Essential risks and uncertainty factors

Essential risks and uncertainty factors
The Group’s major customers are primarily active in the manufacturing industry and agreements with these customers normally run over two or three years. Elanders’ ten largest customers represented 45 (46) percent of the total net sales in 2023. Elanders has one customer whose sales exceed 10 percent of the Group’s net sales. In 2023, sales to the Group’s largest customer amounted to 17 (14) percent while sales to the next largest customer amounted to 9 (12) percent of the total net sales. Sales to these customers are made to several of their divisions, on several continents and is based on multiple stand-alone agreements.

What Elanders does
Elanders’ strategy is not only to be a supplier to our larger customers but to be a strategic partner who builds the basis for long-term business relations. Elanders has worked together with several of the Group’s largest customers for many years.

Essential risks and uncertainty factors
Elanders is dependent on IT-systems for production, logistics and sales. Disruptions or cyberattacks on the systems can mean disturbances and have a negative impact on the Group’s reputation, profitability and financial position. Otherwise, the risk that the Group will suffer a major stop in production is relatively small. There are no considerable interdependencies neither between the units within the respective business area nor between the business areas. There are only a few cases where there are no alternative suppliers of critical input goods.

What Elanders does
Elanders works to identify and prevent risks that can lead to disturbances in production. The work involves regular controls of the production sites where identified areas of improvement are addressed with action plans. The Group has business interruption insurance that covers the loss of margins for up to twelve months. Elanders also works continuously to ensure processes for monitoring and control regarding IT security in order to respond to increased threats to cyber security. Additionally, in 2023 Elanders has increased the number of training sessions within IT security to increase employees’ awareness.

Essential risks and uncertainty factors
Elanders’ main operating costs are cost for goods for resale and other production material MSEK 2,688 (3,342), personnel costs MSEK 3,993 (3,583) and freight costs MSEK 2,443 (3,522). These accounted for 69 (73) percent of total operating costs in 2023.

What Elanders does
Elanders sees no direct risk that these costs will increase in the near future to such a degree that it would have a significant effect on group results. Elanders also has the possibility to within some agreements pass on increased costs to the customer.

Essential risks and uncertainty factors
In business, daily operations can give rise to disputes.

What Elanders does
Elanders is not aware of any dispute that could have a significant effect on the Group’s financial position. The Group’s insurance program contains global liability insurance that covers general liability, product liability, crime fidelity, business interruption and limited protection against environmental damage. The Group also has liability insurance for members of the Board and senior officers.

Essential risks and uncertainty factors
Elanders needs access to competent and committed employees. Competition in the labor market is fierce, and there are high demands on the companies’ ability to attract, develop and retain competence as well as to ensure the availability of good leaders in order to achieve the Group’s operational and strategic goals. To live up to today’s expectations from employees requires a strong focus on areas such as leadership, opportunities for influence, work environment, sustainability, human rights and company culture.

What Elanders does
Elanders works to be an attractive employer. The Group strives to offer a modern, stimulating and safe working environment. This is done through good leadership characterized by transparency and respect for each other. Elanders also strives to be at the forefront regarding issues relating to environmental and social sustainability, as an important factor to attract the new generation of employees.

Essential risks and uncertainty factors
The most tangible business cycle sensitivity is in group operations that supply our customers in the manufacturing industry, particularly in automotive and consumer electronics. Sales to customers in foods, cosmetics, medical devices, pharmaceuticals and the public sector as well as to consumers are less affected by the general economic situation.

What Elanders does
The Group work consciously to reduce the negative influence of business cycles by increasing sales to customers in less sensitive trades and customer groups as well as by increasing the geographic spread of sales. The expansions in supply chain management rarely involve significant investments in fixed assets and lease agreements are signed to match the customer contracts. A large part of the running costs in new projects are variable and can be adjusted in case of volume changes.

Essential risks and uncertainty factors
Wars, conflicts and other political unrest can have a devastating effect on the world around us. When it occurs in areas the Group or our customers and suppliers operate in, it also has a direct impact on Elanders’ operations. The Group has been affected in many ways since Russia invaded Ukraine in February 2022. Some of the Group’s customers have subcontractors in Ukraine and Russia. These customers have therefore started to have some problems with their supply chain. At the same time, inflation has gone up and energy prices increased.

There are several ongoing conflicts and a great deal of uncertainty in the world right now. It is difficult to predict the exact impact going forward. Increased scope of new or existing conflicts could have a significant impact on the Group’s operations.

What Elanders does
The political unrest in general also affect the Group in the long term in how and where Elanders choose to do business. The Group currently has no operations in Russia or Ukraine.

Elanders follows the situation in the world and works with measures for possible scenarios that may arise.

Various parts of the Group help with humanitarian support on the ground in Europe, both for the employees affected and the refugee wave that is expected to continue.

Essential risks and uncertainty factors
Global outbreaks of pandemics, such as the COVID-19 pandemic, can bring widespread disruptions locally as well as globally. Should COVID-19 continue or if a new pandemic would occur, there is a risk that the Group’s operations will be negatively affected as demand for the Group’s services and products may decrease. Possible crisis measures and infection control restrictions implemented in different countries could also affect the Group’s operations.

What Elanders does
In the event of a pandemic, Elanders’ main priority is to protect our employees and their surroundings to the highest extent possible against the spread of infection. Measures will be taken to ensure that guidelines and recommendations of national authorities are followed. To soften any effects of lower demand, a close dialogue with our customers and other partners is of utmost importance. To a certain extent Elanders can adapt operations to changes in demand through furloughs, fewer temps and by implementing cost savings.

Essential risks and uncertainty factors
Climate change carries a range of risks. The public expects to see an accelerations of climate transition as well as adaptations to minimize negative effects. The need for drastically reduced emissions and transparency of companies’ negative impact on the environment is driving new regulations in regions where Elanders operates. Customers may demand new types of logistics solutions. Increased demands to quickly adapt to new technologies create increased needs for investments and financial resources to carry out shifts and phase out old technology.

What Elanders does
Elanders is part of the development and maintains a continuous dialogue with customers and other stakeholders. Possibilities to fully switch to fossil-free energy and incorporate new technology solutions are continuously evaluated.

Generated positive cash flows going forward create the conditions needed for investment in new technology. Should additional funding be required, discussion will be held with shareholders or other external financiers.