engcon AB (publ)

Good morning and welcome to ENKON's Q1 report presentation. My name is Christer Blomgren and with me today as usual I have our CFO Marcus Asplund and today we also have our next CEO, largest shareholder, board member and founder Stig Engström with us. We will guide you through our Q1 report and also answer questions in the Q&A afterwards. With that, we're going into the presentation. We're starting with the business highlights, and we are off to a flying start in 2026 with a strong growth in both order intake and net sales. Europe continues to be our key growth region going forward, and in Q1, we reach a new record level for order intake in the region. The Nordic region, which made a strong comeback in 2025, is still performing well and delivering solid sales growth. At the same time, margin pressure remains and continues into 2026. So despite higher sales, we are not yet seeing the operating leverage we want. We will talk more about that later on. During the quarter, we launched our new 123 series for tilt rotators. This is a new wave of grouping, packaging our products into clear performance steps, making it easy for customers to choose the right solution. As a part of this shift and to support margin improvement, we have also updated our pricing to better reflect both customer value and today's cost environment. And we expect to see the full effect of that in Q3. We have also been active in the market in North America while the U.S. market is currently moving sideways due to tariffs and uncertainty. We remain confident in the long term. During the quarter, we participate in the ConExpo in Las Vegas, a key industry event for building awareness, relationships, and showcasing the value of our solutions. Closer to home, we carried out a roadshow in Norway together with Volvo CE, where we met customers and partners to demonstrate how our new Series 3 improved productivity, safety, and efficiency. And we're going over to the numbers and net sales continue to grow quarter by quarter with an organic growth coming in at 27% in Q1. What's encouraging is that both our key markets, the Nordics and Europe, are moving in the same direction. In Europe, we see stable growth, even if we also see that it's not all markets that are performing strong every quarter. And I will come back to that when we go through the regions. Order intake, organic oil growth was 10% for the quarter. Order intake remains at the high level overall with a strong trend in both the Nordics and Europe. We are very pleased with where we are. You have to go back to 2022 to see similar levels. Gross margin, we continue to see margin pressure with the gross margin coming in at 38% for the quarter. As in previous quarters, this is driven by a combination of factors, including a stronger Swedish krona, a volume mix more towards the Nordics and the ongoing production ramp up. Marcus will also talk more about this shortly. During the quarter, we also implemented the price adjustments to better reflect the value we deliver to customers and the current cost environment. Over time, we expect this to support margins as it gradually takes effect since we have different notice period on the agreements with the dealers regarding price changes. EBIT margin came in at 16% for the quarter. Despite strong net sales growth, we are not seeing the full operating leverage yet. That's partly due to the margin pressure that we just discussed, but also due to higher cost in the quarter, including our participation in Conexpo in Las Vegas, which is a key industry event for us, as I mentioned earlier. We also had ERP project-related cost impacting in the quarter then. And the lower profitability level is also reflected in the rows for the quarter. And more details will Markus go through when he guides us through the financials in a short moment. We are moving over then to order intake and net sales. Order intake has now increased for three consecutive quarters, which is a good sign that the positive momentum is continuing. We're seeing solid trends in both the Nordics and Europe, and it's really these two regions that are driving the development, while the other regions remain more flat. In the quarter, order intake increased by 6%, corresponding to 10% organic growth, with a negative currency impact of 21 million SEK. Net sales show an even stronger development, sales increased by 21% in total or 27% organically, also impacted by negative currency effects of 26 million SEK. Overall, we continue to see strong underlying growth in both order intake and net sales, supported by good demand in our core markets. If we're then going over to our regions and we start with the Nordics then. We have had a strong start to the digging season driven by continued infrastructure investments and underlying renewal needs. Although the recovery across the region remains somewhat uneven. Order intake increased by 18% organically during the quarter, while net sales grew even stronger at 33% organically, reflecting a solid demand and a good execution by us. In the Nordics, development is primarily driven by the Swedish market, where you continue to see strong momentum. If you're looking at the rolling 12 months, it's clear that the region have delivered a solid performance over the past year. During the quarter, we also carried out a roadshow in Norway together with the Volvo CE, where we engaged closely with customers and partners and demonstrated the value of our new 3 Series. Then we're going over to Europe. And in Europe, we are coming into the year with a strong momentum. Order intake grew 10% organically, reaching a record high level of 240 million SEK. At the same time, net sales increased 26% organically, a clear sign that the demand remains strong and that we are executing well in Europe also. We are seeing a real boost in net sales from a solid underlying momentum in the European market. There is a good pace across the business with our markets taking turns driving growth, which tells us we haven't yet seen the full upside of all markets firing at the same time. So overall, this is a business region moving clearly in the right direction with multiple growth drivers in play. And if we take a look at the rolling 12 months, the picture is very clear. This is a strong and consistent growth journey. We're going over to Americas. In the quarter, order intake decreased by 12% organically, reflecting a more cautious market environment. At the same time, net sales increased by 28% organically, with a significant part of that growth driven by the pricing. The demand in the US remains relatively flat, impacted by ongoing uncertainty around tariffs and their interpretation, which continues to slow down the market activity. That said, we remain focused on building the market over time. During the quarter, we strengthened our presence at Conexpo in Las Vegas, an important platform to increase awareness and demonstrate the value of our solutions. We continue to invest in building awareness and knowledge in the market to drive long-term demand. This is a gradual process, but a critical part of our strategy, and we remain committed to educating customers, expanding the market over time. And we're going over then to our last region, Asia Oceania. Order intake decreased by 5% organically during the quarter, while net sales declined by 3% organically. The region continues to be characterized by significant fluctuations between the quarters, which is reflected in the current performance. Asia Oceania remains relatively flat overall. In Australia, our key market in the region, activity has been somewhat slow at the start of the year. We expect the Diesel, Dirt and Turf exhibition in April to help re-energize the market and support activity going forward. Similar to North America, our focus remains on building the awareness and increasing knowledge of the benefits of our solutions. This is essential to driving the long-term demand, and we will continue to invest in these efforts over time. With that, I hand it over to Marcus to guide us through the financial development. Please go ahead, Marcus.

