Bufab AB (publ)

Good morning and good afternoon everyone and a warm welcome to Bufab's Q4 report. My name is Erik Löfven and I'm president and CEO of Bufab Group and together with me here to present the quarter I have Helena Häger, acting CFO. This presentation will be recorded and by attending to the meeting you agree to the recording. I will start to take us through the full year of 2025 and some highlights from Q4 and then I'll leave the word over to Elena for some financial details before I go through each of the regions and then at the end we will have time for Q&A. If we don't start with the 2025, it was another successful year for DuFab. Results, despite a weak market, we had a total growth of 0.5% in the year, where the organic growth was 0.3%. It was a Record high gross margin at 31.9% and adjusted operating margin ended up at 13.3% for the year. The board proposed a dividend of 1.3 SEK per share for the year. We continue to have a strong institution of our strategy. We have added more and more value-added services to our customers. We have some technical issues, so we need to wait for a minute. Okay, we try again, sorry for the technical issues. We start to recap the full year 2025, and it was another successful year for Bufab. We ended up with record high results, despite a quite weak market out there. Our total growth in the year was 0.5%, whereof the organic growth was positive 0.3%. We delivered a record high gross margin at 31.9%, and our adjusted operating margin ended up at 13.3%. The board proposed a dividend of 1.3 sec per share for the year. What I'm very pleased with is that we continue to execute very well on our strategy, and we have more value-added services for customers, and also improving our work with value-based pricing. From a sustainability point of view, we also had a good 2025. We launched new offerings to our customers, and we got recognition from the Kovadis with platinum rating in 2025. I'm also very pleased how we worked with the customer product mix, and we secured many very interesting projects during 2025 in key segments like defense, infrastructure, and in general, industry. We also acquired the Nova Group in Q4. And we also divest with a small manufacturing part of CSG in U.S. And all in all, I'm pleased with the performance. We have strong momentum and put ourselves in a good position to deliver our profitability target for 2026. If we then jump into the highlights of the quarter, Q4 was a Strong end to a successful year for Bufab, and I'm overall pleased with our performance. We continue to focus on things within our control, and most of our systems out there deliver very strong results in the quarter. The organic growth was slightly positive, 0.3%, and the modest growth reflects the continued uncertainty we see in the market, with big variation between countries and customer segments. Demand was strong in energy, agriculture and food due to infrastructure and defense, while the mobile home trailer market was stable and construction, furniture, interior design and automotive industry remained weak. We believe in a very strong gross margin, 33.8% versus 29.3% last year, and adjusted operating margin improved to 13.1% compared to 11.8%. The underlying cost level was unchanged compared to last year if we then adjust for novia and acquisition of Vital. And we continue to maintain strong focus on cost control while we, of course, continue to invest in growth in seasons where it makes sense. And all regions except UK island delivered strong results in the quarter. I will then leave the word over to Helena for some financial details. Please, Helena.

Thank you, Erik. Let's review the financial highlights, starting with net sales. Net sales for the quarter increased by 3.7%, resulting in a total of 1.931 billion. We see a positive increase of 0.3% in organic growth. However, this growth varies across the regions, showing positive results in Europe West and the Americas. While in contrast, Asia Pacific, Northeast, and UK Ireland experienced negative organic growth. And that is, as Erik said, reflecting a continued uncertain market, but is also partly explained by two larger project sales in Q4 the previous year. affecting this one. The change in the net sales is also influenced by a negative currency impact of 6.6%. And that is the strengthening of the Swedish krona that has led to this revaluation effect. And additionally, we have the acquisition of Norvea Group and Vital that contributed 10% to the net sales increase. Moving forward to the margin, we are pleased to see a significant improvement in our gross margin, as well as a high operating margin in the quarter. The gross margin for the quarter was 33.8%, representing an increase from 29.7% in the same period last year. Additionally, gross margins improved across all regions. And the improvement is driven by several different factors. It's driven by savings in purchase, active work with improved customer and product mix, and also price adjustments and currency. The strong gross margin has been a key factor in achieving this high operating margin, which has resulted in an adjusted EBITDA margin of 13.1%. As Erik mentioned before, the underlying cost level was in line with previous year when adjusting for Norway Group and Vital. We also had some favorable impacts related to currency affecting their cost, while acquisition costs had a negative effect compared to last year. And as we said previously, we continue to maintain a focus on invest in companies and projects that will help us to grow for the future. The cash flow. The cash flow for operating activities amounted to 224 million SEK, corresponding to a cash conversion of 93%. The cash flow from operating activities in the quarter was higher than in the comparable period, explained by improved earnings combined with improved working capital. The increase in inventory was smaller than in the comparable period. And on a full year basis, we can see that the inventory levels in the companies have normalized after the pandemic years. So the working capital in relation to net sales amounted to 30%, which is mainly due to reduced capital tied up in inventory. Finally, the net debt EBITDA ratio is up after the acquisition of Norvea, landing on 2.6. Maybe you remember, but in our last call in October, we communicated an expected net debt of 2.7 by the end of 25. After the Norway acquisition in late October, net debt was 3.0 and positive to see by quarter end. It is now improved to 2.6. That was all from the financial highlights.

