Cavotec S.A.

Welcome to KavoTech Q3 Report 2025. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO David Pagels and CFO Joakim Wolquist. Please go ahead.

Good morning and welcome to Kabatek's third quarter presentation. I am David Pogels, the CEO of Kabatek, and together with me today, I have, as usual, Joakim Wahlqvist, Kabatek's CFO. I would like to start with a short introduction of Cavitech for those of you who are not familiar with us. Cavitech was founded 50 years ago by three entrepreneurs in Sweden. Since the foundation, Cavitech has focused on developing technical solutions to improve efficiency and electrify processes in areas such as ports and other industries where electrical cable reels and or radio remote controls are needed. As part of this global expansion, Cavitec moved to Switzerland in 2007. This year, however, we have taken an important step by returning back to our roots in Sweden. These moves brings us closer to our shareholders base, which is in Sweden, and also enable us to become more efficient and agile. We're very excited about that. As you know, we report two business segments. Our service offering is reported into those two segments. Ports and Maritime provides world leading solutions for ports, ships and other marine applications. We have a unique systems, for example, automated mooring, moor master. We have shore power, cranial electrification and connections and charging systems. All these solutions contribute significantly to improved environments and working conditions in ports worldwide. Our customer includes ship owners and operators, ports and terminals, port equipment manufacturers and shipyards. Ports and Maritime is our largest segment and represents the majority of the group's sales and EBITDA. The industry segment is the other one, and its unique selling point here is our ability to drive productivity and contribute to the customer's operational efficiency, electrification as well as occupational health and safety. The products include motorized cable and hose reels, radio remote controls, power connectors, spring driven cable and hose reels. We have customers in a wide variety of industrial sectors such as cranes, energy, processing and transportation, surface and underground mining and tunneling. As a service, as I mentioned, is an integrated part of our business segments and we have service engineers across the globe. They work either from our service centers or are based at our customers' premises. The service offering includes system integration, maintenance, sales of spare parts of course, inspections, refurbishment, as well as round-the-clock service agreements. As you have seen in the report, we have also this quarter been impacted by the continued uncertainty among our customers and the product driven nature of our business with long delivery times or lead times. However, our underlying market remains strong, driven by the need to reduce greenhouse gas emissions, improve ports environments and increase customer efficiency. This in turn is driven by the strong mega trend to electrify society, which we all are aware of. At the same time, we have seen an increasing awareness globally to reduce noise levels in, for example, ports. The need to electrify society and improve environments, for example, in ports also manifests in regulations and governmental requirements that affect our customers and drive their demand. Over our 50 years, we have built a strong expertise and experience in these areas and have a strong and attractive offering based on leading technologies. This gives us the ability to grow in both new and existing customers, thereby expanding our installed base. The installed base, of course, is important because it provides us an opportunity to offer our comprehensive range of service activities. So, looking into some of the figures before I hand over a little bit later on to Joakim to explain a little bit more detail. Order intake increased 0.5% to 36.3 million euros in the quarter, driven by the demand for shore power and more master systems. Our order backlog increased 14% to 126 million euros, which is reflecting the order intake in Ports of Maritime where we have very long lead times in the product business. We have communicated a range of significant orders in the past 10 months in Ports of Maritime. However, this is a product driven business and most of the deliveries will not start until next year. Revenue decreased slightly with 18.8% to 35.8 million due to the certain delays in planned deliveries of shore power systems. A shift in delivery plans from the customers. Lower volumes due to the ports and maritime long lead times and continuing caution among certain customers have led to us reporting a slightly negative EBIT this quarter. Before moving on, I would like to point out the improved profitability in the industry segment. Our work within industry to increase our market presence, attract new customer has led to more opportunities for us that we are very hopeful about going forward. In industry, the businesses consist of many smaller but recurring orders, which balances the Ports of Maritime product driven business. We have recently communicated several significant orders for shore power systems. Two orders with a total value of 9.35 million euros include shore power for new built and existing container vessels. The Kamath Custom is a leading global container shipping company that earlier this year signed an order for 8.1 million euros for shore power. This is a good mark of our delivery and product quality with a leading player in industry gives us this increased confidence. A large part of the latest orders involve retrofitting of shore power system on existing vessels. This means that we will install our solutions on the vessels when they are in operations between Asia, America and Europe. They could either be in dry dock or we can do it during the savings. These are without doubt challenging projects that require a lot of logistics and technical know-how. We are proud to have the competence and experience to be able to do so. Deliveries will continue throughout 2026. The second agreement we have communicated involves delivering of the first shore power systems in Maldives. We expect the system to become important reference in the regions and may create opportunities for more projects in the nearby areas in South Asia. We'll begin deliveries of those equipment in the first quarter of 2026. We have also recently announced an order with construction and engineering company Sivmek for motorized cable reels for installations in Port Headland in Western Australia, which is one of the world's largest iron ore export ports. This is a significant agreement and it's our first major collaborations with Sivmek and strengthen our presence in Australia mining and bulk handling sector. delivery scale for the third quarter in 2026. By this, I will hand over to Joakim for a little bit more deep dive into the financial figures.

