Ferronordic Ab · OMXSTO:FNM
Ferronordic Ab — Investor Presentation (May 2021)
40 slides from Ferronordic Ab's investor presentation, May 2021
Slide 1: Company Presentation
IN FERRONORDIC Company Presentation May 2021
Slide 2: Introduction to Ferronordic
Introduction to Ferronordic Russia/CIS • Dealer of Volvo Construction Equipment, Terex, Dressta, Rottne, Mecalac and Sandvik Group • Aftermarket dealer for Volvo and Renault Trucks in parts of Russia • Founded in 2010 • Sales of new and used construction • Listed on Nasdaq Stockholm equipment since
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 2021 1,585 4,783 97 Revenue by Activity (LTM) Revenue by Industry - Russia/CIS (2020) Contracting Other Quarries & Oil & Gas Services Revenue 2% Aggregates 4% 11
Slide 4: Value pyramid
Value pyramid Vision • To be the leading service and sales company in our markets Mission • To support the growth and leadership of our customers Values & • Quality • Excellence Operating Principles • Respect • Diversified experience • Innovative solutions Our Offer • Complex approach • Superior ser
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 3,4% 3,8% 3,8% 2,3% • Rich in oil, gas and minerals 1,3% 0,6% 1,5% 1,3% • World’s largest forest land • A significant portion of the Federal Governmen
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 China Finland
Slide 7: National Projects
National Projects • Designed to transform the economy and promote economic growth • Recently signed July Decree is Demography extending the terms of achieving the Environment USD 42 Bln Roads plan from 2024 to 2030 and updating USD 55 Bln USD 65 Bln the previous platform • Detailed program to be pre
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 Market starts to recover 17 489 after 2014-2015 economic downturn 13 525 13 568 11 7
Slide 9: Germany
Germany Europe’s largest truck market Heavy truck registrations in Germany (units) 68 450 70 264 67 797 66 441 65 280 60 218 61 940 58 574 55 167 55 215 51 588 48 827 50 427 40 322 Heavy truck registrations Average truck toll mileage index* 9 Source: Germany registrations data compiled by Volvo Truc
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 97 outlets outlets outlets outlets outlets outlets 326 731 767 782 847 1,585 FTEs FTEs F
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 Product Range o
Slide 15: Russia & Kazakhstan
Russia & Kazakhstan Coverage Egvekinot Murmansk Kirovsk Petrozavodsk St.Petesburg Arkhangelsk Velikiy Novgorod Cherepovets Vologda Karpogory Norilsk Smolensk Velsk Vorkuta Yaroslavl Koryazhma Yagodnoe Kaluga Labytnangi Moscow Sharia Syktyvkar Tula Noviy Urengoy Magadan Belgorod Ryazan Kirov Ust-Omch
Slide 16: Germany
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 70,000 registrations in 2019 and 50,500 Nordhausen in 2020 Bautzen Leipzig Kassel Görschen • 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 s
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
Contracting services Client: GV Gold, leading gold mining company in Russia Location: Vysochaishy Mine and Ugakhan Mine Project staff: 216 people (as of April 2021) Fleet size: Vysochaishy Mine: 49 units (35 haulers, 2 graders, 7 excavators and 5 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. Expanded in Q4 2020 • 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 re
Slide 23: Volvo & Renault Trucks: Russia
Volvo & Renault Trucks Russia Authorized aftermarket dealer for Volvo and Renault Trucks in parts of Russia • Currently operating in 11 locations • Platform capacity utilization • 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 455% 420% Index = 100 in 2011 381% 291% 155% 151% 158% 199% 134% 113% 110% 109% 106% 92% 140% 69% 63% 99% 103% 96% 61% 45% 55% 52% 53% 100% 95% 73% 19% 23% 71% 1 2 Market (units) Operating profit (SEK) Revenue (SEK) 25 1) Source: Russian
Slide 26: Development of revenue & operating profit
Development of revenue & operating profit Revenue Operating Profit & Operating Margin1 4 783 4 635 358 357 328 967 3 747 983 274 3 241 2 567 9,5% SEKm SEKm 187 3 816 8,4% 132 7,5% 7,1% 1 658 3 652 87 7,9% 1 469 7,3% 5,9% Russia/CIS Germany 26 1) 2015-2016 refer to adjusted EBIT, i.e. operating profi