Thanks, Helena. I will then continue and give you some details from the different regions, and I would like to start with the region Europe North and East. The total growth was minus 4.6 in the region, and organic growth was negative 1.8. Demand in the furniture and kitchen sector, where AT Bendix in Denmark operates, remained low, while demand in defense infrastructure was strong. Gross margin was very strong for the region, up 4.3 percentage points, driven by active work to improve our customer and product mix, price adjustments, and consolidation of purchasing volumes, and also positive currency effect on the gross margin. Operating expenses was up versus last year, mainly due to one-off related to workforce instruction, but also inflation pressure. And the adjusted operating margin improved to 12.9% compared to 10.5% last year. If we then continue with Europe West, the total growth was 39.2%, of which 40.4% was acquisition and 3.9% was organic growth. We saw good demand in energy and defense, while automotive and construction industries continued on low activity levels. The gross margin was up 6 percentage points, driven by price adjustments and increased added value share results on new projects, and also Novia contributed positively on the gross margin. Adjusted for Vital and the Novia group, share of OPEX was lower than the previous year, and we ended up on a very strong operating margin of 16.2%. Nova Group actually had a negative impact on the operating margin for the region due to the full-year bonus provisions and currency effects booked in Q4. But Nova expects a positive impact on the region during 2026. If we then continue with Americas, they showed total growth of minus 4.5%. and organic growth was positive 9.1%, mainly driven by price increases. Demand was stable, but on a low level for the mobile home and trailer market, and low demand was also noted in the automotive industry for CSG. The gross margin was up 8.4 percentage points, driven by price adjustments, the divestments in CSG, part of CSG, and also reclassification of obsolescence reserves. Some explanation here. The gross profit in the Americas has been influenced by reclassifications of obsolescence, which involves relocating costs between GDP and OPEX. These adjustments, in one time, gave a positive effect on the gross profit for the quarter, alongside a partially offsetting negative effect on OPEX. And additionally, obsolescence costs have risen over the year, primarily in Q4, due to enhanced compliance with our reporting guidelines. So if we adjust for this, we still have a very positive development in the gross margin and end up on around 37% for the quarter. We also saw high operating expenses mainly due to increased obsolescence reserves for Americas and end up on a positive development for operating margin and end up at 11.3%. I can also mention that we have previous quarter have some positive impact on the gross profit due to tariffs on non-tariff goods in inventory, and that didn't have any impact in the Q4. If we then continue with UK island, total growth amounted to negative 12.5%, of which organic growth was minus 2.4. We saw low demand in the manufacturing industry, impacted with UK, combined with lower market prices, which impacts Apex and their stainless business. Gross volume was up as well, 3.0 percentage points, mainly driven by sourcing savings and lower freight charges. We saw higher cost level due to inflation from higher social tax and natural minimum wage in UK. The adjusted operating model ended up at 8.1 compared to 9.0 in Q4 last year. And then finally, Asia-Pacific, the total growth for the region amounted to minus 22.4%, of which currency was 12.7%, and organic growth was negative 9.7%. Blue function had a little bit strong numbers, and both India and also mild negative growth, and both Singapore had a larger decline due to a larger one-time project sales in Q4 last year, as also Helena mentioned. Gross margin was up 2.3 percentage points due to purchasing savings and active work with our value-based pricing. We also saw a higher share of OPEX in the region, primarily due to lower volumes and a smaller currency impact. The adjusted operating margin improved to 14.7%. Before we sum up the quarter, I would like to share a group news, and this time I will highlight one of the customer deals that we closed in 2025, and that is a major project within a world-leading supplier in the semiconductor industry. We signed this contract in 2025, after long discussions, with one of the world leading manufacturers to a semiconductor industry. And it is mainly Bunemax products that will be delivered, but also Z-Port through Floss. And it is tailor-made solutions that is part of this package to the customer. In this type of deal, we deliver typical peace of mind and clear value to our customers through cost savings, short lead times, quality control, etc. So full scope support for the customer. And this is a high volume project that we started in Q4 this year. Sorry, last year. And we predict this project to ramp up during 2026 and 2027. And why is this type of deal good for Bufab in the future? First of all, this is in an industry where we aim to grow, where we see long-term growth potential. We can also utilize our strength as a group with our broad offering and our capability to give tailor-made solutions for our customers and give the right services and solutions that they need. We deliver clear value for the customer, and this is a win-win. If we perform well, we will also deliver strong growth and also higher margins and much higher than the average model that we have in Bufab. And our aim is to create a long-term partnership and win-win situation for the customer and for Bufab, of course. If we then finally sum up the quarter and talk a few words about priorities and outlook, First of all, I'd like to say that I'm overall very pleased with our performance in 2025. We continue to focus on things we now control and execute our strategy very well. And I've delivered a record high gross margin and operating margin for the year. I'm also pleased that we delivered a strong Q4 despite quite weak markets still out there. And over the past 10 quarters now, we have gradually strengthened our gross margin, and we expect the gross margin to continue to have a positive development also during 2026. Despite uncertain market conditions, we are optimistic about the future. We continue to focus on things without control and give value to our customers. And, of course, continue to try to grab market share in a market that is actually good for market share growth. Continue to focus on improving our margin. We focus on improving our gross margin, but of course also be cautious with costs. And finally, continue working with our networking capital and secure a strong cash flow also in 2026. And to sum up, I think we have a good momentum right now, and I put ourselves in a good position to also deliver on our profitability target for 2026. That was my final slide, so I will now open up for Q&A.