Thank you, David, and good morning, everyone. I'll start with the order intake, and the order intake was in line with the same period last year. However, we report an increase in order intake for ports and maritime of 4%, while we see a small decline in industry. Thanks to the order intake in ports and maritime, our order backlog grew with 14% to almost 126 million euros. As David said, we have had significant orders over the past 10 months in portion maritime. However, a large portion of them is up for delivery in 2026 and forward. If we look at the revenue, So although the underlying markets remain strong, we can see a decline in revenue with almost 19% compared to the same period last year. This has mainly three explanations. Number one is the continued macroeconomic uncertainty that results in postponed decision making with our customers, especially for deals with shorter lead times that would generate revenue within the year. We also had a Q3 last year that was not that strong on the ports and maritime side, and that have impacted also the revenue in 2025 as lead times are about a year before they turn into revenue in that business segment. On top of this, you might remember that we had a very big Q4 2024. And part of that was planned to be delivered now in Q3 this year. But we have experienced, as David mentioned earlier, certain delays and this further impacts the revenue in the quarter. On top of this, we had some slight negative impact from currency of minus 1%. And with that, I will move over to our EBIT. As you can see, profitability was impacted and mainly by our lower volumes, but also partly by the ramp up in preparations for upcoming deliveries in the ports and maritime segment. As a consequence of this, we are showing a slightly negative EBIT in the quarter with minus 0.2 million euros. Having said that, We still continue to see improving margins on an aggregated level in the business and we do deliver a result. This is a result from continuous efforts on both our cost out work from our engineering team, productivity improvements in our factories and also from procurement savings. EBIT has been adjusted in the third quarter for non-recurring costs of Euro 0.3 million related to the relocation of the registered office to Sweden. And I'm very pleased to have completed this move. And this is the first quarterly report that we are publishing in both English and Swedish and fully based then on Swedish reporting standards. Moving to the net result, net profit declined to a loss of minus 1.7 million compared to 1 million last year, and earnings per share fell too slightly. Again, this is mainly a result then of the lower revenues in the quarter. Cash flow. Our operating cash flow increased to Euro 2.8 million in the quarter due to mainly advanced payments from shore power orders. At the same time, we are a bit affected by these delays that we have talked about on our working capital, and we're tying a bit more capital in work in progress for the upcoming shore power deliveries. Net debt continues to improve, though, from 13.3 million down to 13.3 million from 15.3 million. Leverage ratios still quite okay at 1.44 compared to last year where we had 0.85, which was still very good. All this together though means that we still have a solid financial position despite two softer quarters this year. And let us now look in a bit more to the two different segments to understand the financials there. Starting with ports and maritime, which is the largest segment. As I said earlier, order intake increased over 4% to 21.9 million, and the order backlog grew by 16.4%, exceeding 103 million. This is reflecting the continued demand for shore power solutions and also our more master systems. Ports of Maritime's project-driven nature with long lead times impact our performance this year, as we last year had a weaker first three months, three quarters of the year, as you might remember, and a very strong Q4 2024. As earlier said, there has also been certain delays in planned deliveries of offshore powered systems in Q3. Moving on to the industry segment. In the industry segment, the order intake declined slightly by 4.7%, reflecting the increased caution among customers. That said, the order backlog grew by 4% versus the same period last year. Revenue improved slightly also from the same period last year. And it's really good to see that the sales push, cost savings and efficiency measures that have been going on for the last one and a half years are really improving the EBITDA margin that we can see here is close to doubling versus the same quarter last year. We still have more work to do to be done here in the industry segment, but we are very pleased with this development and we continue to see a big market potential in this segment. With that, I will hand over to David for some final remarks.

