Boreo Oyj : Esitys

decent profitability & excellent cash flow

Q323 Webcast | november 2, 2023

AGENDA

• Q3 2023 highlights
• Q3 2023 financials
• Q&A

Q323 Highlights

Decent profitability

2.9m€ operational EBIT (Q322: 3.0m€)

Uplift in margin to 7.1% (Q322: 6.8%)

Good gross margin development, sales in pressure

Excellent cash generation

Cash conversion** 208% (Q322: 23%)

ROCE at 11.2% (Q223: 11.2%)

ROTWC* at 30.1% (Q223: 29.0%)

acquired growth +0.5m€, negative organic growth

Acquired growth +0.5m€

(Delfin Tech, Filterit, J-Matic, Lamox) Organic growth -0.5m€ (SSN, FNB)

Stable financial position

Net debt / operational EBITDA 2.4x (2.4x Q223)

* ROTWC: Operational EBIT R12 / Average (trade) working capital R12	3
** Cash conversion: cash conversion before financing items, see for details in the quarterly report

Decent earnings growth & capital efficiency in r12

Without sany: operational ebit 5.9%, earnings growth 19% & ROCE 11.8%

	Operational ebit (€) & ebit%, r12		Roce%		net debt/operational ebitda

4.7 % 5.7 % 5.8 % 5.9 % 5.4 % 5.4 % 5.4 % 5.4 % 5.7 % 5.6 % 5.7 %

					2.5 X	2.5 X	2.2 X	2.4 X	2.4 X	2.4 X
12.3 % 12.2 %	13.5 %
11.4 %	10.9 % 10.9 %		11.3 % 11.2 % 11.2 %	1.6 X
9.7 %	10.4 %

						8.4	8.7	9.6	9.6	9.6
			7.2	7.1	7.6
		5.9
	5.4
3.9
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
2021	2021	2021	2021	2022	2022	2022	2022	2023	2023	2023

Q323

+14%*

(15%)

minimum annual average operational EBIT growth

					70	77	84	85	86	86		34.6	33.9	30.9	36.0	35.7	36.5
									26.7
				62
		48	53
41	44
				8.4	8.7	9.6	9.6	9.6
		7.2	7.1	7.6
3.9	5.4	5.9
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q1	Q2	Q3	Q4	Q1	Q2	Q3
2021	2021	2021	2021	2022	2022	2022	2022	2023	2022	2023	2022	2022	2022	2022	2023	2023	2023
	AVG Capital Employed, R12		Oper. EBIT, R12	ROCE%
				11.2%							2.4x
					(15%)								(2-3x)
					minimum								net debt /
					ROCE							operational EBITDA

Notes: Figures adjusted for continued operations and * R12 ending 30.9.2023

4

Good performance in the two largest business areas

Stable gross margins & improved profitability demonstrating resiliency of our companies

40 %
				Gross Margin%, R12			EBIT%, R12
35 %
							29 %29 %30 %30 %31 %
30 %
			27 %28 %
25 %25 %25 %25 %25 %25 %26 %
25 %25 %26 %25 %25 %24 %25 %
25 %
							19 %20 %		20 %
20 %									19 %19 %19 %19 %
15 %
			10 %10 %10 %10 %10 %10 %10 %
10 %
	6 % 6 % 6 %	7 % 7 % 7 % 7 %
5 % 5 % 5 % 5 % 6 % 6 % 6 %
				5 % 5 % 4 %
5 %								2 % 3 % 2 % 2 %
0 %
Q1/22 Q2/22 Q3/22 Q4/22 Q1//23 Q2/23 Q3/23 .	Q1/22 Q2/22 Q3/22 Q4/22 Q1//23 Q2/23 Q3/23 . Q1/22 Q2/22	Q3/22 Q4/22 Q1//23 Q2/23 Q3/23 . Q1/22 Q2/22 Q3/22	Q4/22 Q1//23 Q2/23 Q3/23

Commentary

Electronics BA

• Decent profitability despite weakening demand
• Delfin with a good start as part of Boreo
• SSN's performance improving gradually from challenging H123

Technical Trade BA

• Strong performance of Machinery's
  Power business, Pronius, Muottikolmio, Filterit and J-Matic
• Machinery's Construction Equipment business facing headwinds, significance limited

Heavy Machines BA

• Good performance of Putzmeister operations (7.1%)
• FNB goes operationally in the right direction, but improvements done not yet reflected in financials

Group

.

