Addtech AB (publ.)

Welcome to the ADTECH Q1 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Nicholas Stenberg and CFO Malin Enerson. Please go ahead.

Thank you, operator, and most welcome to everyone to ADTECH's first quarter report presentation. Today's setup is that we will use approximately 15 minutes to summarize and give our comments on the results and then open up for questions. As usual, just a brief summary for any newcomers. A quick run-through of the key fundamentals of ADTECH. We are a group of 150 plus independent and strictly decentralized companies operating in 20 countries with a clear business-to-business offering. We operate in six business areas. all with the clear strategies and the value proposition centered around niche products and solutions primarily to manufacturing and infrastructure sectors. We have our successful dual growth engine approach focused to develop and grow the business organically together with our local entrepreneurs and then complement and strengthen our strategy strategic niches with acquiring leading niche companies with a strong offering and fund our acquisitions primarily by own cash flow. That's how the model works. size-wise we have now a turnover rolling 12 of around 23 billion and run the operations with an EBITDA margin at around 16 percent and employ slightly less than 5 000 employees throughout the organization and a small and efficient central team there you have ADTECH in a brief summary with that said let's head on to the quarterly highlights All in all, we can summarize a good start of the new fiscal year. Despite the geopolitical uncertainties, the market situation improved for the group with high customer activity and a very solid order intake, broad-based, I would say. Total net sales increased by 6% during the quarter, organically in line with last year and no effects from FX this quarter. Our EBIT increased with 11% and we improved our margin compared to last year to a high level of 16.6%. We strengthened our cash flow and closed two acquisitions during the quarter. A bit more on net sales. The overall business situation was good, as I said. We grew top line 6%, which means it was from acquisition. but solid contributions primarily from business areas automation, electrification and safety. Segment wise, if we summarize all business areas, the main drivers in the quarters were electronics with products and solutions for electrifying equipment. Special vehicles had a good quarter primarily towards mining and defense markets. Solar contributions also from medical and also transport sector where railway and marine were the main contributors also the niche segment traffic safety also this quarter contributed in a good way with the continued positive development all in all high customer activity as I said the broad-based order intake positive book the bill During the quarter, in part of the business, we've seen a tendency for customers to place some framework orders to hedge against uncertainty and feared price increases and delays going forward due to the uncertainties that we have around us. I will come back with more details about market development in each business area very shortly. EBITA then increased with 11%, also here, solid contributions from automation, electrification and safety. We continue to improve our gross margins across the board, so all business areas increased gross margins. It's very satisfying. And we report an improved EBITA margin, as I said, 16.6%. The positive development is primarily due to continued improvements in the product mix and solid contributions from acquisitions, but also positive effects from active pricing initiatives and, of course, also earlier communicated restructuring measures in a handful of companies, primarily in automation and safety, where we now see good effects. We strengthened our cash flow and profitable working capital remained at high level. A few words on each business area then. From the top, starting with automation, as you can see in the slide, the business situation clearly improved in the first quarter. A broad-based increase in sales and a good leverage on both earnings and margins. and the market situation strengthened. We have now had five quarters in a row with a sequential improvement in order intake and that is a strong indication for us. The underlying demand for product solutions for defense industry remained very strong. Also, order intake in mechanical industry, medical and process had a positive development. Within medical it's primarily OEMs supplying diagnostic and analytical equipment and within segment process it's the food processing OEMs that are the main drivers. So a solid recovery in automation that we've been waiting for and clear positive effects on earnings and margins. Moving on to electrification, also a very strong quarter where market situation was strong. a very good order intake here. Net sales increased with 27%, driven by a solid business momentum in basically all main segments. Mechanical industry and defense, the only exceptions. The latter, defense industry, must due to very tough comps. Here we have projects that are not linear. It can come one or another quarter. It's also great to see that our battery group continues to develop positively with good contributions to many of our customer segments. Strong contributions from acquisitions, primarily Ramme in Germany, which are focusing on the marine segment. In summary, a very strong quarter for allocation, broad-based growth, solid contributions from the choir companies as I said, An EBITA growth of 43 percent with a high margin of sixteen point two. And in the margin, I would say that it's partly boosted by very strong performance from acquisitions with a slight positive seasonal effect in this quarter. Energy experienced a very positive market development in the first quarter. The electrical transmission business recovered in a very good way with high order intake after period with fewer project rollouts and the lower order intake earlier quarters. High demand also in distribution and transport while power generation was stable. Sales were down in the quarter as expected due to very tough comps, but with an improved product mix, our margins increased to 19.5%. Forward looking we have a very strong backlog and good business momentum indicating a strong year but tilted towards the second half of the financial year as we indicated already in the Q4 report but again the products are now coming in just as we had expected the overall market situation within industry was good in the quarter but with variations Solid demand in mechanical industry, electronics, subsea and waste management, but companies exposed to forestry and sawmill industry order intake remained weak. We have been repeating this now for a number of quarters. Customer activity is there and a couple of orders were won during the quarter, but we don't see any general trend shift here. Also, special vehicles met a somewhat weaker market situation where demand being negatively affected by geopolitical uncertainty and higher oil price that we had during the quarter. Total net sales decreased with 3%. Again, this is primarily due to the sawmill volumes. And these effects will of course remain until this market situation improves. Moving on to business area process where the overarching market situation was, I would say, stable in the quarter. Demand was good in marine segments, solid order intake related to regulatory demands and shift to more green fuels. Also, energy and special vehicles had a positive development. Stable in mechanical industry, weak in medical technology, towards tough comps and also forestry and process industry was on the weaker side. And here we again see that activities are good. There are a lot of discussions on products, but the customers are still holding off on investment decisions and products are also continuing to being a bit postponed. All in all, a rather challenging start for process with 2% increase in sales, but this is entirely driven by contributions from acquisitions. Earnings and margins were down to the lower business volumes, but adjusted for revaluations of consideration. We actually saw a slight improvement on the margins also for process in this quarter. Last but not least, safety. which had a very positive development in the quarter, a good business development and solid order intake. The market remained strong within traffic safety and the energy, electronics and engineering manufacturing industry experienced a positive trend in the quarter. Regarding data centers, we saw a bit flattening out on high levels within safety during the quarter. And here we see a little shift towards more local product procurement in data centers. And this will seemingly give potential for several companies in the group moving forward. No clear signs, however, I would say in the construction sector, it's an important sector for safety. So the companies exposed to building installation continue to beat to meet overall weak demand. But overall sales increased by 10%, approximately half coming from acquisitions, positive effect on earnings and margins, also fueled by both product mix that was improved and the previously implemented cost measures in a couple of companies that we've been talking about earlier last year. Well, to sum up this picture, I would say a very solid quarter, positive market situation, high customer activity on group level, variations still between different segments, customers and geographies. And it is clear that the geopolitical uncertainty still adds to the kind of hesitant approach in investing among customers in a number of segments. With that said, I give the word to you, Malin, for a few more details.

