Elanders AB (publ) (ELANB) Earnings Call Transcript
July 15, 2026
Earnings Call Speaker Segments
Hello, and welcome to the Elanders AB Conference Call. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I'd like to hand the call over to your host today, Mr. Magnus Nilsson, to begin today's conference. Please go ahead.
Thank you, George. Welcome, everyone, to Elanders conference call. Together with me here, I also have Asa Vilsson, the Group CFO. And I'm also having Florian Beck here that will take over as CEO for Elanders Group 1st of September. And now I will go directly to Slide #5 in our presentation and talk about the second quarter. In the second quarter, we could see that the positive trend with improved demand continued, and we could show an organic growth of 3%. And if you adjust for Air & Sea, the organic growth was 2%. And organic growth came mainly from Asia, but also Europe and North America showed growth, which was a very positive indication for us and which makes us -- which makes things look better when we go into the second half of the year. Also, adjusted EBITDA result continues to improve, and it increased to SEK 181 million compared to SEK 167 million the year before. And this was an improvement with 8% and our adjusted EBITDA margin improved to 6.2% compared to 5.5% the year before. In the quarter, we also managed to renegotiate a huge large -- sorry, a large lease agreement in the U.S., which combined with the opportunity to exit 2 other lease agreements in the U.K. in the beginning of the next year will give us a possibility to lower our cost base in 2027 with around SEK 80 million. If we then go to Slide #6 and look at our cash conversion, you can see that we show a very strong cash conversion of 113%, which resulted in us freeing up around -- freeing up SEK 92 million from our working capital, which helped us to lower our net debt, excluding IFRS 16 with SEK 19 million despite that we made a dividend of SEK 24 million, and we also had a negative currency effect of SEK 56 million on the net debt in the quarter. If we then go to Slide #7, look at Supply Chain Solutions. We can show a strong organic growth of 4%. And if we adjust for Air & Sea, it was still positive with 3% Asia continues to be the main driver. But as mentioned before, very positive in the quarter was also that both Europe and North America could show organic growth. And if we look at the result, we can show continued positive development with both improved EBITA margin and EBITA result. And our adjusted EBITDA margin came in at 7% compared to 5.8% last year. And adjusted EBITDA result was SEK 166 million compared to SEK 144 million, which was actually an improvement with 15%. If we then go to Slide #8 to look at Print & Packaging Solutions, you can see that we had a challenging quarter, which resulted in a negative organic growth of 3% and this had a negative effect on our adjusted EBITDA margin, which came in at 4.2% compared to 5.4% last year. The negative growth comes mainly from our German operations that has a very high exposure towards the German car manufacturers, which know that all of them are struggling with their sales and that, of course, results in lower volumes of manuals. But on top of that, we're also doing cost-saving programs that affect the number of pages in the manuals, which have an extra negative effect for us. On the other hand, we could see continued growth in online print and also our publisher segment is growing, and this should, over time, be able to compensate for the decreased manual volumes. If we then go to Slide #9. look at the development of our different customer segments in the quarter. I will comment organic growth by customer segment, excluding Air & Sea. If we start to look at electronics, the picture continues overall to be very positive. And in the quarter, we could see an organic growth of 5% because of stable demand in both Asia and Europe. But on the other hand, we could also see in the second quarter that our customers' laptop volumes are affected by the memory shortage, and this creates some fluctuations in the demand, which affected us actually both in Asia and Europe. Fashion was stable in the quarter and organic growth was unchanged, but we could see again more positive signs of recovery, both in Europe and North America in the end of the quarter. Very positive in the quarter was that other showed a very strong organic growth of 9%, and that is partly because of recovering demand from FMCG customers in the U.K. and continued organic growth when it comes to online print. If we then look at Automotive, it's a very mixed picture for us with an organic growth of 4% for Supply Chain. But on the other hand, a negative organic growth of 14% for Print and consolidated organic sales was in line with last year. But still very positive that we managed to grow in the supply chain despite a very challenging market. Industrial showed negative growth of 7%. Here, EU was in line with last year, but U.K. has had a negative growth for