Thank you, Joachim. So let me quickly summarize some key points before we open up for questions here. In the quarter, we have seen continued uncertainty among certain of our customers, which has affected our sales of goods and service with some of the shorter lead times. We are closely monitoring the development of this, of course, and prepared to take action if necessary. But we have a couple of busy quarters to come. Our underlying market remains strong, driven by the need of electrifying society and reduce noise levels in environments such as ports. This is also reinforced by the fact that our customers are facing regulations that require them to reduce their emissions and electrify their applications. For us, this continues to create the good opportunities for us since we are offering leading technologies in this area and have built a strong market position during our 50 years in business. Another important business driver is of course our large install base worldwide, which provides us with a great opportunity to generate service business. We have conducted thorough reviews of our markets, our operations and future opportunities. This has resulted in a new strategy or a clearer strategy with a clear direction, providing us with a good basis for our priorities and giving us a better view of where our opportunities lie. This is important, of course, when we are allocating our resources and making decisions about future investments in, for example, new product offerings, et cetera. Already last year, we initiated increased investments in product development. We have launched all-time high new products this year, which has led to a good pipeline of new products to offer to the market. By this, we have come to the end of our presentation here, and we now open up for questions over the phone or by mail through the webcast.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Hi, Lara here from ABG. Just a couple of questions from my side. Firstly, you said that you've noted ongoing customer uncertainty and long project delivery cycles in European ports and maritime segment. Would you say that you're seeing any improvement in the customer decision-making since maybe the quarter end or do you expect these delays to persist into 2026?

Okay. Joakim, I can start with this one and you can fill in. I think it's... it's clear to everyone that the geopolitical situation right now where the tariffs coming and going more or less on a half of a daily basis here creates the uncertainty and we don't really know, the customers are hesitating, they don't really give place the orders if they don't have to, they wait a little bit to see what the future is going to look like. However, the underlying business that we have with the ports and maritime, with the need to electrify, with the need to reduce the emissions, once, as we said, with the regulations, but also with the megatrends, and also they must be seen as doing whatever they can to be green. uh that is there and it's still there and it's robust and that's that's we're not really worried about that at all same thing goes with it with a with a mining sector where we're also strong and it's important part for us and i was as a this port headland order that we won the other day i was visiting them two weeks ago and it's impressive to see how they are now improving and they are they are really doing big investments in order to just secure that they can export and bring out all the iron ore from the mines. So the mining sector is also strong, but we see just a little bit of they don't need to place something, they hesitate a little bit to do, but the underlying business is solid and robust.

Great, thank you. And you've reported a strong increase in your backlog. And you wrote that most of these deliveries won't be taking place until next year. Could you maybe provide some specific phasing for this conversion? And when will it translate into sales?

Joakim, can you take that one? I can take that one. First of all, part of the increase in the backlog also is due to delays in deliveries, which was planned for Q3 and Q4 this year. And so part of that will be postponed a little bit forward. I don't say an exact timing on that, but in general, it's spread quite evenly over the year. But you could, as always, when we're discussing ports and maritime business, it is a bit longer lead time. So there you can calculate more with, More with 12 to 18 months from order intake to actual delivery compared to the industry part where we have shorter lead times, three to nine months.

Thank you. Very clear. And you also stated that the lower volumes were partly due to postponed decision-making, as you just mentioned, especially if it deals with shorter lead times. Is your services business included in this category of shorter lead time orders?

No, I think our services business there is still strong and we're not expecting, we're not experiencing any downturn in the services business. It's more on the shorter equipment orders that we're seeing the downturn.

Just to add there Joakim, what you could say is to some degree, it's even a little bit of the opposite because if they wait to replace equipment or they hesitate a little bit and push it a quarter or a year or whatever, then they need to do overhauls and they need to maintain and even buy more spares. So it could even be a positive effect on the service business. But of course, we want both of them to be progressing well.

Yes, thank you. Very clear. And a bit on the cost side, EBIT was a bit lower this quarter, and you said it was partly because you're increasing costs to prepare for your upcoming deliveries in Ports of Maritime. Can we expect these elevated costs to persist into the following quarters?

I would say that Q4 2024 was a big quarter for Fortune Maritime when it comes to especially shore power. That was planned to be delivered this last quarter, Q3, this quarter and into the beginning of 2026. Okay, great.

That was all from my end. Thank you very much.

Thank you very much, Laura.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

Okay, so we will move on. If we don't have any more questions on the phone here, we will move on to the questions from the feed. And I will start with One question here. You signed many large orders late 2024. Should we expect a strong fourth quarter and ending of the year? David.

I think that's exactly what it's all about. We said we had a lot of orders coming in in Q4 2024 and with the lead time of, as Joakim mentioned before, 12 to 18 months, that means there will be a busy quarter to come. So, yeah, we're not speculating too much of the forecast in the future, but that's a conclusion you can do, of course.

