Afry Ab

Good morning and warm welcome. My name is Linda Pålsson. I'm the CEO of AFRI and I will present our Q2 results together with our CFO Bo Sandström. Starting off with a summary of the second quarter, our work with the ongoing strategy review progressed according to plan. Our efforts during the quarter focused on implementing our new group structure, which has included a comprehensive restructuring of the organization, as we are taking steps now to improve efficiency. We will continue our work on optimizing the portfolio and addressing our cost base in the coming 12 months, which we will come back to a bit later in this presentation. At the same time as we're laying the foundation for profitable growth, we are navigating a challenging market. We see that market remains cautious due to the current uncertainty in the global economic environment. And while the pattern varies across segments and regions, this uncertainty is broadly affecting client decisions and investments. We also had a weak calendar in Q2, and this reflects in our result for the quarter as well. Our net sales declined compared to last year and was in addition to the weak calendar also impacted by a significant currency effect that had a negative impact on the growth. And while we had a total growth of minus 7.2, the organic growth adjusted for the calendar effects was minus 2.5%. Our EBITDA margin was also impacted by these effects, but we delivered an EBITDA margin excluding items affecting comparability of 6.6%, which actually was in line with the calendar Justin margin last year. And despite facing challenging market conditions in some segments, I am pleased that we continue to grow our order backlog, which increased both sequentially as well as year over year. That is very important to us and underscores our strong and competitive position in the market. And taking a closer look at the market, uncertainty remains in some industrial segments. On the other hand, the defense segment continues to be very strong and we see a high demand for our services in this area. The pulp and paper segments has been challenging for quite a while now, and demand is still low for new investments projects in this area. We are, however, seeing some signs of increased market activity, especially in Latin America. In the energy sector, the demand is still strong across the segments. The interest around nuclear is steadily growing and countries are evaluating long term energy solutions and new technologies. This provides opportunities for us as we have a very strong expertise and position in the nuclear sector. What we see in the energy sector overall is that long-term demand remains high, but there are differences and variations across energy sources and regions over time. For instance, in solar and wind power, we experienced these regional differences where the demand is currently very high in Asia, but more modest in Europe and the Nordics. And finally, in the infrastructure sector, the demand is stable in transport infrastructure. And there we also see initiatives for increased resilience that are driving long-term trends and demand. The real estate sector has been weak for a while now and remains so in this quarter as well. We're going into the divisional performance. Infrastructure division was impacted both by currency and calendar effects in this quarter. Despite these effects, the underlying EBITDA margin improved as they continued to work to increase their efficiency. Industrial and digital solution experienced a challenging market in some segments and working actively to adjust its capacity. They were also impacted by negative calendar effects in this quarter, which pressured profitability further. In the process industry division, sales declined slightly, mainly impacted by the low demand in investment projects for pulp and paper. But despite this, they deliver an EBITDA margin of 10% in the quarter, with successful project closings that contribute to the profitability. The energy division continues its solid performance on both sales and margin with high activity in several segments. In management consulting, the high demand for energy and sustainability consulting was not able to fully compensate for the continued weak demand in bio industry, which impacted the sales in this quarter. And as you know, this is the final quarter. We will report the results in this structure. And from Q3, we will report in our three new global divisions. As we now are working through a reorganization and defining a new strategic direction for AFRI, it's essential for us to keep up business momentum and maintain our most important focus, delivering value to our clients. And with that, I would like to highlight some great project wins that we have announced in this quarter. Starting out here in Sweden, we have taken an important step in our partnership with BIA system Hägglunds. We have signed a new framework agreement covering engineering services in product development, procurement, quality and production across several areas of the operation. This agreement builds on a strong track record of delivering high quality engineering solutions for the defence industry. And we look forward to contributing to innovation and strengthening the societal security together with our client. In the quarter, we were also selected by the Norwegian Nuclear Decommissioning Agency to support the safe decommissioning and radioactive waste management of Norway's nuclear research reactors. Under this agreement, AFRI will deliver expert services and strategic advisory to ensure full compliance with the strict security regulations that are very critical in the nuclear sector. And finally, we secured an important contract in Switzerland for the modernization of the Western Bypass in Zurich. So AFRI will be responsible for the operating and safety equipment as part of the highway upgrade, as well as the rehabilitation of traffic systems. The Western Bypass plays a key role in reducing traffic in Zurich, and with our expertise in transport infrastructure, we will support the continued safe, efficient and sustainable operation of this vital route. And I'm also very happy to highlight the first acquisition in our new group structure. Yesterday, we announced that AFRI has entered into agreement to acquire RETA Engineering. RETA is a Brazilian provider of comprehensive project and construction management services with a leading foothold in the mining and metal sector. Reta's strong local presence and competence will strengthen AFRI's existing operations in Brazil, which includes over 1,200 employees, to unlock new growth opportunities across the Americas. As mining methods are essential to meet the increasing demand for materials that are critical to the industrial transition, this acquisition reinforces AFRI's role in advancing the engineering and industrial transition. Detta will be integrated in our segment mining and metals within the global division industry. And I look forward to welcoming all Retta employees to AFRI in Q3 when we expect to finalize this acquisition. And I think that is a nice conclusion before I'm handing over to you, Bo.

