Inission AB (publ) (INISSB) Earnings Call Transcript & Summary

All right. Hello, and welcome, everyone, to this Q1 presentation by Inission. My name is Henric Hintze. I'm an equity analyst covering the company here to moderate the Q&A session after the presentation. But to begin with, I'll hand over the word to Fredrik Berghel, CEO of the company, to deliver the presentation. If you think of any questions for Fredrik during the presentation, please go ahead and type them in the Q&A chat, and I'll read them out after the presentation. Please go ahead, Fredrik.

Thank you very much, Henric, and welcome to Inission Annual Meeting and our Q1 presentation. My name is Fredrik Berghel. I started this company together with Olle, soon to be 18 years ago, and we are still both active. I am the CEO of the company, and Olle is the Chairman. Today, we would like to present the highlights, financial, and also a presentation of what we have been up to during 2024. We will go through the same thing really for Q1 2025, financials, and also a verbal description of what we have been up to. Then we will present what we are doing. I almost recognize all the faces here. So you have heard me saying most of these things before, but still. We will also talk about Enedo, our acquisition and growth strategy. And then finally, our financial parts. And then at the end, Henric will assist us with the Q&A session, both here in Karlstad and on the web. Please think of questions during the presentation. Okay. Looking at the results for 2024. We had a turnover of SEK 2.15 billion, and there was a drop in organic sales, with SEK 191 million, which gave an organic gross profit drop of SEK 15 million. And the comparatively small gross profit drop is due to significantly better material share compared to last year. We also had higher costs, remembering we added a factory into the Inission program end of January last year, which resulted in a higher cost level. Still though, if we sum this up, the AXXE contribution and the AXXE EBITDA as a group, we came down SEK 37 million in EBITDA, which results in a margin -- EBITDA margin of 5.8%. And then profit per share became SEK 3.3, which is SEK 1.2 lower compared to last year. If we zoom out a little bit, sales of SEK 2.15 billion, we are running slightly slower than 2023, and the EBITDA margin, quite a bit less, but still thinking of the whole year, this is the second best year in absolute mind, both for turnover and for profit in the Inission history. And then the result decline here. If you put it really simple, we had one factory external cost, but we -- due to the slower market, we actually had a lower top line. So that is really on a high level, the explanation. So much about the financials. Then what happened during last year, the main bullets. I just talked about AXXE, a Norwegian company situated in Halden that came into the group end of January, last week. We also, about a year ago, announced our ambition to move to NASDAQ main market. I will revert to that. We also, about 1 year ago, hired Mathias Larsson as the Business Area Manager for business area Inission EMS. Mathias had the previous history all the way back in Munkfors, welcome, a long time ago. And then he had some other positions. Originally, Mathias come from the [ Saab ] organization. But then also between Inission Munkfors, he came back here, he was at a company called Rainpower just now and also ANVA in Sunne. And we are very happy to have Mathias back in the family. Inission Syd invested substantially in new SMT capacity, surface mounting machines. We also, at the peak situation, we also launched new capacity for about EUR 2 million in our Estonian factory sort of end last year, but really being into production early last year. We also decided to move -- I will revert to that also, but we also decided to move the Enedo Tunis factory to the Inission EMS organization. We hired Elisabeth Nilsson as our MD for Innovate. Elizabeth has a history as McKinsey consultant, and she has also worked for Volkswagen central organization in Germany. Inission Innovate is our engineering part that have a base in Vasteras. We also reinforced our organization with the Chief Digital Officer, Charlotte Jansson. She has a history working for Ericsson, H&M Group, and also Epidemic Sound. We also, for the business area Enedo, hired a new Financial Manager, Tommi Alakärppä, which has a history in Lu-Ve Nordics and Patria as well as Nano group (sic) [ Nanocomp ]. We also rebuilt, remade, enlarged the factory in Malmö, with about 50%. So towards the end of last year, we actually had a big celebration and the grand opening of the factory there. So we invited our customers, our suppliers and, of course, coworkers from across the organization to celebrate this. It's not so often that they actually open a new factory, partly old, but still we made a happening out of this, which we were very pleased with. So much about 2024. Now moving into Q1 '25, more recent history. Reported sales decreased with almost 17% to SEK 484 million. If we also consider the AXXE contribution in January, that is not included in the organic sales, the organic growth -- or organic decline is 19%. So quite a bit of headwind here in our sales situation. So looking at the result of SEK 20 million in EBITA result. It is very much volume driven, having SEK 111 million lower sales organically. But also, we also had a very much lower material share. So what I referred to the net added value was only SEK 25 million lower. And then cost-wise, we -- I have talked about the whole last year, and I will keep on talking about cost reduction. We have to correct the shrinking cost, and we have done that now. So we are -- if we adjust back for that AXXE -- extra AXXE cost SEK 5 million-ish, we are year-over-year, we are square at cost. And if you also take or adjust for the extra