Welcome to this Q&A session. I would like to ask you to use the function Raise Your Hand if you have a question, and don't forget to unmute when it's your turn. We start with the first question from Johnny Yin. Please answer your question.

Good morning, Eli. Can you hear me? Yes, we can. Hi. Hello. A couple of questions from me. I think I will start with North America. I mean, obviously, very strong gross margin here in the quarter, and we touched upon that a little bit. But could you maybe break down the effect from the reclassification of Solon's reserves here in the quarter and general underlying improvements and the effects from the divestment? If you could break down the drivers a little bit closer. Thank you.

Yeah, so I will not share all the details, but we have, if we adjust them for obsolescence, we have an improvement in the quarter, ending up around 37% on gross modeling compared to 33% last year. And that is driven by the improvement in CSG. When we divested the manufacturing part of CSG, that is improving our overall profitability situation with a better customer-product mix. And on top of that, ABS and also CSG is working well with their pricing management that is contributing. So we're going from later on 33% to 37% if I guess then from the obsolescence that gave us a boost in the quarter. That is a little bit of what I can say about the gross margin in the Americas. Yes.

Okay. So sounds interesting. Majority is structurally obvious then. On demand, a quick question there. I think book to bill is backed above one here in the quarter, which is good. So how should we think about demand going forward, would you say? And what sort of visibility do you have in new customer contracts getting on board as you take market share? Or what is your gut feeling there?

Yeah, what I can say is that there's still a certainty in the market. It's very difficult to predict how the demand will turn out now in 2026. But if you look at things a bit in control, I'm pleased with the performance in 2025 in terms of market share gains and also secure some big projects that we know that will help us and support our growth levels in 2020. in 2036 and 2027 that is sure and then if we get some tailwind from the overall market that is in the crystal ball so to say but I'm optimistic we put ourselves in a good position to I would say harvest when the market bounce back but we still see many industries and statements with quite low demand and not picked up yet so we continue to put ourselves in a good position to hopefully be get some leverage from that when the market goes back

Yeah, understood. But can you say something about how big the new contract with the leading manufacturer of semiconductor equipment is for you? And also, I think you just highlighted Babcock contract and the size of that last quarter. Is that any effect on that already now, or when will that show in numbers?

yes both those projects are for us significant volumes and that could contribute on gradually on top line and right away on on the gross margin because it's a high value services that we provide to those customers and they will have gradually positive impact on the on the net sales and also more than in 2026. we will not be able to disclose any any details about the numbers but more than will gradually help us during 2026 from top line and also more importantly

Understood. Thank you. One final quick one. I think Rosmarie in the UK is also very strong and did quite a big jump here in the quarter year over year. So was there anything particular that drove that or how should we view the UK going forward here?