Thank you, Krister. Net sales amounted to 539 million SEK representing strong organic growth of 27%. As Krister mentioned, strong levels are achieved as both the Nordics and Europe delivering at high levels. The growth margin has experienced a clear decline compared to the previous year when we had an exceptionally high level. This is driven by a combination of compounding factors. Although we have seen the Swedish krona give back some of its previous gains, we still see currency headwinds in the quarter-on-quarter comparison. The higher share of EEC compared with spare parts sales dilutes the margin somewhat due to less favorable product mix. We also see negative price and market effects. The Nordics are coming back strongly with Sweden leading the way. As we have discussed previously, this region is more competitive, which also reflects the gross margin. As we grow, we have also invested in our production capacity. This ramp up phase has temporarily pressured our margins as these costs have increased ahead of our current production volume. This is mainly seen in the beginning of the quarter. To counter the negative margin developments we have seen recently, at the turn of the quarter we introduced the price increase in connection with the launch of the 1-2-3 series. We estimate the impact on an average EC order to be around 5% and we expect to see the full effect in the third quarter. as several dealers, especially in the Nordics, have noticed periods of 60 to 90 days ahead of price changes, as well as orders prior to the price increase will be delivered in the coming months. Looking closer at OPEX, we see some leverage from Hauer Net Sales, despite higher trade shows cost in the period related to Konexpo in the US. In 2025, trade shows costs were mainly concentrated to Q2 with Bauma in Munich. We also continue to see higher administrative costs related to IT and the finalizing of the ERP change. Naturally, we expect these elevated IT costs to subside during coming quarters. On the bottom line, we can conclude that earnings leverage from higher net sales has not materialized as a result of weaker margins and temporary higher cost pressure. Let's take a look at the EBIT development. EBIT amounted to 84 million SEC, which is aligned with Q1 2025. We're not seeing earnings leverage from the strong net sales growth due to weaker gross margins and higher operating expenses with IT costs peaking in Q1 and costs for trade shows. The higher net sales and unchanged EBIT levels means that the EBIT margin declines from 18.8% to 15.7%. This also affects the cash flow. Although we see an improvement, the cash flow is hampered by higher networking capital as we are in the middle of busy season in the Nordics and Europe with high deliveries and the ramp up of production capacity. The same story applies for return on capital employed. Not enough leverage on top line due to currency headwinds and increase in net working capital pulls ROSE below where we sustainably should be. And on that note, I'll pass it back to you, Krister, to summarize the quarter.

Thank you, Marcus. I will try to summarize the quarter then, as you said. We had a strong start to the year with a solid growth in both order intake and net sales, driven primarily by our core markets in Europe and the Nordics. Europe continues to be the key growth engine, reaching record levels in the order intake, while the Nordic maintained good momentum, particularly in Sweden. Overall, the business shows a clear positive trend, supported by a strong rolling 12-month development. At the same time, performance varies across the regions, North America and Asia Oceania remain more cautious, impacted by the external factors such as tariffs, uncertainty, and slower market activity. In these regions, our focus remains on building a long-term demand through increased awareness and the customer education. Margins continue to be under pressure despite higher sales driven by a combination of currency effects, product and market mix, ramping up costs, and last part of the ERP implementation. Actions such as pricing adjustments have been implemented and are expected to support margins over time. During the quarter, we continue to invest in market presence and customer engagement, including participation in Conexpo in the US and the roadshows in Europe. We have also launched our new 1-2-3 product series, simplifying our offering and strengthening customer value. Overall, the business is moving in the right direction with a strong underlying demand, continued market expansion to drive long-term profitability growth. And summarize a little bit of my time here then. After 18 years at ENKON, including 15 years as a group CEO, I had a meeting with the board and what was agreed is that it's time for me to step down from my role. It's of course something I have mixed emotions about, but also have a great sense of pride in what we have achieved together. With these years, we have built Encon into the world's leading manufacturer of tilt rotators, with a 49% market share and a strong global brand. We have gone from clear Nordic base to being present in 17 markets today while delivering a strong growth journey and a significant improving profitability along the way. I'm also very proud that we took income public and onto the large cap list, an important milestone that has strengthened our visibility and created even better conditions for the future. Most importantly, I want to extend a sincere thank you to all our employees, customers, and partners who have made this journey possible. I leave with a great confidence that we have the right people and the right culture in place to continue creating value through profitable growth. And speaking about the right people, now I will hand it over to Stig Engström before we go over to the Q&A. So please go ahead, Stig.

