Ferronordic AB (publ)

Welcome to the Faro Nordic Q2 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to speakers CEO Henrik Carlberg and CFO Erik Donnemar. Please go ahead.

Good morning everyone and welcome to our presentation of the results for the second quarter of 2026. Starting with some highlights for the quarter. We saw increased earnings in all markets, revenue increased 43% or up 54% in fixed currency with growth in all segments. Gross margin amounted to 15.8%, somewhat lower than last year on higher equipment share of revenue, but was up in our main market, the US. Operating profit improved to 68 million compared to minus five in Q2 last year with profitability in all three markets. EBITDA nearly doubled to 180 million kronor compared to 95 the year before. Net profit improved to 45 million compared to minus 51 the year before, supported by lower finance costs and currency gain. Thanks to the increased EBITDA and lower net debt quarter on quarter, net debt to EBITDA improved to 3.0 compared to 4.5 the year before, with net debt then down 112 million in the quarter. So in summary, 43% revenue increase, operating result of 68 million, leverage of 3.0 and earnings per share of 3.08. As I said before, we saw increased earnings in all markets. We did have a strong quarter with higher earnings. The things we've been working on in recent years are increasingly visible in the results. That is mainly then focus on the aftermarket, cost discipline and increased use of data throughout the operations. I'm really happy to see growth and improved profit in all markets but the overall earnings increase was driven by high US sales with June being a record month. Focus remains on existing operations. We see untapped potential in all markets while at the same time continuing to evaluate selected Bolton acquisitions. Revenue as said was up 43% to 1.6 billion krona compared to basically 1.1 billion last year or 54% in fixed currency. Operating profit total 68 million with SG&A down 2% despite higher revenue. EBITDA nearly doubled to 180 million kronor giving us a total net profit of 45 million supported by currency gain but mainly covered by the operating improvement. Net debt to EBITDA improved to 3.0 which is in line with our financial targets compared to 4.5 a year earlier with net debt down 112 million in the Looking at the US in particular, we see strong demand from infrastructure activity and continuously accelerating data center construction activity across the territory. Sales were up 53% in US dollars with equipment sales up 89%, aftermarket up 22% and rental up 15%. Equipment growth was driven primarily by articulated haulers, very much needed for data center construction and ground preparation, and then an exceptionally strong dune. Despite higher equipment share in the total revenue mix, we saw gross margin increasing in the US to 18.2% compared to 17.3% the year before. Operating profit more than doubled to 74 million compared to 26 last year. EBITDA was up 74% in US dollars. Aftermarket continues to grow nicely, but is somewhat constrained by technician capacity. We could sell more service and parts if we had more people, and we are working to fix that. Sales will vary from quarter to quarter, but the underlying drivers installed machine base, aftermarket penetration, and rental fleet continued to build, giving us a good base going forward. During the quarter, we also continued to develop the US platform. We signed a service agreement with Volvo Penta, giving us possibility to service and sell parts for Penta engines. We also extended our cooperation with Sandvik to include underground drills. At the same time, we continue to improve the platform that we have in the US by implementing better sales management processes and working on continued digitalization of the business. So in summary, the market is strong, driven by AI and infrastructure. We have a good platform and a good team, and we're working to improve these further to take a greater share of the potential business in our US territory. Going to Germany, strong deliveries and higher aftermarket sales. The signs of recovery that we've seen earlier continued, but modest pace. Registrations of new trucks in our territory was up 7% during the quarter. Our own truck deliveries were up 52% in Euro with 267 units delivered compared to 100 in Q1. This also had a positive effect on working capital which is now down to 10% of LTM revenue. Each truck delivered expands the population that drives the aftermarket demand going forward. Aftermarket sales then was up 9% in Euro on better productivity and pricing with June being the strongest month of the year so far. Gross margin reached 10.9% compared to 13.7% the year before because of higher truck share in the total revenue mix, but the gross profit increase was up 17% to 59 million. SG&A down 14% year-on-year, reflecting the cost reductions that were implemented during 2025. Operating profit then totaled 8 million compared to minus 13 in Q2 last year. Workshops have more to give. We continue to work on increasing technician capacity, which remains the main constraint in growing the aftermarket business. At the same time, we did sign a lease contract now for a new workshop in central Hesse, about 40 kilometers north of Frankfurt. That will help us to provide even better service to our customers going forward and will grow the profitable aftermarket business. Looking at Kazakhstan, the market was more or less on hold during the quarter due to delays in government spending on infrastructure projects. This is something we expect to pass. Sales were nevertheless up 88% to 49 million kronor, driven by higher equipment sales. Gross margin was flat around 24% and operating profit then totaled 3 million compared to a loss of minus one the year before. Erik, I hand over to you.