cost that our listing have incurred, we are about, annualized, about SEK 10 million lower cost level year-over-year. And then if you also think about that we have quite a bit of an inflation situation. So we have definitely taken down the cost in the group, but not enough. All in all, then this results in an EBITDA margin of 4.1%, which is very much lower than compared to last year. But still, Q1 '24 was peak level in history for a quarter. When it comes to cash flow, we had a decent Q1 cash flow, with SEK 34 million, driven by improved net working cash situation. So looking year-on-year, it looks dramatic. This picture shows more in -- or show the sequence. And there, if you have little bit goodwill, you can see that the profit fall, hopefully, have sort of stabilized now. And hopefully, we can turn it the other way around. So this is a lot less traffic, I would say. But we will need further cost reduction. And we have a program taking down cost in Enedo Italy and in Enedo Tunis quite a bit. We also have a cost reduction program going on in South. And the result of those, we really want to see now in Q2 the effect of those. But on top of that, we're also adding on other cost reduction program that will start now, and then they will be in full effect then Q3, Q4 at the latest. Because we have to realize if we run on this lower top line, lower net added value, then we simply have to adapt the cost to that level so that we reach our -- we should be able to reach our profit margin target, even on this lower contribution level. So if we see this, an LTM, last twelve months figures, we are running just above SEK 2 billion, and we have an EBITDA LTM of SEK 93 million, which then is 4.5% as a margin. So what have we been doing Q1 '25? First of all, we have hired a new plant manager or company manager Inission Munkfors, Mattias Neumann. He has a background. He's had a leading position at Rolls-Royce, which is, by the way, one of our major customers. He also, since Rolls-Royce [indiscernible], became Kongsberg. Kongsberg, they acquired the whole Rolls-Royce Marine division. So he -- his most recent posting was working for Kongsberg Singapore. And Kongsberg now have actually taken over the position as our most important customer since we are selling to Kongsberg, both in Sweden and in Norway. So that is one big project that we've been running. We also have worked the whole last year, really, and also very intensified this first quarter. We have been working with the NASDAQ leveling going to NASDAQ main market. So we had a big celebration there just a couple of weeks ago, fantastic. Me, Olle, and John ringing in the bell there. We had the Board around and the group management. So it was really a blast, really. But the important thing is we are doing this to create a better, stable, and more secure company following the NASDAQ main market rules when it comes to organizations, finance and book, IT security. So there's a number of things that we have improved with the company being able to comply with these routes. And of course, this becomes a quality stamp for Inission, meaning that we can attract also international investors better. Hopefully, we get better visibility so that we will have a better trade in our stock, in our share, better trade, we get a smaller or narrower spread, less volatility and improve the trade so that the -- being public really gets -- so we get the benefit that was originally meant. And one of those was to use our share as a currency when we do mergers and acquisitions. And so far, it has started reasonably well. We have increased the number of shares traded per day, from 10,000-plus to about 30,000 per day, plus. So these first 8 trading days have been quite good. Secondly, we have worked and finalized another big project that we also worked with almost during the full last year and intensify now. And that is actually moving our Enedo Tunis factory into the Inission EMS organization, making the Tunis factory an EMS provider. And that has two major things there, really. And one is Enedo will become a focused product company. I will revert and talk to Enedo later. And so they will be more focused, having only the products, the marketing, and the sales to look after. And for Inission EMS, this will widen the offering to the market, meaning that I can actually sell higher volumes for a little bit lower cost in Tunis. So we have already now made quite a few RFQs. We had a few customer visits, and we already actually have the first win there, not much in value, but still we have a prototype winning. So we hopefully will already during this year, ramp up some EMS production together, of course, with the Enedo production there. So Enedo is now the only and the biggest part over there. So here in the picture, you see our management team in Tunis and also a picture from outside. So if we look into the financial performance of the business areas, it is quite a bit. I would say that still, Inission EMS is -- they are running slower. We had quite a pushout from two big accounts in Norway and also one big account in Sweden, meaning that we have pushed about SEK 50 million out of this quarter, which, of course, affected the top line quite a bit. We also have sales contraction due to the fact that we have receivables in U.S. dollar and the Swedish krona being a lot stronger, that has taken down the sales for currency purpose. In this situation, I think anyhow, having this EBITA margin of 5.7%, it's not good, but it's decent, I would say. So as I said earlier, now having cost reduction program for the Enedo mostly, but we will also move down into the Inission organization, Inission EMS organization to reduce cost. Business area Enedo, they had an organic sales drop of 30%. That is really dramatic, and that is for the same reasons really that we have talked about last year. We have still