Fagerhult Group AB

Good morning, everyone, and thank you all for joining us today. I'm Niklas Willstrand, Head of Communications at Fargo Hult Group, and it's my pleasure to welcome you to our Q3 2026 resource presentation. On the call today, we have, of course, President and CEO, Bodil Sonesson, along with our CFO, Oscar Wallstén. Bodil will begin with an overview of the quarter followed by an update on the executions of our strategic priorities and the progress made in key areas. Oscar will then provide a deeper dive into the Group's financial performance. To close, Bodil will summarize the key points before we open the floor for your questions. We will start with questions from the conference call participants and then take questions from the webcast. You can ask questions by pressing pound key and five or in the chat window on your screen. And I will then read them up for Bodil and Oscar. Please note that today's session is being recorded and will be available on our website later today. So with that, I will hand over to you, Bodil. Please go ahead.

Thank you, Niklas. And also welcome for me to everybody who is on the call today. So the market remained Thank you very much. and that is that the savings program of 100 million that we communicated in July remains on track. The cost savings, the total cost savings in Q3 was 51 million and we had 25 who was related to the savings program. The additional 26 million in the quarter of lower cost were related to lower commissions based on lower sales levels. We continue to work on additional cost savings measures and that they will be materialized in coming quarters. Then we had the additional 120 millions of savings from the strategic review. We have not yet seen those in our earnings. However, the activities leading to them are advancing. The first action was the one we announced for LTS in Germany, and it's the first concrete steps in delivering on that 120 million. And work is ongoing in several other areas across the group. And as these initiatives mature, we will also communicate them to the markets. So if we then turn to the quarter, EBITDA before items affecting compatibility amounted to 130 million compared with 173 million last year, and that correspond to a margin of 7%. While profitability was impacted by the lower volumes, the EBITDA margin stabilized at A level in line with the second quarter 2026, which is reflecting our cost discipline and the impact of the actions already implemented. If we're looking at the order intake, it was a disappointment. It weakened during the quarter and amounted to 1 billion 700 million Swedish crowns, corresponding to an organic decrease of 13.8%. and this is reflecting that activity in larger projects remain very limited across all our main markets. Alongside the cost and efficiency measures, we're also increasing our focus on initiatives that can support growth also in the near time. Across the groups, we're strengthening pipeline management, lead generation and commercial execution. As an example, within business area premium, In particular, we are accelerating our focus on the installed base. And as you know, we've been in the market for many years, targeting renovation and upgrade opportunities where customers can improve energy efficiency, sustainability and lighting performance. While these initiatives will not fully offset weaker market opportunities, they enable us to capture opportunities that are less dependent on new construction and strengthening our position in the market. It's also very much in line with our renovation focus that you've heard us speaking about for quite some while. Net sales in the quarter amounted to 1,860,000,000 Swedish crowns, which was compared to 2,027,000,000 last year. The decrease was mainly attributable to lower order intake in previous quarters at the beginning of the year and adjusted for currency effects and acquisitions. Net sales decreased organically by 9%. So despite the market environment, we continue to see positive development in several parts of the group. In particular, in Iguzini, LeadLinear, Trouto TLV and DesignPlan, who delivered encouraging performance, supported by resilient demand in selected customer segments and geographies. It means it doesn't look the same everywhere, so there are segments and geographies that are more positive. Work on the strategic review continued during the quarter, with focus on strengthening our core European business, improving cost efficiency and accelerating growth in selected areas. And as I said, LTS in Germany, which I will come back to to give you a little bit more detail on, and progress on the growth side in data centers are two concrete examples of how we move from strategy to execution. So as we enter the final quarter of the year, the market remains challenging with limited visibility, and we remain focused on our strategic priorities to building a stronger foundation for the future. So if we then move into and look at what we presented in July, and we was that we communicated our strategic review to the market. And if we We look into our three clear priorities that we communicated. They were reducing costs while strengthening our European core business, maintaining our leadership in innovation while accelerating in high growth segments and leveraging the strength of the group more effectively. So we have already started to turn these priorities and concrete examples. So coming back to LTS in Germany, There we've taken an important step to strengthen long-term profitability. So what do we do? We bring in the sales organization of LTS and Fargo altogether while we optimizing the product portfolio and we are closing the production facility in Germany, which we announced in September. and the production will be relocated to other facilities within the Group. These measures will improve competitiveness while also representing the first concrete actions resulting from the strategic review. Eltis is one example of what we've been executed in the period, but you also have agreed to divest our Estonian subsidiary and they will become a distributor instead. So we're changing the model so they will continue to sell our products. So we maintain the presence in the market while at the same time simplifying the group structure. And in addition, we've also signed an agreement to sell our office property in Guildford in the UK, and that will contribute positively to our cash flow and net depth in the fourth quarter. So these are some good examples of how we're translating the strategic review into concrete actions. Some initiatives improve profitability, others simplify the business or strengthen the balance sheet, but all support our ambition to build a stronger, more focused group. At the same time, we continue to invest in areas where we see attractive growth opportunities. So data centers is one of those areas. We now have experience from more than 60 projects across Europe and we have secured a number of new projects during the quarter, including during the last third quarter. This gives us an increasingly strong platform from which to develop a more coordinated European offering across the Group and further expand our position in this segment. And as you know, innovation remains equally important of long-term growth. And during the quarter, as an example, at Delilictan, we have launched an upgrade of the Time series, which is one of the brand's largest product families. And the new offering includes a new lighting package designed to provide higher efficiency that meets the high demands of modern workplaces with an excellent lighting quality. So these different examples, together with our cost savings programs, all point in the same direction. We are simplifying the business, improving efficiency, strengthening competitiveness and investing where we see the greatest long term opportunities. And with that, I will hand over to Oscar, who will take you through the financial performance in detail.