us. When it comes to Health Care, we continue to see stable demand, and we could show an organic growth of 2%. If we then go to Slide #10 and look at how things will be going forward. I must say that the positive start of the first half year continues to make us carefully optimistic when it comes to the rest of the year, especially when we see the continued organic growth and improved EBITDA result in the Supply Chain Solutions that is our absolute biggest area. We also continue to have lots of interesting requests in the pipeline from both existing and new potential customers. But we should, of course, don't forget that the world around us continues to be very challenging for both us and our customers. When it comes to our markets, we see a continued improvement in demand in Germany, which is our absolute biggest market. And after a couple of tough years in the U.K., could we see some recovery in the second quarter, especially in the life cycle management segment, but also in the FMCG segment. This combined with continued growth in Southeast Asia, gives a very good momentum going forward. Even if North America still is a bit challenging with rather switching demand for us, but positive is that the churn rate at least is extremely low now in North America and again, that the new sales pipeline is picking up in speed again. We're also starting to see an improvement with the high utilization of our warehouses, which over time will lower our overcapacity and the successful renegotiation of a major rental contract, as I mentioned before, an ability to exit 2 other agreements in the beginning of next year will help us even further to optimize our utilization, but we still have capacity for organic growth. That was everything for me, and I hand over to the operator for questions.
[Operator Instructions] Our first question today is coming from Gustav Berneblad calling from Nordea.
It's Gustav here from Nordea. I thought maybe just to start off here, if you can just help us dissect the lease contract renegotiations here. Maybe we can just start with Americas here or North America. Is it possible to quantify this? And also if we should see a positive effect already in Q3 for this region?
This was a huge facility that we don't even utilize anymore, and we actually had a contract running to 2031. But we have managed to negotiate. We will exit the contract in -- latest in December this year, which means we don't have any cost rate starting 2027. And we don't know yet if we will get any benefits this year, but we know that next year, it will give us a saving around $3 million in U.S.
Perfect. Will there be any...
Sorry, that will, of course, improve the result and the margin in U.S. because there we have suffered a lot because of overcapacity.
Yes, that's perfect. Perfect. And then if we move to the U.K. there, I guess, there were additional lease contracts there. You mentioned SEK 80 million here in starting 2027. Is that from 1st of January, we should expect those savings to come through fully or?
No. The first quarter is the savings from U.S. the [ yearly $3 million ]. And then for U.K., that is actually a possible saving of around GBP 4 million, GBP 5 million. That will start in Q2 because we have 2 contracts that we can exit because the contract is running out. So it's a perfect opportunity for us. If we don't fill it up, we just exit them and then we have a saving of GBP 4 million, GBP 5 million starting in Q2. If we are lucky, sales are driving, then we fill them up, but then it will give us a saving anyway because it's also empty space. So that is how it looks like. So I think -- so that's around SEK 80 million in saving. And yearly, it's around SEK 95 million, you can say. But that is not what I said in my statement.
Got it. Got it. And then just on electronics there, I mean, you comment on memory prices affecting sales somewhat still. I mean, you comment 5% positive organic growth. I mean can you just elaborate a bit on the demand situation in that and what you see here going forward?
Yes. I think we still saw a nice growth, 5%, but our customers could sell much more if they didn't have memory shortage. So still good growth for us, but I think our growth could easily be -- could still be 8% like in Q1 in electronics, even for the memory shortage. So of course, it affects our customers and then it affects us. And how it looks going forward is hard to predict. We think there will be some challenges in the coming quarters, but they work really hard to find memory, of course. And -- but the good thing is the underlying demand for personal computers like laptops is really strong. So it's more a shortage. It's a bit like when we had the semiconductor shortage in the automotive industry a couple of years ago. But it, of course, will affect us, but we could have grown much better in electronics.
Perfect. And then when you just look at the overall business you have, not just electronics, but overall, have you experienced any trend shifts during the quarter? In terms of...
