Alleima AB (publ)

Hi everyone and welcome to the presentation of the second quarter 2025 interim report for ALERMA. My name is Emelie Alm and I am head of Investor Relations. I'm joined by Göran Görkman, president and CEO, and Olof Bengtsson, CFO. So as usual, Göran and Olof will take you through the results and then we will have a Q&A session. You can ask questions either in the chat, in the webcast or on the conference call. And as always, safety is our top priority, and we trust that you know the safety routines of where you are located. So with that, I would like to hand over to you, Jaron.

Thank you, Emily. Hi, everyone, and thank you for listening. So I'll start with the highlights of the quarter. Well, I think we're performing okay in a challenging market environment with the mixed demand. Our broad exposure reduces volatility, but of course we note a negative organic top-line growth. Our order intake rolling 12 declined 2%, and revenues in the quarter minus 4% from high comps last year. A backlog is still good in important segments such as oil and gas, in nuclear and in medical, a good product mix and visibility for the near-term future. In the more volume business like industrial segment and in chem, petro, in Europe in particular, the backlog is weaker. Our adjusted EBIT margin declined to near 9.5%, which I think considering the lower revenues and a significant FX headwind shows resilience and a good leverage. And I take this as a proof that we are doing a lot of things right with our strategy. We have a good product mix. Excluding FX, the margin would have been 11.4%. But at the same time, there is room for improvement. So I think parts of the business is performing well, while others clearly have some challenges. We did not have any significant direct effects from tariffs, and we have been successful in passing along these costs to our customers. But even though we have production in the U.S., the pricing has, of course, increased, which is impacting demand. And the ongoing turbulence stemming from tariffs, trade barriers, has been lower than global economic environment and demand, which we now see effects from, with an increase in uncertainty and customers postponing their investments. Our financial position enables us to stay with our strategy, where we have several ongoing profitable growth projects. At the same time, we are actively reviewing our footprint and capacity, ensuring profitability also moving forward. To move to sustainability, as I've said many times before, we are generating positive impact both through our operations and our product offering. If I start with operations. Safety is always the top priority in Alema, and we are continuously and actively implementing measures to maintain safety as a top priority. And the development is, again, trending in the right direction, and the accident frequency is actually now on record low levels, which is something I'm very happy with. Our share of recycled steel remains high and over 80%. I think that's a good figure given our product mix. CO2 emissions are steadily decreasing both on rolling 12-month basis and year-over-year, and the reduction is 6% and 15% respectively. The proportion of female managers continue to increase now to 25.4%. And again, important to recognize this is only one aspect of the broader diversity inclusion initiatives. During the quarter, we announced that Cantal, together with their strategic partner Daniele, will deliver a pilot-scale electric process gas heater to M-Steel DRI plant in Abu Dhabi. This is the first time Cantal delivers its patented Protal technology for commercial purposes. The heater, which is compatible with hydrogen and natural gas, as well as a combination of the two, enables retrofitting and adds flexibility in our customers' choice of technology. The technology as such plays an important role in the transition towards more sustainable steel production and reduce the dependency of fossil fuels. I believe this is an important step in the scale-up development of Pratal technology. We will collect data, experience and know-how and will serve as a reference point, I would say, proof of concept moving forward. Moving into the market development. Overall, we continue to see mixed market sentiment and the macro environment uncertainty has increased. The market sentiment weakened, especially in Europe, and demand was in general continued low in North America. In Asia, demand held up better, but also there we noticed some signs of hesitation. We have momentum in several of our key segments, and I will walk you through the development in each segment, starting with oil and gas. And we noted... Of course, the volatility in oil price and the uncertainty has increased. However, we still view the underlying demand on high levels, and the project list of upcoming tenders and potential future order is solid. Last quarter, we said that the backlog for umbilicals were getting shorter, but we have now booked more orders, and we have not consumed backlog. The book-to-bill was above one in the quarter, and the OCD backlog remains very strong. Chemical and petrochemical year-on-year down. Europe is down the most, while North America more flattish, but on low levels. We also see an impact of higher uncertainty