contrary. And on this positive note, I would like to conclude my part of the presentation. Thanks.

Then we go up for some quick Q&A. On Germany, there's my spot. We're again a little bit behind, but I suggest we take a few questions as we did with the U.S. and still time out of the Q&A at the end. So we get a chance to ask questions to Koen and to Lars, of course, in the context of Germany. So I would, again, start with the audience. Any questions from the audience to start with?

When you sort of -- you say you want to sell more rigid trucks because they provide good aftermarket revenues for you guys. What's the sales case for the customer to buy a rigid truck rather than the trailer trucks?

No, it's not the customer. I mean it's a segment which is almost 50% of the market. So it's the same customers. It's just that we haven't been very successful in competing in that segment before. So we just need to get in there and do our own work to take a share of that market, a bigger share of that market than we have. And frankly speaking, I think that also comes down to having an, as we talked about, agile sales team, we need to reach new customers that we haven't talked to before and not only the old ones that call us up and say, we want to replace trucks. So that's what we're talking about. It's not -- it has nothing to do with customers. It's really our job inside the organization to fix that.

Okay. And then also, I know you never sort of give the exact number on the absorption rate, but are you able to reach 1x absorption rate with the current population in Germany and just sort of upselling or capturing the current population? Or do you also need to grow the population?

To be honest, I could not, yes.

Any more questions from the audience? One more. .

Pardon me if you mentioned this already. But what is the average age of the fleet in Germany? Is this something you've communicated?

Again, before you answer, Koen, is it a tractor or a rigid you're talking about? Because it's completely different in terms of. The average tractor would be 2.5 years, the average rigid would be 4, 5. So it's a very different ball game, roughly. These are rough numbers, but something like. Koen?

Well, I could give you the age of every of these 8,500.

Now it's a very good question because obviously, but we know what it is, but you need to segment the trucks and then like we do, right, then you go ahead. And -- but that's why we want rigids because they stay longer in the population. Of course, a truck tractor is staying 3, 4 years in Germany, then it will stay somewhere else for a long, long time and maybe somewhere else to the third life, right? But we want to service them in Germany.

Thank you. We'll send you that Excel sheet with every single truck. I'll take one question from online, and then we'll move on so we don't ignore the people online. Are you happy with your workshop footprint? Or are you looking for more acquisitions/divestitures to optimize?

I think I answered that. We have a good footprint. There might be some. In general, we're fine. We have a good footprint. There might be opportunities to grow when we see the population that we can make money from Day 1, opening up something. But that's -- it's no more strategic investments.

Thank you very much, Lars. I suggest that we move on, which is my queue.