I think it's overall looks very good. And I think especially Germany, that is still our biggest market in supply chain, we are even growing in automotive, even if it's a challenging time for customers, of course, we are getting some new projects. We are doing well. We can also see fashion in Europe is now start to be -- start to look better. We are improving earnings. Our customers start to look better. Industrial segment, also good in Germany. We can see now that power tools, heat pumps, things like that is going better. And also, if you look at U.K., that has been really challenging for us the last 2 years. We had a really nice growth in life cycle management that is very important for us where we do good earnings. And also even in FMCG, we can see growth. We get some new customers. That's, overall, pretty good signs in Europe. And in Asia, continue to be good for us. Southeast Asia, Thailand is growing. Also Mexico is doing well for us. China, overall more stable, even if the world continues to be a bit up and down.
That's perfect. And if we then just jump to the Print business that you also mentioned here, can you just elaborate a bit more on the review you have there and potentially even cost savings in that part?
Yes. As you know, we always -- we have been expecting car manual step-by-step going down. That's why we have made this agreement with Thalia, the publishing. We are growing in online print. So we have a good plan to bridge it. But we couldn't predict the brutal effect that the market has in the German car industry now. And in Print, we work with all the German brands. So overall, the volumes is going down quicker than we expected. And with the cost pressure they have, they are now making the manual very quickly, less pages, which is less value for us. And we know we will grow and bridge with online print and publishers, but we can now see it will take some time. So we are now looking through our biggest facility in Germany very carefully. There could be that we would do some actions, some restructuring to more quick -- to make our suits more in the right size, if I say like that. So -- but over time, still good growth online print publishers. Our other printing companies was really doing well in the second quarter, but the German one is our biggest one, and that's why it affected our numbers. So we are looking through it now. I cannot say any numbers about it, but we go through everything carefully, every customer all the costs we have, doing analysis.
[Operator Instructions] We'll go to Markus Almerud of DNB Carnegie.
Markus here from DNB Carnegie. Can you hear me?
Yes, Markus.
Well, let me start with some follow-up questions on -- maybe on the leases, I'll start there. So the SEK 80 million in savings or SEK 80 million to SEK 95 million, you said SEK 95 million annualized. Is that just the savings from the contract per se? Or do you also include the savings that you will make from filling up from capacity utilization overall? I would guess that's not included in the SEK 80 million to SEK 95 million, right? Is that a pure savings?
That's a pure saving with all the rental costs, the taxes you pay and you still have some utilization costs, you have some people taking care of the facility. So now it's actually pure cost.
Okay. Perfect. And can you say anything about the balance sheet effects of you exiting these?
I think I can give that to Asa.
Yes, we have -- because you discontinue all the expenses. So we reevaluated the IFRS effects. I think we lowered the liability with around SEK 78 million, and that kicks in right away now because we know that the contract will end this year.
Okay. But it was it included in these numbers in the Q...
Yes, yes, yes. In Q2.
Okay.
In the net debt, including IFRS 16 was reduced with that amount.
Okay. Okay. Okay. Perfect. And then the trend that you've seen, both Asia and Europe -- I mean, Asia is strong and Europe is turning and it is positive. You talked about Germany being positive. Is it -- can you talk a little bit about trends? I mean how they have progressed throughout the quarter and what you've seen in the summer, you expressed some confidence about the fall, et cetera. So can you just elaborate a little bit on the movement throughout the time frame?