in Asia, but still on an okay level. Industrial segment. Last quarter, we noted an improving year-on-year demand in the industrial segment. This quarter, demand is worsening on the low-value ad products, which is what we normally is down-prioritizing when we don't need that volume. And this is especially clear in Europe, but also in North America, we noticed some. I mean, in North America, we noticed some rebound in quarter one. If this was due to pre-buys, it's difficult to say, as this business has been running low for quite some time. The biggest impact on North America we saw in quarter one came from oil and gas, nuclear, medical, and those segments are segments where we would not expect such pre-buys. and industrial HS still on an okay level. Industrial heating, flat demand year over year, and continued hesitance from customers in placing orders, which refers mainly to CapEx-related business. For the solar segment especially, we also have high comps from last year. However, demand was continued positive in some applications, for instance, ceramic elements for electronics, both including semiconductors in the glass industry, but weaker in solar and metals. Consumer demand is now on a good level, mainly driven by the white goods industry in the strip division. Medical continues to be strong with several drivers and momentum is strong across the product portfolio. Mining construction, flat underlying demand year over year. Nuclear, the high activity and growing demand continues, where we're building good backlog to execute for a long time. Transportation demand decreased year over year. Aerospace has a really long backlog, but with some tendency of inventory adjustments among customers. Sorry, automotive worsened. Hydrogen and renewable energy is still a bit mixed. This is a wider segment where some businesses are doing better than others. We booked orders for carbon capture and storage and for biofuels, but no clear signs that this is taking off quite yet. Looking to order intake and revenue, order intake rolling 12 amounts to 18.9 billion sec with a negative organic growth of 2%. This is mainly coming from the chemical and petrochemical and industrial segment, especially in Europe. North America is weak overall and Asia noted a slight setback. but on high levels. Industrial heating was flat on a continued low level. Nuclear, medical, consumer grew, while oil and gas was quite stable, though on a high level. Revenues declined organically 4%, where tubing control declined, while strip grew. Chemical and petrochemical and industrial heating noted the biggest declines, where we could see that the weak order backlog for those two segments impacted revenues in the quarter. Road in 12 months booked a bill of 97%, building backlog in oil and gas and nuclear, while consuming backlog in chem, petro, industrial and industrial heating. This means that the order backlog is still solid in important segments like oil and gas, in nuclear and medical, so an overall positive product mix, but total volumes in the backlog is on the low side going into quarter three. Let's move it to earnings. Adjusted EBIT amounted 454 million, with a margin of 9.5%. And considering the 150 million negative impact on currencies, meaning that the underlying margin would have been 11.4% adjusted for FX. I think we're performing okay, given the lower revenues and the uncertainties in some of the segments. I think this is due to several factors. We are seeing margin contribution for more segments now than in the past. Of course, medical being the prime example of this, but also in oil and gas and in nuclear. But also the way our Asian business has evolved, we also managed to improve our performance in the OCTG business as well as in the transportation segment, both contributing to the margin resilience. All in all, product mix is solid with higher contribution from highly profitable segments and less deliveries for low refined business, being mainly the industrial segments. Looking at divisions, I think Q performed well. I think Cantal continued to mitigate lower volumes in a good way, while Stripe's performance was not in line with expectation. But I will come back to that. Pre-operating cash flow of 347 million, lower than last year, impacted by lower operating profit, lower working capital, and higher capex. overall i'm confident in a long-term strategy we are benefiting for from our diverse exposure and we continue to drive positive product mix or shift make sure while maintaining our order booking discipline in the weaker market conditions we also adjusted cost and capacity mitigate lower volumes and we're prepared to do more if volumes continue to decrease But I think at the same time, we should stay cool and not make too hasty decisions. We need to be ready to deliver once the market demand and volumes bounce back. Let's look at the division starting with Tube. You've noted an organic order growth of minus 6% for the rolling 12-month period, where we continue to see a weak Europe with more uncertainties now than a quarter ago. North America is still on low levels and and a general sense of caution. Asia is still on high levels, although also there we notice a small decline in quarter two. In general, we see customers hesitating to take