Thank you, Niklas. You have mentioned a lot of important matters already. I will dig down in some of them. As you heard, our EBITDA grew and the profit margin improved compared to last year. The EBITDA margin increased by one percentage point adjusted for revaluations of earnouts. and we had just another quarter with a record high margin. We had good contributions from acquisitions, but the development was also attributable to an improved product mix, good pricing power, and the fact that restructuring measures taken in businesses with persistently lower market conditions are starting to have a clear impact now. We can see that the trend line of total cost in relation to sales still has a good development. Regarding other operating incomes and expenses, revaluations of earnouts were more or less in line with last year, while currency effect from revaluation of balance sheet items had substantially less negative effect on other income and expenses than last year. Our cash flow from operating activities strengthened compared to the same quarter last year by stronger margins and efficient working capital. Cash conversion was stable at the satisfactory level. Inventory levels increased somewhat during the quarter due to acquisitions and the usual summer buffering, but also due to price increases and supply chain disruptions. All in all, inventory levels are still at healthy levels in relation to sales and order backlog, and profitable working capital remained at 81% sequentially. Our financial position remained very strong during the quarter and our gearing and leverage decreased compared to last year, even though our net debt has increased. We have a very satisfactory headroom in our financing structure, which strengthened further during the quarter through the rising of new debt. While we do not have any specific debt targets, we believe our strong balance sheet provides significant capacity to fund future acquisitions and organic growth investments. And with that said, I hand over back to you Niklas for more information about acquisitions, I believe.