Now, as I mentioned, Nicole, I'm overall very pleased with our gross margin improvement due in 2025. All regions are contributing, and also sisters in the regions, more or less all of them are doing a good job to improve their situation from gross margin point of view. And that is paying off step by step. And here, UK is no exception. Their challenges is the market situation in the UK in general, but also, of course, the situation for stainless with tough prices out in the market. But from a gross money point of view, they, alongside the rest of the organizations, are doing a good job, I think, and they're glad we improved the situation. So that I'm pleased with.

Understood. Thank you. That was all from me. Have a great day.

Thank you.

Gustav Berneblad, welcome to Ask a Question.

Yes, thank you. It's Gustav Eiffel from RIA. Just to start off here maybe in your best, I mean, very strong margin, and it would be interesting to hear just what do you see there in terms of temporary effects here impacting the margin positively? I mean, if we look at Q4 in recent years, it has not really been, you know, the seasonally strong quarter, so to say, so it would be very interesting to hear.

Yeah. No, West have a good, as you said, development in Q4. I think a little bit, as I mentioned, and Johnny asked this question about gross margin, more or less all companies in the region West are performing well from a gross margin perspective and are good in improving their customer product mix and also adding customers. value services with high audience to our customers. And on top of that, there are projects like this supply to semiconductor industry that is starting to give results as well. So all in all, they're going to do a good job in improving the situation. And then also in Q4, they had a positive customer product mix as well that contributed positively. I would say the main driver is the good work they've done for quite some quarters now is paying off, but also a favorable mix in the quarter.

And in regards to your comment here in the report as well, I mean, you say that the Novia group has a negative impact on the margin as well. Is it possible to give any indication of that?

Yes, that's true. I mean, they give a positive impact on the gross margin, but a negative impact on the operating margin in the quarter. And that is because the way they have done their classifications, the previous owners will take a lot of the reservations and costs for bonuses and currency and others in Q4, impacting the operating margin negatively. Having said that, with our way of reporting and putting reservations in place, we expect... No, we have to contribute positively to the Region West from an Operating Money point of view, starting now in Q1 and continuing 2036. So, if you remove NOVA from the equation, the old ways, so to say, are performing very well in the quarter and have a good momentum. That's perfect.

And then maybe on your comment here, it's not only in America we are seeing price increases. It sounds like West as well. But on a group level, what would you say out of the 0.3% organic growth is driven by price versus volumes in the quarter here?

I will not share any details around that. I would say that it's a combination of factors that drives the improvement. One is the working with pricing management, and the other that is very important as well is that We still continue to get sourcing savings, and we keep them. And thirdly, we are, I would say, better in doing value-add services that we are increasing every time. So we give our customers a broader range of support that generates high margin. And we have, as we mentioned before, also secured deals that is contributing positively. I mentioned this deal here with semiconductor industry that, for example, is helping West in Q4 and will continue to help them also in 2026. So the new deals that we are... Adding to net sales is contributing positively as well. So it's a combination of factors that is helping us on the morning side. Yeah.

Yeah, thank you, thank you. And just, sorry, one last one, very quick one. Are you still seeing, you know, or are you seeing a change here to the situation regarding the buyer's market in China, or is that still, you know, supporting you?

It's still supporting us.

Perfect. Thank you very much.

Thank you.

Can you hear me? Okay, Mathis, please ask your question.

Yes, can you hear me?

Yes.

A question on Forex impact on profitability. Could you be able to quantify the impact on gross margin and operating margin coming from Forex?

No, we don't discuss any details on the forex, on gross margin and on net sales. We don't do that. We have, as you can see, we have some countries, as I mentioned, and some regions, we have positive effect driving, like we mentioned in the Northeast, for example, that is continued positively, and other effects. So it's a mixed bag, and we don't disclose more details than we have mentioned here for different regions. Okay, thank you.

Thank you. Since there are no further questions, I hand over to Erik to close the meeting.

Yes, thanks a lot for joining, and I wish you all a nice day ahead. Thank you.