Second quarter of 2024 in brief

• Sales totaled SEK 2,439 million (2,478)
• Operating profit (EBITA) increased to SEK 245 million (198)
• EBITA margin of 10.0% (8.0)
• Profit after tax was SEK 169 million (155)
• Earnings per share, basic and diluted, rose to SEK 0.63 (0.58)
• Strong cash flow from operating activities amounted to SEK 434 million (240)
  

Although the Group’s second-quarter net sales were marginally lower year on year, we achieved a 2.0 percentage point increase in the EBITA margin to 10.0%. Nolato notes that the initiation and implementation of measures to strengthen profitability generate results. In addition, the Engineered Solutions business area is progressing according to plan, allowing for a greater focus on addressing new market segments.

Business area performance

Medical Solutions: Sales were unchanged at SEK 1,365 million (1,364); adjusted for currency and acquisitions, this was a decline of 1%. Operating profit (EBITA) increased to SEK 149 million (138) and the EBITA margin to 10.9% (10.1). Most market areas experienced stable volumes. In vitro diagnostics (IVD) grew compared with a weak quarter last year. During the first quarter, it was reported that one of Nolato’s customers in the Other category was affected by a product recall, which had a negative impact on Nolato. The situation has remained the same in the second quarter, and will likely also impact the second half of 2024. Pharmaceutical Packaging has experienced slightly lower volumes because of inventory adjustments and geopolitical effects on customers following a strong 2023.

Engineered Solutions: Sales totaled SEK 1,077 million (1,114), a 4% decrease adjusted for currency and acquisitions. Operating profit (EBITA) increased to SEK 108 million (72) and the EBITA margin to 10.0% (6.5). Consumer Electronics volumes declined, mainly due to a previously significant VHP customer reducing volumes. Automotive and Hygiene volumes grew, but at a lower rate than in the first quarter. The Other category saw good growth, with the consumer discretionary sector continuing its recovery having been impacted by economic conditions.

Operations within Materials (formerly EMC) generated higher volumes compared with last year. Strong growth for new products and areas of technology within automotive and new markets are resulting in increased market share and growth; however, this was partly offset by lower sales for telecom, with network equipment volumes continuing to decline during the quarter.

Sustainability
An important part of Nolato’s ambitious and structured climate-related work has involved setting science-based emissions targets in line with the Paris Agreement. These emissions targets were validated and approved by the Science Based Targets initiative (SBTi) in June. Adapting our targets to the latest climate science findings will enable Nolato to continue to help mitigate the effects of climate change in line with the aims of the Paris Agreement, thus promoting a sustainable future.

Comments from the CEO
Christer Wahlquist, President and CEO of Nolato AB, commented:

Within the Engineered Solutions business area, the effects of previous VHP deliveries have now been phased out, and the adaptation of the Chinese business in terms of geographic location and production requirements is complete.

In Medical Solutions we have experienced a temporarily sluggish market climate. Our project portfolio is healthy, but we have had fewer new project starts than normal recently, in addition to which a customer had a product recall, which has negatively impacted us. However, we are delighted about the signing of a long-term cooperation agreement, which at full-scale production, within a five-year period, is expected to generate annual sales in the region of SEK 700 million. The contract is an important milestone for Nolato. Investments of just over SEK 100 million will be charged to the second half of 2024, and we are allocating significant project resources.

Initiatives to adapt total costs, alongside strategic price revisions, are having the desired effect, while, in the short term, we are also seeing trends that mean the third quarter could have slightly clearer vacation effects than in recent years. In addition, we have a strong financial position that enables us to expand alongside our customers at good profitability.

Summary of first six months of 2024
Overall, the Group’s sales totaled SEK 4,881 million (4,954) in the first half of the year, which is a decline of 2% when adjusted for currency and acquisitions. Operating profit (EBITA) increased to SEK 483 million (391) and the EBITA margin to 9.9% (7.9). Cash flow from operating activities was very strong, totaling SEK 570 million (315); net financial liabilities amounted to SEK 1,107 million (1,163) and the equity/assets ratio increased to 54% (52).