an investment decision, which impacts our business. The chemical and petrochemical and industrial segments noted the largest decline. Backlogging key segments like nuclear and oil and gas is still solid, and we maintain our positive view on both those segments. Organic revenue growth of minus 5%, mainly driven by the negative development in petrochem and the industrial segment, somewhat mitigated by nuclear. Book-to-bill was 94%, rolling 12%. Adjusted EBIT margin amounted to 11.2%, which is a good level given the lower revenues as we continue to utilize our capacity in a good way by prioritizing more profitable orders. As mentioned, the product mix was solid, and we have a positive contribution from performance improvements in oil and gas. The OCTG business has improved well, both commercially and operationally. Also, the business within transportation segment, where we have had problems, has improved well. It also had some positive one-off effects, like, for example, inventory buildup during the first half of the year ahead of this year's maintenance stop during the summer. which will be somewhat longer than normal in one of the larger factories in Sandviken. We will be replacing the expansion press in the largest extrusion press. This is a maintenance investment, replacing a plus 60-year-old machine, but it will also bring advantages with higher level automation, generating increased productivity and also safety for operators. This is bringing some positive results. cost-absorption effects both in quarter one and in quarter two, which will reverse in quarter three. The lower volumes from mainly chemical and petrochemical low refined products to the industrial segment in both Europe and North America had negative impact. And we are expecting these low volumes to have an even more visible impact in quarter three, as volumes and absorption of cost is low anyhow for normal seasonality reasons. NFX said we're in the minus 81 million sec, meaning that the underlying margin was strong, 13.6. In the quarter, we're considered to be on the weaker side. Moving over to Cantal. Organic order intake growth for the rolling 12 must be at 1%, still on low comparables. Medical is strong and industrial heating remains soft. Demand was still positive in some applications for ceramic elements for electronics, including semiconductors and glass industry. And the previously announced investment in both Sakura in Japan and Perth in Scotland are both related to those customer segments and is part of our ceramic heating elements offering. The medical segment is maintaining a strong momentum, growing in order intake and maintaining a good revenue level and backlog remains solid. Booked a bill of 102% rolling 12. This is partly due to the negative revenue growth, but also an increase in the medical backlog. Cantal has for some quarters now been affected by lower volumes from the industrial heating, a segment with several end markets and development difference between these end markets and regions where Europe is the weakest. But in general, customers are hesitant to make CapEx-related investment decisions, and it's difficult to foresee when that demand will turn positive again. But the sentiment is not getting worse. The US EBIT margin was 16.7% in the quarter, which is solid considering development, industrial heating, and an FX headwind of 29 million. Underlying margin adjusted for FX would have been 19.6%. I think Antal has proven ability to adjust capacity and reduce cost when needed, which is why margin levels are maintained. And I'm confident they will continue to do so moving forward as well, if that will be needed. But short term due to low volumes and with expected FX headwind, we expect some temporary under absorption effects hitting the margins in quarter three. Moving to STRIP, facing low comparable, STRIP continued to grow its top line. with organic order intake and revenue growth in all segments. Organic order intake grew 30% on a rolling 12-month basis, with growth in all segments. The consumer segment is the main rival, where the main product is compressible steel for wild goods and air conditioners. Organic revenue growth of 19% in the quarter, all segments contributing. And with that, a book-to-bill rolling 1240%. Just a debit margin, 2.4%. And I have, for several quarters now, made comments related to that strip is consolidating the pre-coated strip steel propulsions, and that that business due to low volumes has a negative impact on strip margins. This is also true in this quarter. However, this is not the main reason for the low margin strip. The underlying strip performance is not in line with expectations. Main reason are production efficiency issues, poor mix in the Sandviken site, and some inventory write-downs. They also had an effective win, and in that case, minus 9 million. Mitigating activities are ongoing, and we expect an improvement during the second half of the year. But since strips production is located in Sweden, they normally have a significant impact from underabsorption of cost in quarter three due to the maintenance stop during the summer. We expect that to be the case also this year and that performance improvements will be more visible in quarter four. And with that, over to you, Olof.