Thank you very much Henrik. I'll turn to the financial statements and look a little bit more in detail how the performance of the quarter is reflected in those statements. Starting with the income statement. Revenue again strong across the platform and across the markets. Consolidated up 43% to 1.6 billion Swedish krona. It is the strongest revenue we've had since 2022, so very encouraging to see. Growth in all markets, so the mix of revenue across these segments is relatively stable, 62% US, 35% Germany and Kazakhstan, 3% of that revenue mix. If we look at the revenue mix across business areas, we see however that this quarter was strong in equipment and truck sales, which again reflects business activities in all segments, but maybe notably in the US, very strong equipment sales there, especially towards the end of the quarter. and Germany also where we also saw some trucks being delivered from sales in sales activities in the first quarter. So 62% equipment and truck sales after market 31% and rental 7% that compares to last year it was 49, 41 and 9. So a meaningful difference again driven by new equipment sales conversions and used in the US and also strong tractor deliveries in Germany. Despite that shift in revenue mix year on year the gross margin was relatively stable down slightly and that decline was driven by Germany and in turn in Germany it was again that big delivery of trucks and the number of fleet deals, which tend to come at the slightly more compressed margin as well. So slightly lower gross margin, but stronger gross profit on that significantly higher revenue. If we look at SG&A, despite the growth in top line, costs were held back for the group as a whole. SG&A down 2% to 177 million Swedish. Some help also from the currency there. The average rates in dollars and euros were lower against the Swedish krona year on year. As a percent of revenue, this is a KPI we keep an eye on in all our segments and across the group. SG&A declined to 11.4%. That is, of course, also an effect of higher revenue, so raising that base. Operating profit up to 68 million. with a margin of 4.3% that compares to a negative result last year and a negative margin of 0.4%. So a very strong year-on-year increase there. Net profit of 45%. From that operating profit of 68%, we had lower net interest costs, so finance costs, and were also supported by A SEVENTEEN MILLION SWEDISH FOREIGN EXCHANGE GAIN AND WITH THAT I MOVE IN TO LOOK A BIT AT THE BALANCE SEAT LOOKING YEAR ON YEAR FOR A START ON THE PPE SO MIND YOU THIS IS our properties, but mainly our rental fleet in the US, in Germany. That was higher year on year. That is reflecting investments in the rental fleet in the US mainly. and to some extent also currency effects. Here we would look at end of period FX rates and that work to increase the PPE in the consolidated Swedish accounts. If we would look rather quarter on quarter, which you can do also in the table there to your left, We also see a slight increase, not as big one. And again, that's partly reflecting that rental fleet in the US, which we keep investing in and which has high utilization, which is also reflected in the results of the second quarter. Working capital is at the core of our business and important for our returns on the capital we employ. In the US, we saw a decline in working capital from 19% to 14%, that is as a percent of LTM revenue. reflects partly inventory decrease, to some extent transfers from inventory to the rental fleet, and also higher payables. Receivables are up as they would be when sales increase, so that's in line with with normal business practice. German working capital also down from 13 to 10% of LTM revenue last 12 months revenue that is partly reflecting the decline in truck inventory. As mentioned before, we had a buildup of trucks in the end of the first quarter and that were that they were delivered through the second quarter contributing to that decline in working capital. In Kazakhstan, we had an increase in working capital on a currency basis or SEC basis, Swedish krona, but as a percentage of revenue, a decline there as well, given the higher revenue in the quarter. Net debt for the group as a whole decline that reflects part of this reduction for the group as a whole quarter on quarter reduction in working capital and release of cash and the operating performance and also to some extent foreign exchange differences. And the profit for the period as well as again FX translation contributed to a higher equity as we said and an increase in equity to assets for the group. And with that, I move over to the operating profit dynamics starting year on year. Again, last year was a weak quarter at negative five. Very strong positive dynamics in the US in this quarter from 26 last year to 74. This is in Swedish krona, of course. So again, or an increase of 47. In Germany we moved from minus 13 to plus 8, so an increase of 20. And in Kazakhstan from negative 1 to plus 3, so an increase of 4. All segments, we're happy to say, contributed to the improvement and strong results of this second quarter 2026. Moving to quarter-on-quarter dynamics, a similar picture again. All segments contribute to improvement starting from a higher base from Q1 of this year. The strong performance in the US in Q2 again stands out. Also an improvement in Germany on the profitable first quarter we had. and then also moving from break-even to plus three in Kazakhstan. On the asset side, so just quickly reminding of the balance sheet, the assets that are generating the returns for the business. We see that the biggest part of our balance sheet is the rental fleets. And then in red, it is mainly the rental fleet in the United States, but also rental fleet in Germany. Second, in terms of weight on our balance sheet are inventories as part of working capital. So these are mainly machines in the US, trucks in Germany and machines in Kazakhstan, but also parts, of course, to make sure we have iParts available to service our clients and customers. And receivables, a natural part of our business. And again, that tends to vary a bit with current sales or sales in the most recent period. And then to your far left, there also our infrastructure, of course, the real estate, our workshops and the fixtures and fittings in those workshops. On the liability side, we, of course, try to work as much with payables to our partners as we can. We also work with our bank partners in bank loans and with our partner Volvo with their VFS facilities and that brings us to a net asset value of 1.4 billion or 97 kronas per share. And with that, Henrik, we move to the financial objectives where we are. We are starting on the revenue. moving higher from where we were, but not at our target. We have to some extent the FX against where we set the goals, but again, the dynamics is moving higher. In operating margin, good progress in this quarter indeed. towards our goal of being above 6%. This, I remind the listeners, is last 12 months trailing, so the last four quarters combined. And balance sheet measure net debt and against the income statement EBITDA, We are now also at our target there, which is very positive and encouraging. So a decrease from 3.8 in the first quarter and 4.5 a year before. Good traction there. With that, Henrik, I turn to you for something on the outlook before we open the floor for questions.