Yeah. Next question on a totally different area. Do you have any plans to increase the volumes that the shares are trading at the stock market? I think we can start with the fact that we're moving the registered head office back here to Sweden. We believe that that's something that makes Kabotek more easy to understand. This is also to get closer to the owners. We have more than 80% of owners are Swedish in Kabotek. And we are with this also and our strategy work that we have been doing, have a plan to continue to be more present and more visible for the markets here in Sweden so that we will most likely be able to make an impact on the volumes there. David, do you want to add anything there?

I can add there. What we have said, and this is a decision we have taken as well, especially if you look back a couple of years ago, we wanted to should we say, fix the business a little bit. We had some problems with some unhealthy business in our portfolio then. That's now been worked out, shipped out and delivered and at the same time also improved. We have healthy margins in the deals that we take now. So we are more proud of the company now than what we were maybe three years ago. However, we have purposely not been talking about the company too much. However, of course, now when we are moving home, I think everyone understands we are a Swedish company on the mid-cap, but we are quite unknown to people. So, yes, we're going to talk a little bit more about the company and explain and make us a little more visible and known to the investment community. That's a program where we're going to do me and Joakim more of now when we have the strategy ready. and we're lined up for the future. And then we're going to present a little bit what we are capable of because we are a little bit too unknown to the wider investment community still.

Okay. We have a few other questions here. Where do you see the clearest signs of uncertainty in decision making in terms of segments and geography?

david maybe that's yeah i i it's a good question there i think it's um first of all it's a little bit general it's a little little bit like a wet wet blanket on everything and this is not something unique for covertech this is also what you see and what you're reading to uh the the um quarterly reports by our customers they see the same thing it's a little bit of worldwide thing. But of course, the tariffs and the uncertainty, what's going to happen between US versus Europe, of course, it has an impact direct to US, but it has a knock-on effect on what's going to happen in the other regions as well. we we have discussions going on with our customers and they are and we are also looking into uh can we do something here is it is it doesn't make sense to some of the products you even set up small assembly facilities in us we have a facility in us or there's certain products that we can do there in order to offset some of the tariffs to some degree but more importantly also then to to be present in us and to serve our customers there with with shorter lead times and and being close to them in the market so that is something that we also have already started up and we're going to see more of during 2026. but otherwise in terms of segments and geography i think it's quite evenly spread We don't have any super problematic. We're a little bit of slow down everywhere as for many of our customers. But the underlying business is solid.

Okay. I have another question here. And on the complex shore power container ship orders you receive, are you satisfied with the margins for these projects?

I think our results show that we're not really happy and you shouldn't really be happy but we're satisfied with the improvements that we have done on both Ports of Maritime and industry in terms of the margins in the specific deals and then we need a little bit more volume that's clear and that volume is now as you know a little bit shifted to the coming quarters but I'm I'm okay, and I'm pleased with the improvement that we've done there. And you could say that the more complex the projects are, the more it matters to be an expert and having 50 years' experience in this rather than being a new startup and trying to do something here. And that is shown by the customer who gives us continued trust and doing those complex things because we can do it, we have done it before, we have shown it, and we also then are... also very positive that we're going to see improved models. The more business we do, the more skilled we're going to be, the more skilled our people are going to be out in the field doing it. And then, of course, the overall models in that underlying business is going to continue to improve.

And I think on top of that, I think also we continue to work with cost out and procurement savings on the order book once we have gotten gotten the order so sometimes the long lead times place in our favor yeah okay we go on to the next question uh can you develop in which areas or segments and industries your strategic review is pointing you towards And does this imply a wider or deeper product area expansion?

I can start there, Joakim, and you can continue. I think we have, as you know, we were looking back three years ago, we were ports and maritime and then we had airports and industry at the AirPods is a history that's gone three and a half, four years ago, not part of us anymore. So now we have more industry in focus. Inside industry also have a very interesting radio business where we have sophisticated, in many cases, explosion safe equipment and so on and so forth, which is a bit complex to do. We have the competence, we have the knowledge and we have the certificates for that. So that is certainly an area where I think we can grow more. In addition to that one, as we already mentioned before, we are now more active and present out with customers. We have more salespeople out in the field than what we had before. And we also then are able to offer them a wide range of products. And that pays off. It pays off by the more you visit customer, the more you're sitting in front of customer, the less your competitors are sitting in front of the same customer. And then that generates business. But as we mentioned, the industry business is not big business. one of orders, it's a lot of small orders and it starts small and they want to have a prototype and test it and then after that you're in and then you're starting to have a repetitive flow business year after year and that is why we are very optimistic about the industry segment going forward as well, definitely.