Thank you, Krister, and good morning, everybody. I will give you a short introduction now of me a little bit, and also about the current situation in the company. And please feel free after the presentation of the report to give questions to me or all the others. My name is Stig Engström, and I'm the founder of Encon. I started in 1990 together with my brother, and I was the only one on the pay list for the first three years. Krister came to the company and joined in from 2008. We came together in the toughest time for the company so far. The Lehman Brothers crisis and all that impact on our and other businesses was dramatic. During six months in 2008, we reduced employees from 100 to 50 persons and the turnover went down from 500 to 240 million Swedish crowns and all that in just six months. 2009 was a lost year for us where Christian and I started a cleaning up process with selling out or closing down a number of companies where Incom has become part owners over time. It was a really hard period for us both but we learned a lot and especially stand with your core business is one of the most important examples. Krister took over the CEO role in 2010, as I said, and from that day we started a long and successful journey together. After my decision to take Enco to the stock market in 2021, Krister did a fantastic job. In less than 12 months, Enco went from a private owned company to a public company listed on Nasdaq. And that in time where the war was coming up in Europe and Sweden was entering NATO. It was a special time. Before we entered the stock market, I met a number of investors and welcomed them to be a part of our future success. I also promised them that the financial targets for Encon will be a growth of 20% per year and 20% on the bottom line. And Encon has been on the NASDAQ since June, 2022. But everything comes to an end, and also the cooperation between Krister and Encon. The board, including myself, have agreed together with Krister to change the CEO in Encon. I, as a person, I've got a verified diagnosis as an entrepreneur, a doer without any limits, and my patient is close to zero. That's Krister's word. I'm allergic for complicated processes. I can't see any problems at all. And from my position in the board, I have seen the steps we have taken according to our business plan in the company. But unfortunately, I can also see that the world around us also takes steps and maybe bigger steps than ourselves. If we don't speed up now, I'm afraid that Enco will lose the pool position. Our vision to change the world of digging is already ongoing out there. And we need to work harder with marketing, with R&D, with production and organization, if we will remain number one. So therefore, with the board's request, I will take Krister's place as the CEO from the 1st of May. It's now the third time for me to be a CEO in Encon, but I promise you that will absolutely be the last time. And what will happen now then? My goal is to come back to what I promised four years ago. Growth with 20% per year with a margin of 20% in the bottom line. I have no economic education but I've learned the last 40 years that increase the income and reduce the cost gives better margin and that's exactly what I'm going to do now. So and how will I do it? Our products are used in the mud and in the dirt. Therefore, it is also really important for the organization to come back to the earth. We have to go back to our core business, as we learned in 2008. It will be the old-fashioned boring industrial hard work. I have no plans for big changes in the strategy, but we need to look in the organization, of course. We have to focus more on our most important customers. tighten up our geographic focus areas and for now it's pre on the nordics and europe tighten the product portfolio and more practical sales out in the field and also in the sustainability part i have some ideas to do something and not just talk about it but i will be back in that part later But at last, thank you, Krister, for all your time together with us and the company. We have really tough days. We had also happy days, a lot of laugh and also crying together. I learned a lot of you and hopefully vice versa. Myself, the board and the whole company owes you a big thank you for your efforts. Thanks a lot. Back to Krister.

Thank you, Stig. Okay, that was everything we had for today's presentation. Now we're happy to open up for your questions and feel free to jump in through the telephone conference. So operator, whenever you're ready, please bring in the first question.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Agnieszka Vilela from Nordia. Please go ahead.

Agnieszka Vilela from Nordia. Good morning. So first of all, Steve, could you expand a little bit on what you said about focusing on the Nordics and Europe and tighten up geographic footprint and what does that involve more specifically?