Thank you, Göran. And then let's go to the financial summary for the quarter and a half year. So if we look to the right, to the bridge there, you can see that the order intake amounts to 18.9 billions on a rolling 12-month basis. That corresponds to an organic growth of minus 2%. We show a total growth on the rolling 12-month order intake of minus 6, wherein a total of 4 percentage points of those come from currencies and alloys, with as strong a Swedish krona and lower metal prices impacted. Quarterly revenues, just below 4.8 billion, with a 4% negative organic growth, mainly from the slower European and North American markets. Revenue also affected by the strongest Swedish krona, mainly against the US dollar, with total currency effects of minus 4%. Alloys, some negative alloy effects and orders, minus 2 on the rolling 12.1 basis, and minus 3 on the quarterly revenues. And we see a continued negative alloy effect, both on the rolling 12-month order intake and revenues going into the next quarter. On structure, we have our latest acquisition of Endox in Kantal. It's fairly small, so it doesn't show up in the table, but it's contributing positively to both order intake and revenues in the quarter. And going to the big table on the left, and I'll come back to the adjusted EBIT in a minute. If we talk about the reported EBIT, the margin decreased to 5.9% compared to 12.8% last year, and this is impacted by the low revenues. Currency headwind and by the negative method price effects amounting to a negative 171 million this year. Last year, we had positive effects of plus 96, so quite a big swing at that line. Metal prices have come down in the US dollar terms. They have been fairly stable quarter by quarter. But in addition to the prices in dollars, we also have a strong Swedish krona that impacts our Swedish krona metal price effect. Net financial items in the quarter amounted to a positive 18 millions compared to a positive 137 millions last year. And the finance net consists of the positive interest net on our cash balances in the quarter yielding approximately 2.2%, but also of interest charges on leases, pension liability and bank charges. And in addition to this, also revaluations from derivatives not qualifying for hedge accounting. And that gives a positive effect in this quarter. Last year, the high positive number was affected by accounting adjustments in the hedge reserve, and we had total positive effects of 125 million from this in that quarter last year. The normalized tax rate comes out at 24.1% in the quarter, 29% with the guidance, while the reported rate, it's not in the table, but the reported rate was 32.2%, which is a high number. And that high number comes from one of the items, in this case, a non-deductible withholding tax on an internal dividend. Free operating cash flow was 347 millions in the quarter, and I'll get back to that as well soon. Finally, adjusted earnings per share in the quarter, 1.35, so we just grew up a share, impacted negatively from the lower adjusted EBIT, the high tax rate and the lower finance rate. Going then to the bridge on adjusted EBIT, going from last year's 592 million or 11.1% to this year's 454 or 9.5%. We note an organic decline of 26 million in the quarter. And that gives an operating leverage of 12% on lower revenues. And we find that to be a fairly good outcome in this foreign revenue scenario. So we mitigated the low volumes in a good way, we think, in the divisions. Main impact in the quarter comes from currencies, where we're impacted by the strength in Swedish krona, mainly against the US dollar, but also, for instance, against the Chinese yuan. And the split between transaction and translation is about 50-50 in that number. And this corresponds to a margin dilution of 1.9%. Structure is the acquisition of NDOX that is contributing to our earnings. And then we go to capital efficiency, looking at the balance sheet and networking capital lower than last year in absolute terms, coming mainly from currency effects and lower metal prices. It's higher as a percentage of revenues at 36.1 compared to 32.7 last year. And this comes mainly from the lower quarterly revenues that we saw in the calculation. The sequential decrease is mainly driven by currencies, decrease of accounts receivables and inventories. And to continue on inventories, they are lower in both value, both sequentially and year over year, coming from both lower volumes of bonds in inventory and lower metal prices. We have a lot of focus in our decisions on controlling the physical inventory. And despite the fact that this year we had built extra inventory volumes for the long summer stock, we are lower both in tons and value compared to last year. Year over year, capital employed excluding cash increased to 16.4 billions from 15.8 last year. This increase comes partly from our increased capex levels adding to the fixed assets. And then looking at return on capital employed excluding cash, And this is then based on the operating profit, including the metal price effect. It was 9.2 in the quarter, based on rolling 12 months, and roughly at the same level as last year's 9.3. The free operating cash flow amounted to 347 million. That is lower than last year, coming mainly from the lower earnings, including the negative metal price effects. And on cash items, that refers to, for example, provision releases in the operating result that have no cash flow impact. We have a positive impact from lower working capital in the quarter. It's mainly lower accounts receivable and inventory. The CapEx increase comes from our growth CapEx projects. And if you look at the year-to-date number, the extra cash flow impact from CapEx is about 100 million compared to the same period last year. Next line, amortization of lease liabilities on par with last year. So in total, we have a lower free operating cash flow compared to last year, but the lower earnings are from a cash flow point of view compensated for by a working capital release from the lower invoiced volumes and metal prices in the quarter. And if you take this in round terms, looking at the total cash flow, the business has generated about 400 millions, including finance net items in the quarter. Then we pay taxes and dividends in total approximately 800 millions. And that gives a net change of approximately 400 millions on our cash balance compared to last quarter. This leads down to the strong financial position. It remains strong. We are well below our financial target of net debt to equity of being below 0.3. We're actually at zero at the quarter end. If you prefer to use the net debt to adjust the EBITDA, it also comes out at very close to zero. And looking at the components then of the net debt, the net pension liabilities, they increased from 761 last year to 813 million this year, coming mainly then from lower discount rates compared to a year ago. Leasing liabilities, 462 million, more or less on par with last year's 457. Cash position remains strong. I mean, this year we have spent... 130 million on an acquisition and then paid the dividend in May of 577 million. And still we have a cash position of 1.3 billion. And a net debt position then of 33 million. It's actually a net cash position. And we also have, of course, our unutilized 3 billion revolving credit facility. So we have a very strong financial position in total. And this gives us room to execute and operate on our strategy of profitable growth. Looking then how well we managed to guide you ahead of this quarter or the last quarter. Yesterday capex of 456 million. We're guiding for a full year of 1.2 billion. So I would say we are waiting that range as we normally have more capex in the second half of the year. Currency transaction and translation effects at 123 millions in the quarter, fairly close to the guidance of 130. If we look at the total currency effect, it came out at 115 million in the quarter. Metal prices affected us negatively with 171 million in the quarter, we guided for negative 150. I think the main difference here is that the strong Swedish krona gave an extra effect here on the metal price effect. Normalized tax rate 23.8. Our guidance is 23 to 25. That's the year-to-date rate, the 23.8. So in the lower part of the range, actually close to the middle, for the quarter, the normalized tax rate was 24.1. Then looking at the guidance for the coming quarter, we guide for a full year cap of 1.2. We're staying at that guidance. As I just mentioned, we are normally having more capex in the second half of the year. Currency effects still quite considerable, 150 million for Q3 for transaction and translation. And then for the metal price effect with the strong Swedish krona, the metal prices at the end of June, we think that we will be around 150 million negative on that line. And tax, the guidance remains at 23 to 25% for the full year 2025. And I would like to hand back to you, Jörg, for the outlook.