Thank you, Erik. When it comes to the United States, we remain optimistic on the operations and the market ahead. Infrastructure spending remains high. At the same time, AI-related data center investments and related power infrastructure continues to grow across the territory. Customer order books are solid and machine utilization is high. So I mean, all in all, the underlying demand in the US business is good. Q2 then sets a high mark and quarters will vary, but the installed base, our rental fleet and rising aftermarket penetration will keep building, giving us good hopes for the future. In Germany, the gradual recovery is expected to continue as fleet renewal needs accumulate. Customers do continue to use their trucks, securing underlying demand for parts and service. We now have a lower cost base in Germany. We have a stronger aftermarket and we have an organization that is able to handle larger volumes. So we're well positioned for operational leverage when the market normalizes. In Kazakhstan, we expect activity to improve as government spending resumes and we continue to see good opportunities in mining and road construction. Thank you.

So with that, we pass word back to the operator, the host of the call for a Q&A.

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 Albin Barnevik from ABG Sundal Collier. Please go ahead.

Good morning, Henrik and Erik. This was Albin at ABG. So, a very strong report here, of course, highest pentadibits since Q4 22. Perhaps if we would start on splitting out the development, you touched upon this in the presentation as well. How much of this is the strong rental conversion figure playing in here, and how much is perhaps the strong aftermarket in Germany and the decreasing SG&A? I understand the largest contribution to be, of course, the rental conversion figure in the EBIT development.

Well, actually, if you look, I mean, it's clear that the US is the main driver here in terms of the positive development. But if you look at the revenue mix and even within the revenue mix, again, we see a big share of equipment sales in the US, but it is really actually the new equipment sales that is driving this. So the rental fleet has high utilization and we do see conversions here on year or the conversions are up year on year but it's really the new ones that is driving the sales in this quarter which is positive we have high utilization on the rental fleet and it means that that is being depreciated and opens up opportunities for conversions going forward. We see growth in aftermarket in the US and in Germany, but I think the quarter as a whole driven by strong deliveries, again in the US, top line new equipment and also in Germany. But again, positive to see the very important aftermarket grow in both those segments significantly. And we remind you that those machines going out in the market becomes potential for the aftermarket as well to grow in the future.

Yeah, and you described the German recovery as gradual and modest. This point and onwards, how should we think about the secular recovery in the underlying market and perhaps also if we can continue to extrapolate this strong aftermarket development. How do you perceive that?

Alvin, I think when it comes to the recovery, customers continue to use their trucks and at some point they need to be replaced. When that happens will probably depend on when customers feel more confident in the German economy as a whole and so on. But at some point we expect new sales to take off. At the same time when customers use the trucks they will need to service those trucks and they will buy parts and so forth which will secure the aftermarket business going forward. And then we continue to work on increasing capacity in the workshop so that we can capture a larger share of the potential business that is out there. That is also the reason why we are now expanding the workshop network in Germany to better service customers and grow the aftermarket business.