destocking going on in major accounts. They still have too much on the shelves at the moment. We have cut down on costs, but as you can see from the numbers there, we are selling for SEK 83 million, and we are actually losing SEK 3 million. So this is really bad. Our LTM numbers here is getting close to 0. So we are now shrinking fast, in Italy and in Tunis. So let's just generally talk about our operations. Our business area today is Inission EMS contract manufacturing, industrial electronics. That is what we do. And then we have business area Enedo OEM. They are providing power supplies in different -- to Inission EMS, they are a product company. So they develop their own products, marketing and selling their own products. Centrally, we are working with our values. A long, long, long time ago, when we started this company and especially when we launched Inission as a brand, we had a wide discussion within the company. The company was a lot smaller at that time. How do we want to be perceived against our customer, supplier internally. And then we talk to more or less all people employed at that time. And these four value words derive from those discussions. And we keep on working with this all the way from our Board of Directors to all new employees. We actually were having education programs. We have a propaganda. But we also -- I think when it comes to the best, that is when we have the daily pulse meeting in the factory in the morning there, boys and girls saying to each other, what did we do yesterday that was really in line with our values? Did we do anything that was against the values? And they have small chit chat there. If we can get that through the organization, I think it's really driving a strong force. We keep on working with our sustainability. And here, we have really clean production, and we are close to our 2025 target of having a net zero Scope 1, Scope 2 when it comes to carbon dioxide. We will perhaps not get close absolutely down to 0, but then we will compensate. So when we sum up this year, we will get there. The main thing that we work on now when it comes to sustainability is to comply with the EU CSRD directive. And that is quite a lot of work there. It's quite a lot of bureaucracy, but still, we will work to be able to comply to that during this year. That is our target. So over then to business area Inission EMS. We are the leading supplier of manufacturing services, mostly for electronics, but also for metal fabrication, sheet metal production. And we also have our own design capabilities. We have a small engineering office in Vasteras. We are very much a Scandinavian company. There, you see the sales. Even though the sales here is mostly Sweden, Norway, Finland, the products that we produce, they will be spread out all over the world. We also think box build is really important, meaning that we provide to our customer a ready-made product. We learned early in this soon to be 18-year Inission line that the more we do for our customer, the more reason they have when they do the customer survey. And also the more we do for our customer, the better chance is that we have a good margin. The more value we provide, the more there is to share about. It's not more complicated than that. So Inission is very much an acquisition story. We have, since we started 2007, added to the group about a company per year, and we have kept on going like this. And I will revert to acquisition strategy, but that is also our ambition for the future to keep on growing also with acquisitions. We call ourselves a total supplier in that, meaning that we provide all the services in the product's life cycle. And if you look up at the web pages, all our competitors claim that they do the same, but we actually have our own development engineers. We provide both new and old customers extensively with prototypes, helping them industrialize the products. And then, of course, manufacturing is the core of what we are doing, maybe 90%, 95% is manufacturing. We have fantastic customer portfolio where industry is the widest segment here, but also -- and also the biggest. All in all, 37 key accounts built up about 60% of our revenue here. And the largest key account, as I said, is Kongsberg. And there is about 10% of what we are doing for Inission EMS. There are some of these, especially the defence, that is, for sad reasons, had a strong growth. We had -- we don't have this type of customer that says -- our sales manager says, let's say, [ bag ] yet, but we have some starting points there. But on the next level, on Tier 2 suppliers that supply to those, there, we have some business. And this segment is really, really growing fast now. Also the electrification and communication segment have strong growth. Over to Enedo in brief. As I said, Enedo is a product company in difference to Inission EMS. They own their own IPRs, big difference in business model in that sense. And they also, like Inission, they provide customized high-end products. So a big share of the Enedo product is actually customized product that is tailor-made for that specific customer. Also Enedo has a fantastic customer portfolio. But here, you see also a total difference compared to Inission EMS that is that they are more of a global company. They have the most customers in EU and in U.S. So 30% of what we are doing in Enedo is going to U.S. customer, I would say, because some of the products will actually be sent to their factories in Asia. And a lot of this is power supplies, and then we have the LED drivers, and the smallest, and that is mainly the Finnish part of the company, is DC systems. Enedo has a background in telecom industry in Finland, Nokia-related. Then they realized back in the history that it was not really possible to produce that type of sort of high-volume products in this part of the world. So they divested the