Yes, and before I do that, I think I was wrong on two numbers. The margin excluding FX should be 13.1% in Qube and 18.3% in Cantal, nothing else. So outlook for the third quarter, I would say the general economic environment weakened during the second quarter. And considering the changing global trade policy situation, the uncertainty concerning future development has increased. Backlog is solid in several key segments where we have good visibility in the near-term deliveries. At the same time, challenges were noted in other customer segments, particularly in Europe and North America, which may impact near-term deliveries. Order intake, revenues and adjusted EBIT margin normally lower during the third quarter compared with the second quarter due to seasonal variations stemming from maintenance stoppage during summer. And stoppage in one of the larger production sites in Sandvik in this year is planned to last slightly longer than last year, which is expected to lead to temper higher than normal under absorption effects in the third quarter. Product mix expected to be similar to the second quarter, and we continue to expect a currency headwind in the third quarter. Cash flow is normal high in the second half of the year compared to first half. And with that, to summarize, overall, we showed continued earnings resilience. The company is in good shape, and we deliver on our financial and strategic targets. In quarter two, we noted a continued mixed market sentiment with weakened demand, especially in Europe. North America remains soft, and what we see is delays in some custom investment decisions. The near-term future is difficult to foresee, as are the turbulence in the market relative trade barriers and geopolitics. In key segments like oil and gas, nuclear medical, continued good momentum. And I think our diversified exposure to customer segment, different stages of the business cycle, as well as our strategy to grow within more profitable and less cyclical niches have proven to be successful. Revenues declined organically in the quarter, mainly back on weak development in chem and petrochem, industrial and industrial heating segments. EBIT margin declined year-over-year, mainly due to FX. Adjustable FX margin grew year-over-year. And this shows how we long-term have driven a positive product mix and maintain our order booking discipline. A weaker market position is able to maintain profitability. We need to continue to stay agile and adjust cost and capacity where we have a weaker backlog. 43 is a seasonally weaker quarter due to maintenance stops during the summer, and we expect some margin dilution from the absorption of costs, as we have a longer-than-normal stop plan for this summer in the larger extrusion plus. In addition, volumes are low in segments like chem and petrochem and industrial, mainly in Europe and North America, and we also expect effects to remain headwind in the near term. We have several ongoing growth initiatives which will strengthen the company in the long term. Our strategy has always been to have global footprints, meaning production close to our customers. And all the announced investments are strengthening this further, and they are progressing according to plan. Financial position remains strong, which will enable us to continue to execute on our strategic agenda. And then I'll hand back to you, Emelie.