Yeah, I understand. Perhaps also on the aftermarket growth, you discussed the constraint by technician capacity being a constraint here rather than perhaps demand. Can you put a bit more color on the efforts undertaken to relieve this constraint in the coming quarters?

It's really a question of hiring more people and training more people and making sure that we are a very good employer to make sure that people actually stay and to train technicians so that they become more productive. But it's in a way a soft question, but it's continuous work to hire and make sure that good people remain.

And how do you see the SDNA impact of scaling the technician headcount going forward in Germany?

So, I mean, the cost saving measures we have taken have never really affected technicians or workshop. We've been very careful to keep the operational capacity that we have. The cost saving measures have affected overhead expenses mainly. So, of course, the more we grow the business, the better absorption we get on the overhead costs that we have, and that should increase profitability going forward.

Yeah. And perhaps moving down to the US and US aftermarket. You discussed the Volvo Penta service agreement. Yeah, I understand it that you have not had an agreement with Volvo Penta before. And how much how should we think about this in contribution to the aftermarket business in the coming year? Looking forward?

Yeah, I don't really want to quantify that. The same applies to the extended corporation with Sandvik, but it's part of the strategy to grow the revenue and to grow the profitable service business. I'm excited about the Penta business because Penta is doing very well in the United States, not only related to engines that are in machines, but also related to the data center constructions that we are seeing.

Yeah, interesting. And on the Sandvik Corporation guarding their underground drills then, is this Is this also an aftermarket activity mainly or can you go a bit more detail into this?

No, this is both equipment sales and aftermarket. We have a cooperation with Sandvik for surface-based drill rigs since many years in the US and this has now been extended to also include underground machines.

All right, yeah, I understand. And yeah, of course, you're aware of this, but VC has, of course, launched many new and updated models during the last couple of years. Do you see yourself capturing market share as a result of this effort as well? You've been talking about the positive development for the articulated haulers, for instance.

Volvo has had their biggest launch year ever last year and of course we have new generation of excavators, we have a brand new generation of articulated haulers and they are very popular especially for these big ground preparation projects where you need haulers.

Yeah, and looking at the income statement, I saw that the selling expenses fell to 14 million from 64 million a year, while G&A rose to 163 million from 117, so combined roughly flat in total numbers, but have you reclassified any cost items here between those two lines?

No, I think those are reflecting dynamics in their respective segments in terms of those costs. I would probably, in your case, focus more on the total. So no trends or dynamics that changes in terms of the business.

Yeah, right. And I guess you also talked about this, but the lower net working capital, that's mostly attributable then perhaps to the post toned German orders that now are delivered, at least partly.

Correct. If you refer to the working capital in Germany, yeah, you may remember that we had this build up at the end of the first quarter with deliveries being postponed until the second quarter. And we saw those deliveries materialize now contributing to that big volume of sales in Q2 and consequently the working capital decline.

Yeah, understood. And the increase in PP capex, that's mainly attributable then to the US rental fleet increase. And perhaps a bit on the expected full year capex run rate from here. How do you see that?

Well, I think we talked about this before as well, Albin, that when it comes to capex, the maintenance capex we have on our real estate, on our properties, our workshops, that's relatively stable. The service fleets for our mechanics are an important part, so the vans and equipment that they use. also relatively stable rolling. The other part is, of course, the rental fleets. And there we don't really envisage an expansion of the German fleet. The US is part of our strategy to grow that with new equipment to take more market share and then rent it, keep utilization high and convert them later on. That's more planned to continue that expansion. I wouldn't really quantify for it, but you should expect to see continued investment into it.

The net-to-ebit, of course, reached 3.0 times this quarter at the top of the stated target range, perhaps a bit sooner than we expected as well. How does this impact your thinking on capital allocation?

Well, I think we stick to our guns, so to say, Albin. I mean, the objective is to have it actually lower than three, as you know, that increases our strategic flexibility. In a way, I think, you know, I think Henrik says somewhere in the CEO comment, you know, that we see great potential and continue to develop our core business, our existing markets, but continue also to look for selective acquisition opportunities. And that's where we are. We will continue to grow and develop our current businesses, but keep an open eye for acquisition opportunities. We do believe that we have capacities to scale our business further, and that will benefit in terms of returns to our investors. So I think that's how I would put it at this point.