Yes, thank you, Malin. And as you can see in the picture, we have had a strong first six months of this calendar year. So a lot of very good companies coming into the group. We completed two more acquisitions during the quarter. Two Dutch companies, one Staka Holding, supplying customized outdoor enclosures, and Nihus Engineering, selling patented system solutions for road and rail construction machinery. So we are proud to welcome them both to the group. Together they add about 250 million SEK in turnover with accreted margins. Given our increased footprint internationally, as you can see in the picture, it's a lot of acquisitions outside of the Nordics. We can really see that we have a growing awareness of ad tech in a lot of new markets. And we continue to fill our pipeline with high performing companies. that are well spread across both niches and geographies and business areas. So this combined with the strong balance sheet as Malin just went through, this gives us a lot of firepower. And I really expect to keep a high acquisition pace going forward. So the acquisition market looks very promising, I would say. And to wrap up this very good start to the fiscal year, high customer activities quite across the board. And we can see that despite again the geopolitical uncertainty and the very tough comps in energy and industry, We grew top line and we especially grew earnings with 11% and even better on earnings per share And strengthen the cash flow and balance sheet remains very strong so Given our agility and strong positions in attractive niches, we have a positive view of the continuance of this financial year tilted towards the second half, as we have been indicating before. So with that said, over to Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Opo Tani from Goldman Sachs. Please go ahead.

Hi, good morning, Christopher. Sorry, good morning, Nicholas, good morning, Christopher, and good morning, Marlin. Two questions on my end. Morning. Morning. Two questions from my end, maybe just one on margin and then one on industry. I suppose margins have been quite strong for a few years on quarters now, but particularly strong in the last few quarters. Could you just give us thoughts on how you see this level in coming quarters and any thoughts on what's driving margins higher?

Yeah, it's like you said, we have had a really good development of margins. Of course, they can vary a bit quarter over quarter. If we look at The group as such, we see that the kind of rolling 12 margin is relevant with the continuous ambition to gradually increase the margin. Then it can vary a bit, of course, between the different business areas. Automation is coming from a lower level and as we've been indicating in early quarters we have foreseen that automation should come back on the level there are now while on the other hand we can see that for instance industry having the kind of tough comps on sommelier industry will most likely as it looks right now rather maybe decrease a little bit but it's all in all we think it's the rolling 12 margin is relevant going forward again with as always an ambition to increase the margins And then, as I also indicated, in electrification, a very strong margin this quarter, which is partly boosted, not very significantly, but a little bit due to a very strong performance from acquisitions this quarter. And especially Ramme in Germany has a little seasonality effect with the strong Q1 and a bit weaker Q2. due to that they closed down production and so forth for a couple of weeks. But all in all, we think, yeah, we are satisfied with the margin levels.

Great. Thanks very much. And just one more on industry. I think you've sort of telegraphed that sort of headwind and forestry has existed for a few quarters now. Is there anything new in terms of special vehicles or the end markets there? sorry, on special vehicles? Yes, within industry, just the other end markets may be driving sort of weaker organic growth in the long term. Is it just forestry or sort of special workers and other stuff as well within industry?

No, I mean in general I would say we see a positive development on most niche segments in industry. The sawmill headwind is of course the big issue for industry. This quarter we saw a little bit weaker order intake from some segments in special vehicles and that is due to disruptions in supply chain and also higher oil price that has given a little bit of a hesitation. But we still see special vehicles having a good market situation. So I would say also electronic production, mechanical industry, we have a good development there. So I would say it really runs down to the sawmill market.

Great. Thanks very much. Thanks for giving my questions.

Thank you.

The next question comes from Max Bako from Seb. Please go ahead.

Thank you, operator, and hi, Niklas and Malin. My first question... Yeah, hi. The first question also relating to the industry segment, basically a follow-up. As you mentioned yourself, the margin down 1.3 percentage points here in the quarter, or 1.4 adjusting for earnouts revaluation. Is that... Yes, so

There might be, again, it's always very difficult to guide here because it depends on many different variables, but we said going into this year that as long as the solar market is hampered, this will have an effect on the margins. I think there is probably, as of now, rather maybe some additional slight negative potential on the margin in the coming quarters. I would not expect any dramatic change, but from this level it's maybe a little bit more there.