Thank you, Linda. I will, as usual, cover the financials, this time for Q2 2025. Q2 showed net sales of 6.7 billion and EBITDA of 438 million. On rolling 12 months, we are now at 26.5 billion on net sales and we fall right below 1.9 billion on EBITDA, following two quarters with a really weak calendar. Calendar is the driving factor for the decline on rolling 12 months EBITDA compared to 12 months ago and explains approximately 165 millions of the negative movement. In the quarter with a net sales of 6.7 billion, adjusted organic growth came in at negative 2.5%, where volume continued to be pressured by capacity adjustments during the last number of quarters. As seen in previous quarters, the decline in volume was partially compensated with positive pricing. We estimate higher average fees of approximately 5% in the quarter, which is in line with the last number of quarters. Total growth is reported at negative 7%, affected also by a negative calendar of more than nine hours and FX effects from a strengthened SEC compared to last year. The negative adjusted organic growth in Q2 was sequentially lower and most divisions saw sequentially lower growth levels. Process industries was the exception and showed sequential improvement, but remain on negative growth also in this quarter. The energy division remain in growth mode, but showed somewhat lower growth than the really strong growth in Q1. The order backlog developed favorably and increased to 20.7 billion, improving sequentially and to last year. Currency adjusted, the backlog has improved 5.6% to last year, with improvements primarily from divisions infrastructure and process industries. The energy division maintained the largest order backlog in relation to net sales, but at the level in line with last year adjusted currency effects. EBITDA excluding items affecting comparability came in at 438 million and the EBITDA margin was at 6.6%. Negative calendar affects EBITDA with 104 million and the EBITDA margin with 1.4 percentage points to last year. So that calendar adjusted margin was fully in line with last year. Currency changes has marginal impact on the EBITDA margin, but on absolute terms, we estimate a negative currency impact of 20 to 25 million on EBITDA compared to last year. As seen throughout 2024 and in Q1, divisions infrastructure and energy continue to support the margin development of the group when adjusting for their respective calendars. Process industries report a 10% EBITDA margin in Q2 following successful project completions. Management consulting is well below last year, primarily due to a positive one-off in the comparative quarter. Utilization is again lower than last year, but for Q2, the decline is in line with what we saw in 2024 following the particularly weak Q1. All divisions show negative year-over-year development for utilization in Q2. And as stated last quarter, utilization will be a clear focus for A3 going forward. We have some effects remaining in IDS related to the Agency Work Act, but from next quarter we are expecting those effects to be fully absorbed. In quarter two, we report 91 million restructuring costs related to changes in the group structure, reported then as items affecting comparability. The restructuring costs relate to redundancies, both on managerial and operational levels. With the new group structure now operational, we will continue to address our cost base as well as making portfolio optimization in quarters to come. And we estimate further restructuring costs of 200 to 300 million in the next 12 months. We are expecting the payback time of these restructuring efforts, both the one in Q2 and the ones in the next 12 months, to be on average one year. Thus, we are on average expecting an EBITDA run rate uplift of the same level as the restructuring costs when they occur. Cash flow from operating activities in Q2 was marginally lower than last year. Available liquidity remain around 4 billion, and the sequential movement on net debt is driven by the dividend payout in the quarter. On net debt to EBTA, we report 2.9 times. This is higher than last year, despite the lower net debt, given the weak calendar last 12 months and the restructuring costs in Q2, both affecting EBTA. Normal seasonality for the remainder of the year would provide significant deleveraging in the last quarter of the year and take us to around or below our financial target of 2.5 times. And with that, I leave back to you, Linda.

Thank you for that, Bo. And I would with that like to give you an update on what we have achieved this quarter, but also a bit of what's coming ahead. So setting the foundation for profitable growth. During the quarter, we have prepared the implementation of the new group structure, which was announced earlier this year. We performed a comprehensive restructuring of the entire group structure, which included an assessment of all parts and layers of the organization. With these changes, we have now set the foundation for driving profitable growth, enabling us to streamline operations and structurally address our cost base. At the same time, we maintained a strong focus on keeping business momentum and continue to increase our order backlog. The new group structure became effective as of 1st of July. And in Q3, we will report the new group structure through the three global divisions, energy, industry and transportation and places. And looking at our ongoing strategic journey, we now initiated the first steps during Q1 this year, focusing on the build-up, setting the group's strategic direction, initiated the portfolio review, and conducted the assessment of AFRI's operating model. Now, during Q2, we worked resentlessly with restructuring efforts and operational readiness to ensure that we are ready to operate in the new structure from 1st of July. And going into the second half of 2025, we're now accelerating the strategy development of the new structure, focused on our core segments strategy and the client-oriented and high-value offerings. And we will present our updated strategy at our Capital Markets Day on the 4th of November this fall. In parallel, we are driving the implementation for a fit for purpose operating model, including continuously addressing our cost base and also operational efficiencies. And lastly, we are very excited to welcome you to our Capital Markets Day on the 4th of November here at our headquarters in Solna. We will spend half a day together where me and my executive team will present AFRI's updated strategy and our profitable growth plan. This will be an in-person event and we will share more information as we get closer to the day. And with that, we will open up for questions.