telecom business and they acquired an Italian company called Roal. And then a few years later, a Finnish company called Powernet. And that is really the base of Enedo today. Segment split, you see the lighting, the display industry and instrumentation. And here, the Enedo customer portfolio is somewhat more concentrated compared to Inission EMS. But the list of their customers, again, it's a very interesting possibility there for also Inission EMS to do business with those customers because a lot of those is also using EMS services. And the other way around, all Inission EMS customers, they use power supplies in their application. So that's where the connection between Enedo and Inission comes through. So a few words about our acquisition strategy. As I said, we have been acquiring a companies a year. And the most important, what we look for when we do these cases, is the customer manufacturing capacity and these things that can always be fixed. The key here is the customer. But then, of course, management culture, financial potential, and then geography-wise. We think of proximity as an important thing within Inission, meaning that we want to build out our geography. So we are more or less done in Sweden, Norway, we perhaps want to have something more in Finland, and then Denmark, and then we see Germany as the next possible place to be. We will also, in due course, start to do acquisitions within the Enedo business area. But that will be when we have stabilized the financial, meaning decent profitability, decent cash flow that we will work on. Since we have been doing this for the last 17, 18 years, we think we have become quite good at doing acquisitions. So we have an Enedofication process, we call it. And we actually lay the ground for the Enedofication process during the DD. So when we make the analysis of the company, we parallel write down the things that we want to improve, things as a target company or things that we see that they do really, that we can use back ourselves. And normally, this is no easy win. It's a tedious project that takes a few years actually to develop the profitability. And as I said earlier, AXXE, a little bit more than 1 year ago, we acquired those, and they are an excellent example of the companies that we look for. Erik Dragset here on the picture. He is one of the founders, and he's also MD, and he is driving this company in a really good entrepreneurship way. Normally, there are quite a bit of synergies between -- when we take in a new EMS company. But we never use these synergies to justify the price. Some of the items, we implement quite fast. It could be financial reporting. It could be the sourcing that everyone in our business have the same component supplier, this worldwide component distributors. So we use the same so that it will be easy to include them in our program. KPI follow-up and so forth. We are in a headwind situation now. We dropped organically sales last year in Inission EMS, 7-ish percent. We have a tough quarter now, but the underlying growth in this industry is really good. And it's driven by a number of megatrends. And these megatrends, they have been there for quite a while, and they have been reinforced. First, by the COVID, and then also by this tragic war in Ukraine, and meaning that -- electrification, for example, when the Russian gas comes too expensive or even banned, electricity also for heating down in Europe, which we already know here in Scandinavia, it's a good trick. The regionalization is another megatrend that is also have been pushed forward by this, really, big happenings in the world. But then, of course, automization, communication, Internet of Things, machines talking to machines. But it's a lot of things that is actually driving the need for and the use for industrial electronics, which is beneficial for, of course, both Enedo and for Inission. Yes, before I jump into our financial targets, I want to show you the history here. We have been -- we became a public company 10th of June 2015. And since then, we have been growing in average, CAGR 25%. So we have been growing reasonably fast. We have had an EBITDA during this time 5%-ish, I normally say, but you can see it climb a little bit. The dip here 2021 is when we consolidate in the Enedo numbers, that was quite ugly. So coming from this history, we have put forward the financial targets for 2025. So the Board of Directors have decided these targets to be SEK 2.2 billion. We target to reach an EBITDA level of 6%. We have a target of having our net debt over EBITDA to be 2.5 or less. Here, the covenant with our bank is a little bit higher. So there is a headroom between our target and the bank covenant. We also want to exceed 30% in equity ratio. And we like to pay dividend. There is a balance, of course, whether the money should stay in the company or go back to the shareholders. But our policy says up to 30% after tax. And this year, we are glad to announce, of course, that we will reach above that. So every share we correspond to SEK 1 in dividend. Medium term, we have higher targets. We want to go -- we want to grow 15% annually. And if you compare to that historical 25%, meaning we would slow down in growth speed, and we want also to weight over from acquisition-driven growth to organic growth, because organic growth is really the key to increase the profitability, to increase -- to grow organically is extremely helpful when it comes to profitability. So that is how we see it. And then we have a set of other things that we also really want to -- that we're working on long term so that we should be able to reach 9%, and that should be looked at 3, 4, 5 years down the road. Regarding capital structure and equity ratio, they are the same, short term and also midterm, as well as our dividend ambition. So that was all from me. Henric, do we have any questions?