Yeah, I think that was all for me. Thank you for taking my questions. Have a good day.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Thank you. We do have some questions online and I'll ask them and Henrik you can point back to me if you want me to take it. Starting one question on the rental fleet in Germany. The question saying that it's quite heavy in terms of its place on the balance sheet. Are there any risks to the quality of those assets? And as a follow-up question, is the e-rental business now profitable?

So I can start with the rental fleet. It's mainly a financial question, but I'll try to answer it and then you can correct me if I'm wrong. But we do impairment testing on the rental fleet continuously to check that it's in line with market values. And if we see an impairment indication, then, well, values are written down and that would be then reflected in the income statement. So in other words, the reported numbers, they already capture this risk. When it comes to e-rental and profitability, I mean, we don't report electric rental business as the profitability there, but it's part of our German rental business and it's developing well. We received government subsidies that lowered our acquisition cost for the trucks. which allows us to offer them at rental rates that give our customers a good cost of capital at the same time as we cover our costs. But maybe more important it gives us a very good insight on how electric trucks are actually used so that we are well prepared when this technology gains momentum.

Indeed, also help us to market and sell these trucks knowing how they're used and operated. The second question related also regarding the sustainable transport solution that we have in Germany. asking the scale of that business and the state currently update on that.

Okay well this is a pilot project it's a very small operation today we're talking single drivers really not the fleet and I think it should be best understood as a concept project that gives us operational insight into electric transport as a service. It should not really be compared with our former contracting business or anything like that, but it's a very interesting project that we learned a lot from.

I actually have a list of questions here, but I'll jump one forward given that you mentioned contracting services. One of the question here is if we see ourselves getting back into contracting services either in Kazakhstan or in the United States.

I wouldn't rule anything out but we always want to move closer to our customers. But there is no concrete project at the moment.

And staying in Germany, how pleased are we with our return on capital in Germany? What recent measures have you taken to turn the capital faster, thus lowering the overall risk of this competitive sector?

I don't think I will ever be happy with the return on working capital. It can always be improved, but we did release a lot of inventory during the quarter so that working capital as a percentage of revenue came down to 10%. Can it be optimized further? It can always be optimized further and we will work on that.

Thank you. I would just second that. I mean that is something we're constantly looking at. How can we optimize the capital we tie up on our balance sheet and turn it as quickly as possible with the best achievable margins. Optimizing that really turn versus the margin we achieve for the best return to capital overall. One question on the US in terms of that demand driven by AI and data centers investments in on-shoring manufacturing in the US. Do we see demand effects of that driving pricing in machines?

The data center trend is unprecedented, I would say. We have so many projects popping up. And it's not only data center, but it's also related infrastructure, such as power plants. And as we write in the report, these projects, they do require extensive earth moving and site preparation. So we see demand there not only from the contractors that are actually building these sites, but also from the producers of the raw material that is used in quarries to produce aggregates and so on. So it really drives equipment demand in different places in the value chain. So of course this is driving a lot of the demand in the market at the moment, which we are very pleased to participate in this journey.

Circling back to Germany, one more question in terms of finding mechanics. A question on the general state of German economy and reports of big layoffs in the German economy. Are we seeing any opportunities from there in terms of finding mechanics that the labor market losing in up, so to say, to offer more supply of mechanics?

I would say yes, even though we don't see any direct effect of that yet. But of course, people working in factories are also potential technicians, but one should also remember that technicians are quite they have specific training for their jobs and that might not necessarily be the same that they're doing in factories when they're being laid off so there would be a transition needed for that so overall I think the main point is really and this applies to the US as well that there is more demand when it comes to repairing and fixing machines that we can currently accommodate and we need to work on increase in capacity one way or the other.

Thank you Henrik. One last question I have online regards our view on owning versus leasing real estate. I think in general there we're actively looking at every single object and real estate object I mean and opportunity we have. So Henrik mentioned we're leasing starting in January a new workspace in Hesse in Germany. That's a lease contract. The most efficient way to access that space as we see it and not to tie up capital. There are other workshops where opportunities are limited. It's a very specific workshop we don't think maybe we would get good pricing on it in a sale-and-leaseback structure. So we try to look at the totality, but also specifically at each single opportunity and make sure we make the most efficient use of our capital, bearing in mind, again, that some of our real estate and infrastructure is quite specific to the work we do. So with that, I don't have any more questions online. So I would probably give back the word to the operator to maybe offer more chance for listeners and otherwise, yeah, thank people for this call. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

We have no more questions. So thank you very much for your interest in Fair Nordic and do reach out to us after this call if you have more questions or anything else we can do for you to help you out. Thank you very much. Thank you. Bye bye. Bye.