Ferronordic Ab · OMXSTO:FNM
Ferronordic Ab — Investor Presentation (May 2022)
44 slides from Ferronordic Ab's investor presentation, May 2022
Slide 1: Company Presentation
IN FERRONORDIC Company Presentation May 2022
Slide 2: Introduction to Ferronordic
Introduction to Ferronordic Russia/CIS • Dealer of Volvo Construction Equipment, Dressta, Rottne, Mecalac and Sandvik • Aftermarket dealer for Volvo and Group Renault Trucks in parts of Russia • Founded in 2010 • Sales of new and used construction • Listed on Nasdaq Stockholm equipment since 2017 •
Slide 3: Introduction to Ferronordic: Development
Introduction to Ferronordic Development 1 Employees Revenue (SEKm) Outlets 2010 (Start) ~160 1,184 6 1 Employees Revenue (SEKm) Outlets Q1 2022 1,817 6,690 113 Revenue by Activity (Q1 2022) Revenue by Industry - Russia/CIS (Q1 2022) Contracting Other Revenue 1% Transporation Oil & Gas Services 2% 2%
Slide 4: Value pyramid
Value pyramid Vision • Being the leading service and sales company in our markets Mission • Support the growth and leadership of our customers Values & • Quality • Excellence Operating Principles • Respect • Diversified experience • Innovative solutions Our Offer • Complex approach • Superior servic
Slide 5: Vast market with long term potential
Vast market with long term potential Russia/CIS Russia at a Glance Russia’s GDP Development5 • Population: ~144 million1 • Area: 16.4 million sq. km1 4,6% 3,4% • Rich in oil, gas and minerals 2,3% 1,3% 1,5% 1,3% • World’s largest forest land 0,6% • A significant portion of the Federal Government inc
Slide 6: Significant need to improve infrastructure
Significant need to improve infrastructure Road density in Russia and Kazakhstan is low Rail density is low too 192 122 Road density (km road per 100 sq. km land area)1 172 180 Rail density (km railway per 1,000 sq. km of land area)2 96 129 132 75 61 53 67 43 24 23 17 20 6 14 5 5 6 7 4 Kazakhstan Fr
Slide 7: National Projects
National Projects • Designed to transform the economy Demography and promote economic growth Environment USD 36 Bln Roads • Program is extended from 2024 to 2030 USD 48 Bln USD 56 Bln and previous platform is being updated • Almost half of the budget earmarked for infrastructure, including the road
Slide 8: Pent-up demand
Pent-up demand Import of construction equipment to Russia (units) Young market – sales of high-quality construction equipment only took off 2006/2007 Import of high-quality brands gains 21 009 20 573 momentum 18 627 17 489 Market starts to recover 16 858 after 2014-2015 economic 15 979 downturn 13 5
Slide 9: Germany: Europe's largest truck market
Germany Europe’s largest truck market Heavy truck registrations in Germany (units) 80 000 120 70 264 70 000 67 797 65 280 66 441 68 450 115 60 218 61 940 60 000 58 574 110 55 167 55 215 55 386 55 277 48 827 50 427 105 50 000 40 322 100 40 000 95 30 000 90 20 000 85 10 000 80 0 75 2008 2009 2010 2011
Slide 10: Strategic objectives
Strategic objectives Leadership in the market Aftermarket absorption Expansion into related for construction rate of at least 1.0 x business areas equipment and trucks Expansion and Industry leading digital development of Geographic expansion service and sales platforms contracting services 10
Slide 11: Strategic cornerstones
Strategic cornerstones Customer Orientation Build on Strong Brand - Volvo Customer centricity World leading manufacturer of trucks and construction equipment Leading service and product availability Strong brand position (leading in Russia) Tailored customer solutions (including contractin
Slide 12: UN Sustainable Development Goals