We have a limited amount of resources and we need to keep them where we can do the best business for the moment and therefore we have to be more close where we have the markets now. You know the problems we have in US for example we have other business around the globe and it's really difficult to do it with for the moment so therefore I want to keep this as as lean as possible and we have to be closer to our core markets and that's for the moment Nordic and West Europe.

Okay got it thank you very much. Then separately on the cost ramp that you have for the international production here in the early part of the quarter is that kind of behind us or is that the bigger ramp that we should expect to sort of weigh on profitability in the coming quarters as well when you kind of balance the volume with the cost expansion on that part?

Maybe I'll take this one then. Yeah, I see that the most of us behind us here in that sense. We already saw in March here coming down. So I feel confident that these exact things at least we've left behind us for this time. Okay.

Thank you very much. And then separately on the cost for Conexpo and Bauma and so on, are those costs kind of comparable in level? You had Q2 last year and Q1 this year, but do they kind of net out on a full year basis?

they are more or less netting out and Connexpo is a little bit more expensive one in that way. Everything in US is more expensive. So it's a bit less than last year in Q2 with BOM. Got it.

Very much. And then finally, There's also been changes to the section 232 impacting some companies negatively, some companies positively. Is that something you have counted for in your price hikes now? Or how do you see the sort of the impact from those changes in the coming quarters?

We have adjusted and we're on the ball all the time with the changes and so forth. And we are in a good position as it stands right now. Of course, there are still things happening on which will be the leading one here going forward and what will be taken out and not. But we are in a good position there, fully compensated right now. Got it.

Thank you so much, Edmund.

Thank you. The next question comes from Anna Woodstrom from DNB Carnegie. Please go ahead.

Hi, good morning. Firstly, just congratulations on the job. Well done, Krister. And welcome back, Sig. So my first question is if you could give us some idea on how the price increases have affected order intake already in this quarter and you're talking about it being sort of gradually implemented but if you could give us some rough idea on how we should think about price versus volume in this quarter.

It's hard to say if there is any pre-ordering, we were pretty late giving the notice about it in the order then just to not getting the pre-ordering effect in that way. So I think it's pretty solid order intake for the quarter in that way.

You mean that most of it is volume when we're reading to the order intake first?

Yeah, it would have come even without price adjustments or anything like that. So it's a growth that is a real growth in that way.

Okay. And then my second question is on legal costs, given that the thing has been dismissed now. Did you have any legal costs in the first quarter as well?

not any bigger numbers but we have we had some legal cost uh for it um but uh i don't know marcus if you have the numbers yeah much less than than the comparison uh quarter 2025 at least when when when this the the first decision on on the high court there so yeah it's it's it's far less if you if you want to have the comparison there

Okay, perfect. And yeah, okay, perfect. We've heard from a lot of other companies, much talk about weather conditions, mainly in January and February, actually, both in Europe and in North America. And did you notice an impact on this in either of the regions?

can't say that we see it as a big problem but it's been colder and it's been more snow and so on but that's normally a bit digging season path we we are stronger in the northern part of us and then canada and the northern part of us of course been affected by the the stronger winter but I can't say that it was any specific there. And in the Nordics, it's pretty common that it's in that way. So I wouldn't say that we were specifically impacted by that.

Okay, perfect. And then just the final one on how the other countries in the Nordics are doing. You highlighted that Sweden continues to showcase the best trend and momentum, but how are the other countries doing?

It's Sweden that, as you mentioned, doing the strongest and maybe as no surprise, as we talked about earlier, Finland have been having the toughest in that way because of the financial situation that are current in Finland. So Denmark and Norway doing a little bit in the middle there then.

Okay, perfect. That was all my questions.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Zeno Englund Rikcudi from Handelsbanken. Please go ahead.

Yes, good day. Thanks for taking our questions. Sorry I joined the call a bit late if you have elaborated a bit on the questions. I'll start with the comments you made, Stig, regarding if AIMCON doesn't speed up, you may not be on poll. Can you elaborate a bit more on what it is that you're seeing out there?

have technical threats coming up from others we have competitors ramping up we have of course also geographical problems with what's happening in different countries so we absolutely have to be on our toes and really be aware of what's going out there so absolutely we have enormous potential but we also have to penetrate it and do it now

And the competitors, is it mainly existing or are you seeing new ones entering the market?

No, it's existing, especially.

Very clear. And I'd also like to know further on the profitability side, on the ambition to reaching the financial goal. Of course, you have I'll say one of affecting the quarter but do you have any time frame when you wish to or when you expect to see profitability which comes closer in line to the target?

Hopefully we'll see some results in the end of this year but if it comes from actions now or if it's from actions earlier I don't know but we have to at least we have hopefully we have something in the end of this year.

Thank you, I'll get back in line and I'd also like to wish you all the best that comes ahead for you, Krister.

Thank you. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thanks again for tuning in today and take care and again thank you for this time and also for these four years that we've been talking to each other there have a good day bye bye bye