Okay, we take the next question. Can you expand a bit on what products that are part of your product development? Is it Fortune Maritime or industry or both?

Simple question is both. Simple answer to that one. We have certain things in our Ports of Maritime product portfolio where we have had gaps. We are filling those gaps and we are launching new products now and we have done that during 2025 and we have more things to come there that we also think is a product that we're just going to add into the portfolio so they have a wider range of offering to our customers. and same thing goes with industry where we have level wind reels etc where we are designed and with a new new compact design that fits better into the products of our customers and we're working in cooperation with them in order to develop their what they need for tomorrow and again there i'm also very pleased how that how that that job is is done how we do it in a and again Taking back on the radios again, we have a new radio design, which has also been very positive reaction from the market where we developed it and we went out to the customer, talked about it, etc. We get their view into it. So we have their buy in and that now see generating the results. So clearly we have a lot of things that we are doing and there is a lot of things that still to be done and still to come.

And also a question regarding the tax implementation by the International Maritime Organization. Does the delay in tax implementation have a positive, negative or neutral effect on the business of Cabotek?

David? Sorry, Joakim, one more time.

My mistake. The delay in the international maritime organizations tax implementation, does that have a positive, negative or neutral effect on the business of Cavitech?

I think I'm not so worried about that. I think it's... There is a delay, but the underlying, and as I mentioned before, regulations or not regulations, there is a strong need to go as green as they ever can. And they are working on, so I'm positive that we are still gonna see positive effects of that. At the same time, we should not, we pointed it out in the presentation, we should not neglect the fact that one thing is the regulations in terms of emissions, but it's also about safety or more massive system creates increased safety in the harsh ports environment. And at the same time, also the pollutions, the ship, the cruising ship that in the city of the Port of Miami, for instance, they don't want to have back smoke coming out of the chimney. They want to turn them off and switch them over to the shore power. So I think it's a change that is there and it's going to continue.

Okay, and we have another question here. The industry segment profitability improved due to implemented cost savings and efficiency measures. Can we expect a stronger margin in industry going forward? Maybe I can start a little bit and David can continue. First of all, we believe that there is still big potential here to work with cost out on our engineering side and also with improved procurement savings. But having said that, also, we do have already the installed capacity, so we have a bit of leverage there that we can deliver more volume on the industry side already now without having to increase investments. So we do have a bit of leverage there, and we see a good future potential for improved margins going forward.

David? It's a good point. We have the installed bay. We can definitely manage more volume without needing investments in terms of manufacturing or assembly facilities. That's clear. We have capacity to do more. And secondly, we're also working actively. As you mentioned before Joakim, we have long lead titans, yes, At the same time, it's also worked in our favor and our engineering team are doing a great job there in terms of sustaining engineering to look at what are we doing today? How can we do this problem, fix this problem and design this in the future or near future to make it more cost effective and better for us, better for the customers and in a true win-win-win.

Okay, I think we had one here. You mentioned, and I think this was the last question here for the moment, you mentioned in your strategic review of the operations and future opportunities, will there be any change of direction in the company in the future? I'll leave that one to you, David.

I think every time when you do a strategy work, and as I mentioned before, we have this first time when we really do a deeper drill down into the strategy specifically for industry. I think we have a much better understanding now where are the opportunities, where are the gaps, where do we want to serve, which are the customers, where we are today delivering one of the things in our products, what else could we offer to the same customer? So that is clear now, and that's where we also accelerate and we see it generates interesting leads and opportunities there. But equally important when you're doing a strategy is to decide where you want to be, but at the same time also where should we really be? And of course, that is also something because the whole market evolves and therefore it's important to see where do we want to be and where do we have our things and where should we be? But at the same time also then say, sorry, in that case, maybe we shouldn't be so active in that area, but we should be elsewhere. And then we are either developing new products or selling new opportunities or cross-selling to new customers as well. It's not a major change in the company of Coverdick. We're going to continue to delivering automated solutions for mooring. We're going to continue to lower shore power and cable reels. Sure. So we're not going to change that in general, but it's more specifically and then broken down per customer, per segment, per market, where we're going to do more in order to be even more successful going forward. So no major change, but it's more clear direction broken down to activities per segment and per region per power type.

Okay, and I think that was all the questions we had in the feed here also. So, David.

Okay. So in that case, I thank you for your continued support here, for your interest in what we're doing. We are excited about the future and we look forward to get back to you going forward. And we're going to announce what we're doing in the business with press releases as we do, but at the same time, next coming up quarterly calls. Looking forward to those. Thank you very much. Thank you, everyone.