Okay, understood. And then on the same topic which also addressed during the presentation automation and safety segments both saw very nice profitability improvements here in the quarter which was something we discussed last quarter as well and still quite stable on a sequential basis, the margin then compared with Q4. Would you say that these levels are reasonable to expect going ahead or is there any seasonality in these two segments that should be considered?

No, I would not say any specific seasonality. As you can see from early years, we see some effect, of course, from the summer period. But apart from that, on the margin side, I would say that automation is on the right track, meaning that automation should have a slight better margin than rolling 12. while in safety I would say rolling 12 is probably an irrelevant number also going ahead.

Okay, very clear. And then the final one, just to clarify it, I mean you highlight here in the quarter a well-filled order book, positive book to build and also that the market situation has strengthened during the quarter. and then of course we have the specific dynamics in each respective segment but to me it sounds like that you at least expect organic sales growth to gradually improve in the coming quarters versus the basically zero percent that we have seen during the last two quarters. Is that a correct interpretation?

Yeah, I mean, only looking at our order intake in the quarter and the order book, again, considering tilted towards the second half. And of course, the all uncertainties that might have different effects. But our expectations is that organic growth should gradually improve, but again, tilted towards the second half.

Very clear. That was all from me. Thank you very much. Thank you.

The next question comes from Carl Boakvist from ABG Sundal Collier. Please go ahead.

Thank you. Good morning. First on automation here, we've talked about it, but just when thinking about the margins now, and you've been talking about the cost savings initiatives, etc., From this step, if we think about the 14% level, is there more that can be realized from your own initiatives or is it now from this level more about getting a bit of organic growth back and that you get leverage on volumes and so on, which in turn could drive profitability?

Yes, good morning. Yeah, I would say that as of now, it's more relating to top line growth and that will generate incremental margins, potential incremental margin improvements. So the cost initiatives, again, as of now, I would say are already in the numbers.

All right. And then just on industry here, EVEN WHEN WE TAKE THE EARNOUT REVALUATIONS INTO ACCOUNT IT'S AT 20% AND DESPITE THE FACT THAT SOIL MILL VOLUMES ARE LOW AND I ACKNOWLEDGE YOUR COMMENT HERE EARLIER ABOUT THAT IT COULD HAVE A SLIGHT NEGATIVE IMPACT BUT JUST THE OTHER PARTS HERE DO YOU THINK THAT KIND OF THERE IS MORE TO COME IN OTHER AREAS OF INDUSTRY THAT COULD SUPPORT OR RAISE MARGINS OR IS IT MORE ABOUT to your point earlier about kind of rolling 12 with a slight negative impact from sawmills. That's how we should think about it.

Yeah, I mean it's always in a group like Adtech and also in industry there are a number of companies that should increase their margins, but if you look at industry as a whole, I would say that my comment before is not that I really see at this point that we have any other segments or markets that would kind of balance up that effect from sawmills. So rather a slight decrease until the sawmill market comes back.

Final question is on just looking into your second quarter now ahead. and primarily on energy and industry and correct me if I'm wrong here but when just looking at the organic growth that these businesses saw last year it seems like both had quite good quarters so would it be just fair to assume or take that into account when assessing the year-over-year development for those two divisions now for your current second quarter?

Yeah, I think it's quite clear if you look on the second quarter last year and my comments now, where industry has had a very strong effect from some sawmill projects in the second quarter last year, and primarily from that side, and also Energia having a strong quarter, and as I said, a really strong product inflow now in energy but that is more those products are more I would say tilted towards the third and fourth quarters so I think your assumption is probably correct.

Great and then the follow-up would be because then from Q3 it looks like those kind of comparables for lack of other words are better in that sense, right? That it's primarily Q2 where you still have this challenge year over year, and then from Q2 things look more normalized.

I mean from Q3, yes. That's, yes.

All right, very good. Thank you.

Thank you. The next question comes from Gustav Bernebled from Nordia. Please go ahead.