UN Sustainable Development Goals 7 12 13 14 15 3 4 5 10 Minimum emissions and waste Injury-free objective High-quality, long-life, fuel- efficient and safe machines 4,282 hours invested in Health & Safety trainings Maximizing uptime for efficient production 50,000 hours of training and d
Slide 13: Strategic development
Strategic development 2010-2013: Phase I 2014-2016: Phase II 2017 and onwards: Phase III establishing platform streamlining to handle market decline leveraging market recovery and company maturity 12 75 75 73 74 113 outlets outlets outlets outlets outlets outlets 326 731 767 782 847 1,817 FTEs FTEs
Slide 14: Product offering
Product offering Volvo CE Volvo & Volvo & Ferronordic Dressta Rottne Mecalac Sandvik Renault Trucks Renault Trucks Since Since Since Since Since Since Since Since 2010 Russia 2017 Russia 2020 2012 2014 2016 2016 2021 2019 Kazakhstan 2019 Kazakhstan Product Range Product Range Product Range Product o
Slide 15: Russia & Kazakhstan coverage
Russia & Kazakhstan Coverage Murmansk Kirovsk Kaliningrad Petrozavodsk St.Petesburg Arkhangelsk Belaya Gora Velikiy Novgorod Cherepovets Tver’ Vologda Karpogory Norilsk Smolensk Velsk Vorkuta Yaroslavl Alexandrov Koryazhma Nezhdaninskoe Kaluga Labytnangi Gurovo Moscow Sharia Syktyvkar Tula Noviy Ure
Slide 16: Germany coverage
Germany Coverage • Ferronordic expanded to become dealer for Volvo and Renault Trucks in Germany in January 2020 Hannover Barleben • Germany is Europe’s largest trucks market Dessau with 50,500 registrations in 2020 and 55,400 Nordhausen in 2021 Leipzig Kassel Görschen Bautzen • Ferronordic’s sales
Slide 17: Complexity of Customer Demand
Moving torward further customer integration Complexity of Customer Demand Business Consultancy Business Services Open Platform Total Cost of Ownership Customized Upcycling Solutions Part Sales Services Rental Segment Experience Grow in new Machine/Truck Sales Finance Segment Ferronordic’s Offering 1
Slide 18: Aftermarket focus
Aftermarket Sales Aftermarket focus • Proactive customer coverage based on real- time data from the existing machine population Share of sales Share of sales (LTM) Russia/CIS (LTM) Germany • Proprietary system transforms machine telematic signals (e.g. VCE’s CareTrack) into Other Other Contracting 1
Slide 19: Connectivity & Digitalisation
Connectivity & Digitalisation Focus on growing sales Telematics System Rules Engine Customer Proposals Sales Action Follow Up • Telematics systems, e.g. • Signals from the telematics • Sales leads and concrete • Responsible sales • Customer proposals Volvo CE’s CareTrack, systems flow through the cu
Slide 20: Contracting services
Contracting services Integrating with our customers Contracting services Traditional method Contracting services • Part of strategy to become increasingly integrated in the business of our customers Machines • In addition to supplying and maintaining machines, we provide customers with operators to
Slide 21: Contracting services: GV Gold
Contracting services Client: GV Gold, leading gold mining company in Russia Location: Vysochaishy Mine and Ugakhan Mine Project staff: 267 people (as of April 2022) Fleet size: Vysochaishy Mine: 54 units (37 haulers, 2 graders, 8 excavators and 7 dozers) Ugakhan Mine: 15 units (12 haulers, 2 excavat
Slide 22: Component and machine rebuild centre
Component and machine rebuild centre Opened in Ekaterinburg in Q4 2019 • Rebuild of components and machines for customers and contracting services • Rebuild of engines and gearboxes for Volvo CE and Volvo and Renault Trucks • Chop-off and recycling of parts • Components to be resold to customers wit