Thank you, Göran and Olof. It's now time to start the Q&A session, so operator, please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question comes from the line of Adrian Gilani from ABG. Please go ahead.

Yes, hello. I'd like to start off with a question on tube where I see the book to bill fell quite sharply compared to Q1. And, of course, you mentioned this is, you know, to an extent driven by the short cyclical industrial orders. I guess, is there a component here also of order backlog in oil and gas starting to come down? And are you still as confident in the oil and gas outlook for the coming two to three quarters, let's say?

We are quite positive on the oil and gas outlook here. On umbilicals, the order backlog grew slightly, and there is quite a lot of projects still out there. So no, oil and gas was not the main reason for that.

Okay, I understood. And a bit of a similar question in Cantal here. Rather, the book-to-bill came up a bit, and is that entirely driven by medical, or are you seeing an increase also in industrial heating orders?

I think, as I said, the two reasons why I booked the build went up. One is lower revenues and then medical has a good development, so it's mainly medical.

Okay, understood. In Strip, the organic EBIT is down 21 million in this bridge that you show, while organic revenues are up 8%. So it seems sort of the cost efficiency has gotten significantly worse compared to last year. Can you sort of explain what drove that?

Yeah, I tried to do that in my presentation. I think, I mean, first of all, we... We're not pleased with that, to be clear. There is a number of reasons. One is production efficiency reasons. Due to where Strip is coming from with lower volumes before, that is still orders that we invoice. So there is a, let's say, time take some time to flush through the poor uh production efficiency we had before and and it will be better going forward another reason is that we have had some bottlenecks issues so the most profitable products produced in the big production site has had bottlenecks, bottleneck problems. So the inverse mix compared to quarter two last year is much worse. And that is, I would say, the main effect. And then there is some inventory write-downs due to yield issues. Okay. All of that. Did you specify the amount?

Sorry? Did you specify the amount on the write-downs as well?

10 million, I think it was. All the issues are addressed and actions are ongoing.

Okay, perfect. That's helpful. I guess the final one from me for Q3 specifically, you first of all have the 115 million FX headwind and I guess that in isolation would take you to around 200 million on adjusted EBIT and Then when you mentioned sort of longer than usual maintenance shutdowns and greater underabsorption, I take that as sort of soft guidance that organic EBIT will also be negative year on year. Am I sort of assuming that correctly? Because that would take you somewhere below 200 million on Q3 EBITs.

I mean, that calculation makes sense.

Okay. Thank you. In that case, that's all for me.

We have now a question from the line of Victor Trollsten from Danske Bank. Please go ahead.

Yes. Thank you, operator, and good afternoon, everyone. So firstly on the Q3 guidance and the under-absorption that you flagged, just wondering from a broader sort of perspective, how much of a one-off, Is this in business, you know, just how we broadly should treat it beyond Q3? Is this something that we should count on happening, you know, quite a number of quarters, or is it, you know, truly a one-off? I'll start there.

That's a one-off, yeah.

Yeah, yeah. Yeah, no, good. Yeah, that's clear. And then secondly, I guess, you know, it's quite volatile and difficult times, of course, but in the context of some of your industrial peers talking about, you know, signs or the start of some sort of, you know, short cycle recovery and volumes finally, you know, turning, you know, slightly positive. I do see that Q3 has been messy, but could you speak a little bit more around how the quarter has developed month to month? Perhaps if there's any difference from your CapEx customers to OpEx customers? I'm just trying to understand here why you don't see the signs that some of the others are seeing into Q3.