All right. Very good, Fredrik. I think I'll start us off with some questions on my own and let everyone else gather their thoughts for a few minutes. So first of all, you wrote in the report that deliveries of three high-volume products have been moved forward in time. Should we interpret this as a temporary headwind for sales in Q1? Or will this keep affecting sales negatively in the coming quarters?

Then the good answer would be, of course, that these pushouts, they will end up in Q2. So we think of those pushouts as not lost sales. We think of those as postponed sales. But then, of course, yes, you always have orders coming in and going out. So it's a mix there always. But we see -- we don't see those as lost. We see them as to be delivered later. And one of these three cases is extremely concrete because that was our PCB supplier supplying, and that was -- I talked about Kongsberg earlier. So that is orders going to Kongsberg in Norway. And they are working on those right now because we have already got the better quality PCBs, and they will be shipped now in Q2. So they are not lost, they are postponed. That's the way I see it.

All right. Very good. So secondly, there was some mixed messaging in the report, I would say, on the one hand, you maintain your guidance, keep your cautiously positive view on the market. But on the other hand, you also say that the U.S. tariffs are bad for the global economy and that you're therefore not as optimistic on market growth in H2 as before. Also, orders have been very strong for the past two quarters, I would say, but you still choose to now implement additional cost savings programs. How should we sort of reconcile these positive and negative statements?