Electronics

.

Technical Trade

.

Heavy Machines

Excellent cash conversion driven by release of working cap

Successful management of working capital during the past quarters

						151 %
						14.8
					96 %
74 %					9.5
	46 %		51 %	44 %
4.4		10 %	4.5	4.4
	3.0
		0.7
Q1	Q2	Q3	Q4	Q1	Q2	Q3
2022	2022	2022	2022	2023	2022	2023

Commentary

15m€ of operative cash flow in R12

• Cash conversion of 151% in R12
• C. 8m€ of working capital reduced since 8/22

Q323 cash conversion 208%

• Working capital release of 3m€ in Q3
• Successful management of working capital group-wide, in particular at Machinery and in Heavy Machines
  BA

Cash flow generation in focus

• As of Q323 c. 29m€ of operative working capital at the balance sheet
  - positive trend since Q222
• Target to continue with the reduction of working capital - normal sustainable levels closer to 25m€

Cash Flow, R12		Cash conversion %, R12

Figures adjusted for continued operations

Capital efficiency continues to improve

Rotwc without Sany 32.4%

60 %

									ROTWC%, R12
50 %							50 %50 %	49 %
			42 %	43 %	44 %				44 %44 %	43 %43 %42 %43 %
					40 %
40 %					38 %
		28 %29 %30 %
29 %	27 %27 %27 %
30 %												19 %18 %
20 %
													16 %
														10 %12 %
10 %														8 % 9 %
0 %
Q1/22	Q2/22 Q3/22 Q4/22 Q1//23 Q2/23 Q3/23	. Q1/22	Q2/22 Q3/22 Q4/22 Q1//23	Q2/23 Q3/23 .	Q1/22 Q2/22 Q3/22 Q4/22 Q1//23 Q2/23	Q3/23 .	Q1/22 Q2/22 Q3/22 Q4/22 Q1//23 Q2/23 Q3/23
		Group	.	Electronics	.	Technical Trade	.	Heavy Machines

Figures adjusted for continued operations

Commentary

Return on capital -mindset

• Good steps in rooting the return on capital & capital efficiency -mindset to the organization

ROTWC up from 27% to 30% in R12

• As a result of stable earnings and strong cash flow, ROTWC on the rise
• Negatively impacted by the weaker profitability of SSN and FNB compared to previous years

Without SANY, ROTWC at 32,4%

• The discontinued SANY businesses in Finland and Sweden continue to weaken performance the next quarters
• ROCE excl. SANY 11.8% (vs. 11.2% reported)

Focus on earnings generation and cash flow

Companies showing resiliency in challenging times

1

Confidence in our ability to

deliver over 15% average annual

operational ebit growth

in the future

Profit generation

• Business environment continues to be challenging - companies show resiliency in a tougher environment
• Increased focus on cost control
• Diversification across various industries & strong market positions of companies provide protection

2

Continued efforts to optimize working capital in the coming quarters

Capital efficiency

• As of Q323 c. 29m€ of operative working capital at the balance sheet
  - positive trend since Q222
• The normal sustainable level of working capital for current group of companies closer to 25m€

3

Target to maintain leverage at the low end of the 2-3x leverage target

Financial position

• Continuation of work to evaluate attractive acquisition opportunities
• Preparedness to act on opportunities when a solid financial position is maintained, and shareholder value is created

8

Distribution of the 2nd part of the dividend for 2022

Continuation on the path of paying increasing dividend per share

0.30

769

2015

0.31

794

2016

dividenD per share development, 2015-2022

	0.40
0.32	0.33
		1,039
		846
820

			0
2017	2018	0.00	2020
2019

0.42

1,111

2021

0.22

593

0.22 593

2022

Dividend policy

• 'Target to annually increase dividend per share, taking into consideration capital allocation priorities'

Distribution of the 2nd instalment

• Based on the authorization of the AGM, the Board of Directors decided on the distribution of the 2nd dividend installment for 2022, EUR 0.22 per share.
• The record and payment dates are November 9 and November 17, respectively.

Dividend per Share

Dividend, k€

9

AGENDA

• Q3 2023 highlights
• Q3 2023 financials
• Q&A