Good morning, it's Gustav here from Nordea. I thought maybe just to build here. Hi, good morning. Just to build on Carl's question on energy. It sounds like you are incrementally more positive here in terms of orders where you phrase it very strong. Can you just elaborate a bit more on this and maybe just recap to the previous discussion we had here in Q4 where you sort of highlighted permitting constraints and a bit of a bottlenecks and so forth and so forth.

Yeah, good morning. So What we have always said here is that we will not see a linear development. Even if the underlying demand is very, very strong on the markets where we are, it will be variations quarter by quarter. So the fact that we had a little slower project inflow due to all of these restraints that we usually talk about in the last maybe one, two quarters, We now see a very strong comeback, so to say. But I think we have to look at this market in a more longer perspective and just realize that it could be variations. on a quarterly basis. And this permit situation, I would say, is still there. It can still be delayed due to appeals and all of these things. But again, the kind of outlook at this point looks very promising.

That's very clear. No, no, that was good. Just a follow up on that because it feels like you commented on, you know, as you say, a decent market still and despite that, I mean, you still comment on volumes picking up first in Q3 and Q4. Is it sort of, should we assume that it's longer lead times on these projects as well and that we should expect it to be more, you know, tilted towards 2027 than the orders you take here in Q1 or?

No, I think my point is that as it looks as of now, and we elaborate on the order book, we should see effects from this in the third and fourth quarter.

Perfect. And then just, is it possible to comment anything specific on specific number on the book to bill here in the quarter?

Yeah, as you know, we don't report figures like concrete on order intake, but it's, if I say it's clearly above one. As a reminder if you wish to ask a question please dial pound key 5 on your telephone keypad.

The next question comes from Johan Lankvist Sundian from DNB Carnegie. Please go ahead.

Hi, Niklas and Malin. Hi. Thank you for taking my questions. I actually just have one follow-up question to all the good questions that have been asked. It's on the safety segment and the comment on the data center exposure, where you mentioned that you're seeing a trend for more kind of local procurements and it could create big opportunities for more out there companies. Can you please elaborate a little bit what that really means, how many companies can be involved and how can that kind of segment or that exposure change for you in the coming year or so?

Yeah, I mean We have had, looking back, primarily a couple of companies in the UK with a very, very strong situation on data centers. What we have seen, as I said, it has flattened out a little bit on that side and that is because we we can see a shift towards procurement being more on a general European basis for a few players towards more local procurement. So what we can see now and it's very difficult even if I wanted to I couldn't say an exact kind of potential here but it's quite clear that I would say it's It's a number of companies that are indicating that they are in discussions on projects and it's basically in all Nordic markets. So that's kind of the shift I talk about. If it flattens out a bit on the more kind of The bigger procurement project is now more tilted over to local procurement. So we see a positive potential here, but I couldn't elaborate on any figures here.

If I may have a follow-up there. when you say more companies, are you still only referring to companies within the safety segment or are there many companies in other segments as well?

Yeah, it's actually also in I would say both energy, electrification, so it's actually a bit broad-based here.

Interesting.

And another question as well on a different topic is the project postponement that we talked about a bit. You say that they still persist any kind of change throughout the second quarter of indication of change behavior on that sense?

No, not really. It's still kind of the same thing. I've been talking about this kind of confidence in investments, and I think the kind of ongoing disturbance that we see over and over, not in our kind of company, but more the geopolitical situation. I would say particularly affecting more very high energy consuming production like chemical industry and so forth. Here we can see that there is a lot of products. We have a good order book and a lot of discussions, but we still see these hesitations. So I would say no real change here. And what about lead times?

if the client would decide to go ahead tomorrow? Would it be possible for you to deliver or would it be normal for you to deliver for the client during the fall or is it something for 1st of 27?

No, I would say that A number of these products have been planned for quite a long time, so we could most likely start to deliver quite instantly during the fall. It, of course, depends on the different product, but to quite large extent, we could start supplying during fall.

There are no more phone questions at this time so I hand the conference back to the speakers for any written questions or closing comments.

So thank you all for good questions. We can conclude that we don't have any written questions either. So with that said, we wish you all a great week and eventually good summer. Thank you very much.

Thank you all.