Yes, it's a complicated world. And I think with the macro things happened, especially what is happening in U.S. now with this possible trade war coming up or already trading tariffs, which is significant, and they will affect -- for sure, they will affect the growth in the world. Then how much and how this will impact? We don't know that. But of course, everything becomes more unsecure. But when we talk to our customers and try to understand where they are, how will they be affected of these U.S. tariffs, for example, then we don't get any clear good answers. So then, what to do? We stay with our best guess that we have, but we try to signal in the report that a level of unsecurity has increased dramatically. But we don't have any concrete examples of customers sort of canceling orders or delaying orders or pushing out from the rest of the year. So we are -- we understand that the unsecurity level is much higher, but we don't have any better guess than we have already presented. And so we maintain our SEK 2.2 billion as our sales target. When it comes to the cost cutting, we, of course, if we -- half of that-ish is already decided and earlier cost-cutting programs that doesn't have come through in the way we want to see them. And the new cost-cutting program, you can see it as precaution. But of course, if really the s*** hits the fan and it becomes a disaster, those cost-cutting programs that we have put into place now or starting to work with, they will not be enough. And we have to be a totally different level. But we are not there now. We are basically optimistic also in our company. And our customers are optimistic. And I talked about the defence here earlier. They are -- when we talk to Kongsberg, they are extremely optimistic. The amount of orders these people are getting is enormous.

All right. So same base case, but more uncertainty.

It's a very mixed picture, if I put it like that. It's really mixed picture.

All right. Very good. Now the transfer of your Tunisia factory from Enedo to Inission was completed on May 5, and you wrote and mentioned in the presentation now that you have signed your first external customer. What kind of demand have you seen from potential new external customers for production in Tunisia?

We foresee, with the cost level that we have with Tunisia, blue-collar operator, EUR 2 per hour, that is a cost level, above China or even lower, perhaps Vietnamese cost level, that we can target perhaps not new customer or different type of customer, but type of products that is running in higher volumes that is more -- that has a higher cost pressure on them, that normally would have been around East, Southeastern Europe, or even in Asia. That type of production could be -- we could do that type of product competitively in -- out of Tunis. So that is not necessarily other customers, but the type of product that is running in longer and higher series, that is what we are targeting. And that is the type of production, type of offering all our big competitors have, but we haven't had until now.

All right. And can you say anything about what kind of pipeline of potential customers you have?

We haven't quantified it. So maybe it would be reckless of me to quantify it here, but we have a decent pipeline of requests. We have a decent RFQ pipeline and even a small order, it's small in money. But normally, we start with prototypes and small wins, and then you get the first try out series and then you build from there. So it would be substantial, I think, within a couple of years. Substantial portion of the Inission EMS will come out of Tunis. And what we really don't want to see either that is that we move production, that we move over with the existing production. That would be a disaster. So we want really targets for type of products that -- where we are not competitive with the Scandinavian production or even the Estonian production.

All right. And going back to demand on the group level, your order book is now 23% higher than it was a year ago. Yet you seem a bit cautious on volume growth for the year. Why is this given the strong increase in the order book? How should we think about that?

We have had good bookings. We had really good bookings in Q4, and the good booking also continued now in Q1. But a portion of this order book is, of course, later than '25. It goes into '26 also. And then -- the history teach us that when times are good, order books come closer to you. When times are more slow, speed in economy is slower, the existing order books tends to stretch in time because when we say order book, that is frame orders. And they have, of course, a schedule absolutely. But that schedule will be sort of longer if the customer wouldn't need those products. We don't have a history of just stuffing products into the throats of our customer because it says that. We could perhaps do it by contract, but it would not be wise to do that because first, they don't like it and they become upset. Secondly, if we do that, that sales will be missing up a bit later. So it would be a little bit about -- this is similar to peeing in your pants, it will feel better now, but it will be cold later. So we normally don't do that. So that is where we are. That's where we have the situation.

All right. So the 2025 profitability target for Enedo is 2%. But in Q1, the EBITA margin was only minus 2.75%. Given that you have previously stated that you've already cut costs very significantly in Enedo, how would you say is the 2% target for the full year still feasible following the Q1 results?

Yes. It will be challenging, but we have come down, as I said, but they are intensified in a way now. And this -- we have splitted it there in our presentation, still, it should be seen as the total target is 6% EBITDA. And then we have sort of splitted it up from historical background. It's not hard targets externally in that sense. But it will be challenging, yes, but absolutely doable because costs will come down even further.

