Afry AB

Today we published the report for the third quarter. So a warm welcome to this interview with our CEO, Jonas Gustafsson. So welcome, Jonas.

Thank you, Katrine.

So what's your view on the report?

Well, first of all, in the quarter, we faced a bit more mixed market. And despite that, we delivered an improved EBITDA margin. And with that, I'm pleased. So the EBITDA margin ended up at 6.1% and that's better than last year's 5.4%. So we had an improvement also when you adjust for the calendar effect that was roughly eight hours in the quarter. We saw some different development in the divisions, but strong development in infrastructure and energy that was really driving the improvement compared to last year. And then moving over to sales that ended up at 6 billion, and that was roughly on the same level as last year, so flat growth level compared to last year. And that is really reflecting the market that we faced in the third quarter. We saw different development between divisions, and we had positive adjusted organic growth in four divisions, while process industry faces a more challenging market, and here we had negative growth in the quarter. Good news is that the order stock remains stable at around 20 billion, but also here variations between division, strong pipeline in energy and a bit more challenging in process industry. And I also have to say that I'm pleased to see that the infrastructure improvement program continues to deliver according to plan.

So all in all, we had a quarter with improved profitability in a mixed market. So what's your view on the market?

Well, as I said, we really faced a mixed market in the quarter and starting with the positives, the energy segment, here we see strong underlying demand basically in all markets that we operate in. And then we had really stable demand in transport infrastructure. The real estate segment continued to be weak as well as the pulp and paper segment. And that has been weak now for quite some quarters. And then we have seen an increased uncertainty across industrial segments and the demand for consultants of service into IT and telecom continues also to be weak.

So let's take the temperature of the divisions, starting with infrastructure.

And here we are basically meeting two different markets, one stable demand on transport infrastructure and a weak demand in the real estate segment. And with that said, I'm pleased to see that we continue to improve our EBITDA margin driven from the improvement program we started a year ago. So stable and good development in infrastructure.

Okay, so over to industrial and digital solutions.

Yeah, meeting a mixed market. We have some segments like defense industry, food and life science with good demand, but then we have weak demand in telecom and IT and a bit more uncertainty. So they had a flat development compared to last year.

And process industries?

Yeah, and here we really face a more challenging pulp and paper market, and we have seen that for quite some quarters. This is affecting our top line as well as our EBITDA margin. So we are driving now a lot of activities, selling more on operational service, adjusting capacity in process industry.

Any projects you would like to highlight?

Yeah, then we can highlight the assignment we had with SSAB with their ambition to decarbonize the steel production in the plant in Luleå. So that's a really significant and super interesting order for us and for SSAB, of course.

And then the energy division?

Yeah, and this is really our highlight and positive because there's so strong demand in the energy segment across all markets and in all sub-segment. And we have seen a stable development, but also building strong order stock pipeline. And highlighting one order was to Australia, to Queensland Hydro, a pump storage solution where we actually are world leading in that technology. So a very good and strong order into a new interesting market for us, Australia.

And then finally, management consulting.

Yeah, basically flat development compared to last year, facing a bit more challenging market in the bio industry, but operating on good levels, so flat.

Finally, tell me about AFRI's focus right now.

Well, basically, we stick to our three areas. First of all, continue to drive improvement in the infrastructure division. It's roughly 40% of our revenue, so the program in infrastructure to continue to drive that is key. The second one, of course, to continue to drive sales in the segments where we have a strong position and where there is strong demand, energy is one of them, but also defense, industry, food and life science, to continue to push and also take market shares in those segments. And the third one is really to adjust and to be flexible. We see now a lower demand in pulp and paper segments. So adjusting into that, but also to be very agile because we said market is very mixed right now. So you need to be prepared to increase capacity, but also decrease capacity depending on the market. So that's the three areas that we continue to focus on.

That was all for today. Thank you so much, Jonas.

Thank you, Katrin.

Thank you so much for watching. And you will find the full report on AFER.com.