Slide 23: Volvo & Renault Trucks Russia
Volvo & Renault Trucks Russia Authorised aftermarket dealer for Volvo and Renault Trucks in parts of Russia • Currently operating in 11 locations • Platform capacity utilisation • Cross-selling and customer service Used trucks business launched in 2019 • Purchasing, restoring and selling used trucks
Slide 24: Volvo & Renault Trucks Germany
Volvo & Renault Trucks Germany Authorized aftermarket dealer for Volvo and Renault Trucks in parts of Germany • Ferronordic services and sells Volvo and Renault trucks, trades and restores used trucks and manages a trucks rental business • Ferronordic will invest to grow and improve network in area
Slide 25: Strong resilience and growth in market with upside
Strong resilience and growth in market with upside Russia/CIS 615% 589% Index = 100 in 2011 420% 381% 291% 199% 200% 213% 140% 155% 151% 134% 100% 99% 113% 103% 95% 110% 109% 96% 106% 92% 86% 91% 71% 61% 69% 63% 45% 55% 52% 73% 23% 19% 1 2 Market (units) Operating profit (SEK) Revenue (SEK) 25 1) So
Slide 26: Development of revenue & operating profit
Development of revenue & operating profit Revenue Operating Profit & Operating Margin1 6 690 6 750 550 20% 6 212 511 500 483 6 000 1 527 1368 450 5 250 4 635 400 15% 358 4 500 328 3 747 350 983 3 750 300 274 9,5% SEKm 3 241 SEKm 8,4% 10% 3 000 2 567 250 7,9% 7,8% 7,6% 7,3% 7,1% 5 163 187 4 844 200 5
Slide 27: Cash flow & capital allocation
Cash flow & capital allocation Working Capital Development Net debt/(cash) Development 300 10% 300 255 225 250 198 183 8% 200 200 143 140 137 6% 150 4% 3% SEKm 100 SEKm 100 3% 4% 2% 50 2% 0 0 0% -50 0% -100 -33 -26 -75 -100 -2% -150 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q1 2021 Q2 2021 Q3 2021 Q4
Slide 28: Return on capital employed
Return on capital employed Decline in 2019 related to working capital build- up and IFRS 16 German expansion added assets at end of 2019 2020 includes negative contribution from Germany Consecutive increase during 2021 1 Return on capital employed 28 1) Operating profit plus financial income (LTM) i
Slide 29: Good performance in turbulent time
Good performance in turbulent time Group • Business affected by conflict in Ukraine from end of February • 38% revenue growth to SEK 1,746m as demand remained strong Russia/CIS • Revenue increased 32%, partly due to machine product mix and growth in aftermarket • 9.0% operating margin, affected by S
Slide 30: Q1 2022 Troubled times
Q1 2022 Troubled times Sanctions • After 24 February, the EU and other countries have imposed far-reaching imposed on sanctions and restrictions on Russia, some of which affect our products Russia • Some of our key partners, including the Volvo Group, have suspended sales and deliveries to Russia •
Slide 31: Q1 2022 Group highlights
Q1 2022 Group highlights SEK 1,746m Group revenue +38% to SEK 1,746m (+38%) revenue • Russia/CIS revenue +32% to SEK 1,326m (+37% in RUB) • Equipment sales +37%, aftermarket sales +32% and contracting services +11% • German revenue +62% to SEK 420m (+56% in EUR ) SEK 108m • Equipment sales +80%, aft
Slide 32: Q1 2022 Russia/CIS operational highlights
Q1 2022 +37% Russia/CIS operational highlights increase in equipment sales (+42% in RUB) • In Q1 2022, the market for construction equipment grew by 25%1 • Before 24 February, strong demand was due to pent-up demand, strong commodity prices and continued spending on big infrastructure projects • Aft
Slide 33: Q1 2022 Germany operational highlights