Thank you Bodil and good morning to all of you. Let me now take you through the financial development in the quarter. As Bodil has described, market conditions remain challenging across most of our markets during the period. Activity in new construction continue to be weak and customers remain cautious when making investment decisions. While profitability and cash generation remain below our expectations, there is evidence that our strategic operational improvement initiatives are starting to gain traction as Bodil mentioned. Throughout the quarter, we maintain a strong focus on cost control and we will continue to focus on operational efficiency and working capital management. Let me now move to the financial summary for the quarter. Net sales decreased 8.2% during the quarter, reflecting continued weak demand across most of the markets. While not reflected in the table, the report also highlights a declining gross margin. The 3.6% percentage point decrease was primarily driven by lower volumes in collection and premium, where the cost base has not yet been fully adjusted to current demand levels. In addition, material and production costs accounted for a large share of sales compared with previous quarter or previous year, sorry. EBITDA before IEC amounted to 130 million compared with 173 million in the corresponding quarter last year. Reported earnings benefited from a positive non-recurring earn-out revaluation related to Capelon of approximately 30 million. Excluding this item, underlying profitability remained under pressure due to lower volumes, continued margin pressure in several business areas. Cash flow remained weak during the quarter and improving cash generation continues to be key management priority. Let me now turn to profitability. reported EBITDA margin before items affecting comparability was 7% in the third quarter, compared with 8.6% in the corresponding period last year. It is important to note again that the quarter includes a positive non-recurring earn-out accrual release of 29.7 million. This item had a positive impact on reported earnings and should not be viewed as a part of underlying operational performance. Excluding that item, the EBITDA margin would have been approximately 5.4%. Highlighting that underlying profitability remains challenging by lower market activity and reduced volumes. That said, we're encouraged We saw particularly good progress in professional and infrastructure during the quarter. Looking at the rolling 12-month perspective, the EBITDA margin decreased from 6.9% to 6.5%. This underlines that while we're seeing early signs of operational progress, there is still considerable work ahead before profitability returns to levels we consider satisfactory. Going forward, our focus remain on executing the strategic initiatives already underway, further improving efficiency and converting operational improvements into sustainable margin recovery. Looking at the business areas, the performance varied considerably across our portfolio during the quarter. Infrastructure was once again the strongest performing business area. Delivering both growth and improved profitability, professionals showed relative stability despite challenging market conditions. Collection and premium continued to be affected by lower demand. Weaker volumes and pressure on profitability. When the current market environment remains difficult, the quarter clearly demonstrates the value of our diversified portfolio and our exposure to several different customer segments and markets. Let me dive into the different business area more in detail. Collection continued to operate in competitive environment during the quarter. Demand remained weak across most markets, particularly in the Dutch region and Nordic countries. Customer activity remained cautious and product volumes were lower than in the corresponding period last year. Lower sales volumes combined with an unfavorable business mix put pressure on profitability. At the same time, there were positive signs within selected parts of the portfolio. Brands such as Egucena-led Linear demonstrated resilience and activity within several outdoor applications remained relatively stable. Our focus remained on adopting the cost base, improving efficiency maintaining our strategic market position. Business Area Premium Premium continued to operate in a demanding environment during the quarter. The European lighting market continued to be weak, particularly within office and education applications, where investments activity remained low. In addition, several larger project decisions were postponed during the quarter, which negatively impacted order intake and sales development. At the same time, we saw encouraging developments within renovation-related demand, activity increase in several markets, and the business secured a few important projects wins during the quarter. We also continue to execute operational improvement initiatives, including actions within our German brand LTS, aimed at strengthening profitability and competitiveness, as Bodil mentioned. Going to professional. Professional delivered a relatively stable performance despite the weaker market environment. Sales development varied between markets. France and UK remained solid, while Australia continued to develop positively from a commercial perspective. Although demand levels remained below historical norms, the business was able to maintain a relatively stable activity level. Profitability was negatively impacted by gross margin pressure, but disciplined cost management helped mitigate part of the earning impact. Overall, professionals continue to demonstrate resilience despite the challenging market conditions. Infrastructure. Infrastructure was our strongest performing business area in the quarter. Growth and profitability improved compared with corresponding period last year, primarily driven by design plan. Demand remains strong within public infrastructure and correctional facility projects, where design plan continued to perform very well. We also continue to see attractive opportunities within data center applications across Europe. A segment that remains structurally attractive and where activity levels are significantly stronger than in many other markets. Let's move on to cash flow. Cash flow from operating activities amounted to negative 62 million in a quarter. Compared with last year, the development was mainly driven by weaker earnings and continued working capital absorption. Inventory and receivable levels remain elevated relative to the current demand environment and improving working capital efficiency remains a clear management focus. While we are not pleased with the current cash conversion level, several initiatives are ongoing across the group to improve cash generation and strengthen balance sheet efficiency. And the last slide, from EBITDA to EPS. Let me bridge the development from EBITDA to earnings per share. EBITDA before items affecting comparability amounted to 130 million compared to 173 million last year. Following items affecting comparability, the 40 million, Reporter EBIT amounted to 160 million. In addition to lower operating earnings, net profit was significantly affected by higher financing costs. The financial items amounted to negative 66 million in a quarter compared with negative 22 million last year. This increase reflects a combination of higher debt levels Higher interest cost and currency related effects. And in the box on the right hand side, you can find the details. As a result, earnings per share amounted to five öre for the quarter, compared with 49 öre in the corresponding period last year. With that, I will hand back to Bodil for the concluding remarks and outlook.