Yes. I think a good trend for us is that if you look at the numbers country by country like U.K. and Germany, and there's still almost no growth in consumption, but still we can see growth. So -- and I think it's a combination there. We have been very successful in gaining new customers, especially in Germany, the last year, we made a big restructuring, but we have been really good in gaining new customers, gaining new customers in the fashion segment. And also then in the U.K. that also is a big market for us. We could really now see a lift off in life cycle management. We actually had -- we don't show that in the report, but they actually had a growth of over 20% in the second quarter. That was really impressive in life cycle management. But also FMCG, even in U.K. U.K. shows now some growth, but I think we could see we were gaining some really new customers. I think Europe overall in supply chain, we are in a good shape. Also in Sweden, we are not so big there, but we gained also some new customers in supply chain. we're looking at several projects in more Eastern part of Europe. So things is happening. So that overall good for us. And Asia, then we have our plants in Thailand. That was a very successful greenfield operation for us. They are doing really well. We're getting more volumes. We are now in discussions about Vietnam, about Malaysia. China is still good for us. And as I said, South America and Mexico -- for us is more North America has been really up and down the last year. Every quarter, we see now it's -- now the pipeline looks better, then it slows down. But I think it's been a lot about the trade war as well that makes our customers, especially in fashion, very hard to handle U.S. But a good thing now if you look at North America, U.S. and Canada is the churn rate is almost gone. We're calculating lots of projects. It feels like our customers start to navigate around all these challenges with the customer duties and things like that. So even if you cannot see maybe so much growth in the market, but for us, it looks like we are in a good position. And also all the savings we did in supply chain last year also helps our margins to grow. And second half of the year is always our most important part of the year, which I will hand over to Florian and Asa to take care of. But no, I must say it looks overall good for us. Of course, it's challenging times. You never know. The memory shortage, who knows, but without it, we should do even better. So I hope -- we hope it doesn't get worse because that could affect us negatively.
And maybe a follow-up on the U.K. and then on the U.S. If I look at Life Science and FMCG in the U.K., how big a part of the business are those 2 segments?
You mean how big FMCG is in U.K.?
Life Science and FMCG.
Life Science is -- just give me a second here, Life Science is around GBP 30 million.
And FMCG?
FMCG, what could that be? That should be around GBP 25 million roughly in U.K.
Okay.
GBP 25 million, GBP 30 million.
For like for last year, right? Or in the quarter?
No, no, it's for full year, yes.
Yes. Okay. And on the U.S. and particularly in fashion because fashion has been difficult, but it's good to hear that the churn rate is almost gone. And how -- because you phrased fashion as still challenging. Is it mostly that...
I lost you.
Accelerating, but the churn is gone. Can you just explain a little bit?
I missed some of the words, but I think I captured it. So no, I think it's -- in North America, it's -- for a while we had a problem with the churn rate was really high and it was low and then it come the trade war things and it went up again, but now it's stable. So that is very low. It's a good base. And the good signal with that one is also that we can see that the pricing now is stabilizing. For a while, competitor start that was extremely aggressive was offering 20% or 30% lower price than market price because of empty space. And so hopefully, that now is stabilizing that they don't need us anymore and utilization is going up. And we can also see that we have more SKUs now than we have had in a couple of quarters. So we are calculating the offers and prices on several customers. And we can also see that some of our existing customers even show some growth. So -- but I must say we cannot -- it's really hard to say. I've said this before, it's been changing quarter-by-quarter in North America. But for the moment, it looks better again. It's -- but we also are working hard to sell more in the Lifestyle segment as well. And a good thing for us in the last quarters, we have managed to gain more customers in like cosmetics and other products. So we are also trying to open up other verticals more to compensate for fashion because we are still I believe -- we don't think we will see a big boom in Fashion in America. So new verticals is important for us in -- especially in omnichannel that we are good at, but we also look in other areas as well.
Yes. But if you look at the churn rate because the churn rate has been high. When did this start? Is it quite recently started to almost disappear? Or has that been going on for a while?
No, it's pretty recent. We started a good trend in Q1. In Q2, there was almost no churn. But even in Q4, Q3 -- Q4 was hard for customers to leave. But last year in Q2, Q3, we had a higher churn rate. So it's been much more stable this year. So it looks better.
Perfect. And then finally, maybe if you can talk a little bit about the timing of this, of the Print & Packaging review, when do you expect to see the results from that? Or when will the review be done?
That will be -- the plan is to have it done in Q3. So after analyzing it carefully and to go through it and so then if we need to do actions, it will be in Q3.
[Operator Instructions] Mr. Nilsson, we have no further questions at this time. I turn the call back over to you for any additional or closing remarks. Thank you.
Thank you, George. That was my 69th quarterly report and the last one for Elanders. So I want to thank everyone that has been listening to me during the years. And -- but it's been really good to hand over to Florian and Asa. So I feel confident that we will have a good future. So thank you, everyone, and have a great summer. Thank you.
Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.
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