Slide 27: Cash flow & capital allocation
Cash flow & capital allocation Working Capital Development Net debt/(cash) Development 660 531 476 354 SEKm SEKm 230 13% 213 183 10% 83 8% 5% 4% -20 -33 NWC NWC as % of LTM revenue Capital Expenditure Development • Focus on working capital efficiency and return on invested capital 173 165 • Asset li
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 1 Return on capital employed 28 1) Operating profit plus financial income (LTM) in relation to capital employed (e
Slide 29: Best first quarter to date
Best first quarter to date Russia/CIS unit sales up 31% in recovering market Record first quarter operating result and margin despite currency headwinds Growing aftermarket sales in Germany Continued investments in service network and organisation Strong cash flows as working capital remains low Cre
Slide 30: Q1 2021 Group financial highlights
Q1 2021 Group financial highlights SEK 1,267m Group revenue up by 13% to SEK 1,267m (+13%) revenue • Russia/CIS total revenue was up +54% Y-o-Y in RUB but +20% in SEK to SEK 1bn due to sharp decline in the RUB • Equipment sales increased by 22% (+57% in local currency), aftermarket sales was flat (+
Slide 31: Q1 2021 Income statement
Q1 2021 Income statement Q1 2020 Q1 2020 Q1 2020 Q1 2021 Q1 2021 Q1 2021 % change • Total revenue of SEK 1,267m SEK MM Russia / Russia / Germany Group Germany Group Group CIS CIS o 80% (75%) Russia/CIS and 20% Germany New units sold 227 172 399 297 136 433 9% o 62% equipment and trucks, 24% aftermar
Slide 32: Q1 2021 Y-o-Y operating profit development
Q1 2021 Y-o-Y operating profit development 100 3 -4 80 4 -4 29 60 SEKm 40 80 65 51 20 0 EBIT Q1 20EBIT Q4Rus/CIS 19 gross profit Rus/CIS SG&A and net Germany gross profit Germany SG&A and Germany EBIT Q4 EBIT 20 Q1 21 increase other expenses increase net other expenses restructuring costs decrease i
Slide 33: Revenue and margin development
Revenue and margin development Revenue Trends • LTM revenue in Russia/CIS increased by SEK 164m to SEK 3.8bn • LTM revenue from German operations decreased by SEK 15m to SEK 967m Revenue Consolidated (Rolling 12 months) Revenue Russia/CIS (Rolling 12 months) Margin Trends • Q1 2021 consolidated gros
Slide 34: Development of cost and return on capital employed
Development of cost and return on capital employed SG&A Development ROCE1 LTMLTM S.G&A S,G&A Expenses Expenses to to Revenue Revenue Return Return on on capital capital employed employed Russia/CIS Russia/CIS Return on capital Return on capital employed employed Group Group • Group LTM SG&A expenses
Slide 35: Q1 2021 Cash flows
Q1 2021 Cash flows Q1 2020 Q1 2021 Q1 2021 Q1 2021 • Net cash from operating activities decreased SEK MM mainly due to negative operating result and Group Russia/CIS Germany Group higher working capital in Germany Cash flows from • Higher tax payments negatively impacted Cash flows from operating ca
Slide 36: Q1 2021 Balance sheet
Q1 2021 Balance sheet Q1 2020 Q4 2020 Q1 2021 • PP&E decreased Y-o-Y mainly on RUB SEK MM Group Group Group depreciation Property, plant & equipment 605 507 568 • In Russia/CIS net working capital decreased from SEK 120m to SEK 76m or from 3% to Cash & cash equivalent 639 603 665 2% of LTM revenue,
Slide 37: New Financial Objectives and Dividend Policy
New Financial Objectives and Dividend Policy KPI Objective Q1 2021 LTM Double the 2020 revenue in its 1.0 x Revenue 1 current markets by 2025 (in SEK) 2020 revenue Operating margin Above 7% 7.5% Below 3 times (over a business Net Debt / EBITDA (0.1) x cycle) The ambition is to pay at least 50% of ne
Slide 38: Outlook
Outlook “The business environment remains uncertain, mainly as regards supply chain constraints. Despite this, we expect our markets to continue to recover in the remainder of 2021. In Russia/CIS, our optimism is supported by higher commodity prices and increased activity on the so- called national
Slide 39: Ferronordic: 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 40: Ferronordic
m~ FERRONORDIC