All right. Very good. Finally from me, maybe you sounded quite positive on the potential for an acquisition this year. How do you view the ability of your current balance sheet to support the new acquisition, given your current debt level and covenants?

We have a net debt -- net debt over EBITDA at 2.6. So there are some room to make acquisitions. We also -- when we debate with some of our target companies, we also discuss with those whether they can take shares as part of the payment. So we -- yes, we absolutely think there should be room for at least one acquisition. And that would be -- our sweet spot is really SEK 100 million to SEK 300 million in turnover. And that type of company, we should absolutely be able to acquire within our borrowing capacity.

All right. I think that's all the questions I had. I don't see any questions in the chat at the moment. Do you have any in the room maybe?

Anyone?

I noticed that [indiscernible].

We, of course, measure this carefully, and we could be better. And we split it in stock receivables and payables. And when it comes to stock, yes, we are on '25 stock level over -- turnover annualized, and then I take the last quarter's invoice. We are on '25 now, they're on '24, [indiscernible] is on '24. So we are -- I would say we are not good, but we are in par with the market. When it comes to the receivables, we -- the only one there that is clearly better than the market, that is HANZA because they are selling a lot of their receivables. We have -- I should have mentioned that earlier, but we -- during the year, we made an RFQ or we sourced banking services. So we negotiated with a number of banks to finance this company. So we decided to get out of selling invoices, which have actually increased our receivables quite a bit. But we get a lot less administration. We get more -- it becomes more cost efficient. So that means that the receivables are also about in par with the rest of our peer group. What is -- where it comes out clearly different is with payables. And some of those that do the best, they have extremely low payment terms. When we are on like 12% payables over invoicing, they are [indiscernible]. So that's where we have the big difference in peer group comparison between our net working capital level. And then we are very low in investment. So we are very capitalized when it comes to investment machines. So we are not a paper mill or a steel mill, but we finance our customers' inventory, meaning that we buy on their behalf their components, put them on our balance sheet, keep them in our stock. But they are also -- we have back-to-back contracts here. So that stock is really the customer's stock. So if they don't need it, we will sell it back to them. And that normally works well, but there are also accidents, of course, yes.

You said inventory, relating to also [indiscernible].

No, we call it obsolete and excess. And since there is a well-established program for this -- so this is part of our business. When we have obsolete or excess, we sell it back. And we have a continuous ongoing process. So we measure in every factory. We see what has not moved in the last 9 months, then it becomes on the selling list. And then after 12 months, we take out. So we control this even though it's -- for our size of the company, of course, we have a lot of inventory. But we have a continuous process actually keeping it fresh, keeping it -- yes.

[indiscernible].

This is one of the things that we discussed the most on company level, business area level, and also on group level with the Board and also management. There are -- in the industry, there is quite a threshold to move existing production. You don't move that. If you have well-functioning price competitive production, you don't move it just because you get a little bit in price or just because you are a little bit. You have to be extremely accurate if you move existing production. So your window opens when our customer or our not customers have a new project, when they have new products coming into the market. And there is a window, and then we have to be there. What we have done now, differently in the last 2, 3 years compared to earlier, that is that we actually invest in dedicated people only doing this, calling these people and visiting these people, making sure that we are on their list as a potential supplier. So we do that. And we see the result of that. We see new RFQs coming in from the light customer. And when it comes to fast-moving defence, for example, we have been working on power for the last 18 years. But now we have some power business. We have some power business in Stockholm. We have some power business in Munkfors. And of course, now it's about to increase it. When it comes to defence, we also have a few breakthrough orders with Kongsberg Defence and Aerospace. So we have the test order in AXXE. We also have some small business, and we have interesting RFQs in Løkken. And if we can break the ice really there, that would make a big difference. So it's not that we don't try. It's not that we don't work systematically, but the time lag between starting a call until you have substantial business, years, unfortunately, years.

Any other questions? Then we'll end this.

Thank you all that have participated here in Karlstad and also on the web. Thank you very much. Take care.