Yeah, I also see in the others, since I don't know their business in detail, I cannot comment on that. But what we see in the quarter, when the quarter started stronger than it ended, then, of course, we need to look at the the quarter and exclude bigger orders like we, for instance, had for good order intake end of the month for medical and we have some umbilicals. But if I look at sort of the more volume related business, I'll say the second half of the quarter is worse than the first half of the quarter. And of course, even though we compensate for Tariffs, of course, we see saw a change in America's when when tariffs suddenly moved from 25 to 50 percent. And even if we come and even if we have. quite a lot of production in the US. I mean, there's a significant price increase for the customers and that has made the market so uncertain and they postpone their investments.

Okay. Interesting times indeed. Let's see what happens.

It's a lot of uncertainty. If you don't know Is the tariffs going up or down? When will there be trade agreements? All of that creates a lot of uncertainty. And when there is high tariffs, I think quite a number of customers speculate that it will go down. If they don't need steel at this sudden moment, they wait with their purchase.

Okay. Yeah, no, that's really interesting. But I guess you are mostly CapEx-driven, correct? It's not that much OpEx-driven demand, typically, for you. I'm thinking there's a difference between the CapEx programs that you can sort of delay and OpEx is more, you know, you need to run the business more.

Yeah, and we have quite long value chains, so it's not always easy to see where other stuff is ending up. I mean, we don't see oil and gas, we don't see nuclear impacted, but if you can delay a month or so, I think they are willing to do that, even if it's CapEx related. I mean... I know I would react if the tariff suddenly went from 25 to 50.

No, fair point. Yeah, that's all from me. Thank you very much, guys. Thank you.

Thanks, Victor.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Igor Kubitsch, DNB. Please go ahead.

Thank you, operator, and thank you, team. I just have a couple of follow-ups here. Can you please quantify in some way about the underabsorption in the Q3 situation? I mean, what should we expect on the cost base if we start there? And then the second question is, do you see any difference in the chemical versus the petrochemical business in terms of demand, or is it a relatively similar weakness in both, so to say?

I'll start there. I'll start with the last question. We don't see any difference. I'm not sure I know that, actually. And it's somewhat mixed. I cannot say that there is a difference. Regarding the extra stock, I mean, we estimate a little bit less than 100 basis points impact in quarter three.

Okay, thank you. And then also the last one, do you see any, I don't know if you are looking at the size of the orders or are you still receiving a number of smaller sized orders and then the larger ones are not as common as before or can you comment anything about that?

I don't think we see any pattern like that, to be fair. I mean, in some of the segments, like oil and gas and nucleus more, what kind of product it is. So, no, we don't see any pattern like that.

Okay, and the decline in chemical and petrochemical, was that related to any larger orders, or is it overall just...

to say it's overall and what is a larger order. I think we see it both in heat exchanger, we see it in instrumentation and hydraulic tubes. So from a patent point of view, it's more geographically than order size. And where Europe is sort of the one that's gone down most. On the other hand, North America was really low from the start. Okay, I see.

And the last one, sorry. Do you see, have you lost any orders due to the ethics, would you say? Or is it an overall market thing that the volumes are down?

I mean, it's impossible to answer that directly. We don't see that happening. at least not clear because there are so many orders and we don't know what they are not buying. But that's not what we see. What we see is a very uncertain market with a lot of hesitancy to even place orders. And of course, how can I be sure of that? I mean, If you take the U.S., for instance, there are not much local competition, and I haven't seen – I mean, I don't have reports from sales organizations saying, okay, so we are increasing price, and that's why we're losing orders. That is not what we see. We see a market waiting.

Okay. Yeah, I see. Okay, that was all from me. Thank you very much.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Emily Alm for any closing remarks. Please go ahead.

Thank you, operator. Yes, that concludes the Q&A session. And back to you, Jaron.

And before ending today's session, I would like to take the opportunity to thank Olof and Emily, since this is actually your last report, Brelema. Olof is retiring and Emily is moving on to new challenges. Both of you have been strong contributors to the successful listing and the positive development of Lamas. I would like to thank you both. I will miss you both a lot. This, of course, means that next quarter will be myself, anyone and someone from Investor Relation. Thank you, Jan. It's been a pleasure.

Thank you, all the best, Olof. And also a big thank you to all our analysts and investors for a good collaboration. So that concludes today's call. So we wish you all.