Q1 2022 German trucks Germany operational highlights market declined 1% Y-o-Y • Based on registrations of new trucks, the total German market for heavy trucks was largely flat (-1%)1 • Rigids (-1%) declined while tractors were unchanged • Continued recovery in economic activity and a pent-up need fo
Slide 34: Q1 2022 Income statement
Q1 2022 Income statement Q1 2021 Q1 2021 Q1 2021 Q1 2022 Q1 2022 Q1 2022 % change • Total revenue of SEK 1,746m SEK MM Russia / Germany Group Russia / Germany Group Group o 76% Russia/CIS and 24% Germany CIS CIS FX (SEK/RUB, o 65% equipment and trucks, 23% 8.86 10.24 9.20 10.34 EUR/SEK) aftermarket,
Slide 35: Q1 2022 Y-o-Y operating profit development
Q1 2022 Y-o-Y operating profit development 200 -10 150 -45 80 17 -13 SEKm 100 65 50 108 80 0 EBIT Q4 19 EBIT Q4 20 EBIT Q1 21 Rus/CIS gross profit Rus/CIS SG&A and Rus/CIS provisions Germany gross profit Germany SG&A and EBIT Q1 22 increase net other expenses for doubtful debts, increase net other e
Slide 36: Revenue and margin development
Revenue and margin development Revenue Trends • LTM revenue in Russia/CIS increased by SEK 319m to SEK 5,163m • LTM revenue from German operations increased by SEK 160m to SEK 1,527m Revenue Consolidated (Rolling 12 months) Revenue Russia/CIS (Rolling 12 months) Margin Trends • Q1 2022 consolidated
Slide 37: Development of cost and return on capital employed
Development of cost and return on capital employed SG&A Development ROCE1 Return on capital employed Russia/CIS LTM S,G&A Expenses to Revenue LTM S.G&A Expenses to Revenue Return on capital employed Russia/CIS Return Return on capital employed on capital employed Group Group • Group LTM SG&A expense
Slide 38: Q1 2022 Cash flows
Q1 2022 Cash flows • The negative cash flows from operations Q1 2021 Q1 2022 Q1 2022 Q1 2022 were partly a result of an increase in SEK MM Group Russia/CIS Germany Group working capital Cash flow from: • Income tax and interest paid were also higher and partly relates to withholding tax Cash flows f
Slide 39: Q1 2022 Balance sheet
Q1 2022 Balance sheet • PP&E decreased Q-o-Q mainly due to SEK MM Q1 2021 Q4 2021 Q1 2022 depreciation and RUB depreciation against SEK FX (SEK/RUB, EUR/SEK) 8.67, 10.24 8.22, 10.23 9.06, 10.34 Property, plant and equipment 576 1,006 950 • In Russia/CIS, net working capital was largely unchanged Q-o
Slide 40: Russia standalone financial statements
Russia standalone financial statements Q4 2021, Q1 2022 and preliminary April 2022 SEK MM Q4 2021 Q1 2022 30 April 2022 SEK MM April 2022 FX (SEK / RUB) 8.22 9.06 7.27 FX (SEK / RUB) 8.18 ASSETS New units 56 Non-current PPE 635 529 653 Used units 15 Current: Total revenue 375 Inventories 1,243 861 8
Slide 41: Financial objectives and dividend policy
Financial objectives and dividend policy KPI Objective Last Twelve months (LTM) Double the 2020 revenue in its 1.4 x Revenue 1 current markets by 2025 (in SEK) 2020 revenue Operating margin Above 7% 7.6% Below 3 times (over a business Net debt / EBITDA 0.3 x cycle) The ambition is to pay at least 50
Slide 42: Outlook
Outlook As a result of the military conflict in Ukraine, the subsequent sanctions, counter-sanctions and suspended deliveries from some of our main partners, the prospects for our operations in Russia have deteriorated significantly. In addition, the impact of the sanctions on the Russian economy co
Slide 43: In the capital market
Ferronordic In the capital market 2010 2011 2013 2017 Volvo CE Russian 3-year SEK 400m bond SEK 500m preference shares Ordinary shares listed on distribution business was issued and listed on issued and listed on Nasdaq Nasdaq Stockholm and taken over Nasdaq Stockholm First North Premier SEK 200m ra
Slide 44: Ferronordic
IN FERRONORDIC