Interim report 2024, January - March - Seite 3

In Asia, primarily driven by Japan, where we have had the biggest impact from pre-purchase orders, we still see weak demand and continued high inventory levels at our largest customers. Here, we expect to receive new order only towards the end of the year.

What is somewhat surprising is the development in North America, which is taking a small step back after a good development at the end of 2023. The slightly weaker order intake in the US is related to the Anybus embedded products, where we still have a couple of our biggest customers holding inventory. Overall, we still see that North America has the prerequisites for a good development over the year.

THE ACQUISITION OF RED LION CONTROLS HAS BEEN COMPLETED

On April 2nd, we gained access to our largest acquisition to date, Red Lion Controls. The acquisition is consolidated from the first of April. Several activities are now underway to realize the sales synergies that have been identified, but also review other collaborations and cost synergies between the companies. After the acquisition, we have been able to verify several of our expectations regarding products, technology, and company culture. The management of Red Lion has received us as new owners in a very positive and constructive way. We expect the integration to take place during 2024 and well into 2025.

Over the past five years, Red Lion has shown organic growth of 4% with an average adjusted operating margin of 20%. HMS sees good opportunities to improve organic growth by utilizing the joint sales channels in an efficient manner.

The order intake rate for Red Lion in the first quarter has shown growth compared to last year’s second half and we can also see a gradual improvement during the quarter. This is in line with our expectations for the recovery of the North American market. We will report Red Lion separately during the integration period. You will find more information about Red Lion on page 4 in this report.

OUTLOOK

The message has been similar since mid-2023 – In the short term the market continues to be characterized by inventory adjustments and general uncertainty due to the macroeconomic situation. There are still high inventory levels at many customers, but we expect a gradual improvement in order intake in 2024, especially in the second half of the year.

Customers’ willingness to invest in digitalization, productivity improvements and sustainability is high and underlying demand is still considered to be good, although there is some concern linked to how the industry will be affected by weaker consumer purchasing power, increasing energy costs and the difficult security policy situation.