Garo Aktiebolag (publ)

Hello and thank you for joining the GARO Interim Report January to September 2025. My name is Harry and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. You exit the queue. I will now hand over to CEO Jonas Clarion to begin. Please go ahead, sir.

Hello and welcome everyone to GARO's Q3 presentation. I am Jonas Claren, CEO, and as always, we appreciate you taking the time to join. Our focus this quarter has been turning structure into rhythm and rhythm into results. With me is our CFO, Helena Clausson, who will take you through the financials shortly. But first, let me share the key developments from the last month. Next slide, please. Let's look at the third quarter and how Garo is progressing. The overall picture is one of steady improvement. We're building momentum across the group and beginning to see structure turning into rhythm. Electrification continues to be our financial backbone, performing steadily across markets. We see positive momentum within installation products and stronger project pipeline, particularly in the UK and Ireland. The Swedish residential market is still slow, but we're starting to see signs of increased activity. Our focus is on sharpening sales integration and preparing for the next market upturn. Immobility remains challenging as the home charging segment has become a clear low price market. We are staying disciplined, simplifying the portfolio, reducing inventory and focusing on professional and public charging where our strengths lie. Technically, the entity platform is stable and the LS4 platform continues to gain traction on export markets. step by step for gaining control and positioning the business for recovery. On the leadership side, collaborations between sales, production and product development is much stronger and the organization is starting to find its rhythm. We have one unified Swedish sales team and better alignment across the group. Operational control and liquidity have improved, creating a stronger base for what's ahead. We are now refining and executing the group roadmap to ensure every part of Garo contributes to a more resilient company as we move into 2026. In summary, Q3 shows that our plan is working. The fundamentals are improving and we are continuing to build Garo step by step for the long term. Over to you, Helena. Next slide, please.

Thank you, Jonas. And as usual, I would like to start by looking at the financial summary for the third quarter. Net sales amounted to 251 million, a decrease of 7% compared with the same quarter last year. Garo Electrification showed a stable quarter with sales almost in line with last year. It is very pleasing to notice that our product group Electrical Distribution Product showed growth of 4% compared to the year earlier quarter. Also, our project business seems to be recovering after the summer. Immobility continued to develop weakly, with a 22% decrease in sales in the quarter. Gross margins have been on similar levels to previous quarters, where stronger margins within Gado Electrification have been offset by lower gross margins within Gado Immobility. The adjusted EBIT for the quarter amounted to 2.5 million compared to 0.4 in the same quarter last year. EBIT for the third quarter amounted to negative 1.6 million, where the result was charged with 4 million in termination costs for the departing personnel. We have a significant imbalance between the two business areas, Goro Electrification and Goro Immobility, where the latter weighs on the group's overall results. Next slide, please. And now moving over and looking at the two business areas separately, starting with guard or electrification. Net sales amounted to 197 million in the quarter, 3 million less compared with the same quarter last year. Sweden experienced a decline of 13%. On the other hand, our sales to the Nordic countries grew with 5% and the sales to Europe, excluding the Nordic countries, showed growth of 18% in the quarter. Looking into the different product groups, sales within electrical distribution products increased by 4% compared to the same quarter last year, while sales in product areas Project and Temporary Repair both decreased by 12%. However, sales within project was sequentially higher in September, and current order intake indicates that also October will be a good month for project business. This indicates that Garo's seasonality also applies for this year, where the fourth quarter normally is Garo's strongest quarter. Adjusted operating profit amounted to €22 million, compared with 20 million in the same quarter last year. The result in the quarter is explained by growth with strengthened gross margins in both Ireland and in the UK, which has then partly been offset by the costs of ongoing ERP projects. Our work with the implementation of a new ERP system has reached an intensive phase involving a high rate of investments. but the project is crucial for our long-term efficiency. Adjusted operating margin came in at 11% compared to 10.3% last year. EBIT for the third quarter amounted to 21 million, where the result was charged with 1 million in termination costs for the departing personnel. Next slide, please. And now we move and focus on the Garo immobility business area. Net sales amounted to 54 million for the quarter, giving us a negative growth of 22% or 50 million compared with the same quarter last year. In the quarter, collaborations with E.ON and Hyundai has resulted in Garo delivering a large number of LS4s to the Hyundai European factory in the Czech Republic. Furthermore, the dialogues have also created business with SHEA in Slovakia for the Kia factory, where Garo will deliver semi-public charging. The adjusted operating profit for the quarter amounted to negative 19 million and is fully explained by the low sales and a product mix. EBIT for the third quarter amounted to negative 22 million, where the result was charged with 3 million EUR. in termination costs for departing personnel. Next slide, please. And now looking into our cash flow and our balance sheet. Cash flow from operating activities before change in working capital amounted to 5 million. Cash flow from operating activities after changes in working capital amounted to 11 million. Tied up capital from inventories decreased net with €18 million in the quarter. We have a deposit with the supplier for materials ordered but not yet called off. The deposit being in euros has remained unchanged during the quarter and amounted to the equivalence of €43 million. Our net debt deposits amounted to €270 million compared with €319 million. in the year earlier quarter. We had an equity asset ratio of 51.5% and available liquidity including overdraft facilities of 50 million. In July, as a result of improved cash flow over time, Garo's available overdraft facilities were reduced and 2.5 million Euro repaid. And now back to you, Jonas. Next slide, please.

Thank you, Helena. Let's move to Sweden, because as we say, when Sweden works, Garo works. The Swedish organization is now in place and starting to perform as one team. Daniel Emerson is firmly established as country director, leading a unified sales organization across both electrification and immobility, together with Daniel Benzer, our sales director. This structure is giving us clarity, speed, and accountability. Decisions are being made closer to the market, and collaborations is improving week by week. With Royal Return by Frans van der Paar now joining as business development director, we are increasing our ties with installers and wholesalers, restoring market confidence, and reconnecting Garo with its roots. In short, the commercial engine is starting to turn again, stronger, more focused, and much closer to our customers. Next slide, please. Over the past months, we have focused on creating a clear and predictable framework for how Garo operates. We now have an integrated structure that connects strategy, operations, and leadership, turning our plans into consistent execution across all markets. Our work is centered around four priorities that define how we move forward. Organization and execution. We have established clear roles, country accountability, and a consistent leadership rhythm across the group. Product and technology. We are simplifying the portfolio, securing compliance and strengthening competitiveness in each product line. Operations and capital. We are improving efficiency, releasing cash, and optimizing factory utilization step by step. Market and customer, we're rebuilding relationships, improving service quality, and restoring brand credibility in every market. Together, these four priorities form the foundation for Garo's next phase, one of stability, profitability, and sustainable growth. Next slide, please. Looking ahead, this roadmap shows how we connect today's recovery with Garo's long-term mission. Each phase is designed to strengthen our ability to deliver reliable, innovative and sustainable electrification solutions across Europe. In 2025, our focus has been to stabilize and simplify, to secure profitability, reduce complexity and fully align our leadership. In 2026, we moved to build the baseline, completing our digitalization programs improving capital efficiency and preparing for control growth. In 2027, we will accelerate and scale, expanding our product reach, levering out manufacturing capacity and governance in Stoller Trust in all markets. And from 2028 to 2030, we aim to lead and evolve, positioning Garo as a sustainable leader in electrification and expanding in energy solutions. Step by step, this is how we move forward towards our mission, to power the energy transition to a more sustainable world. Next slide, please. As we close the third quarter, we continue to see steady progress in how the organization works together. Leadership and collaborations are strengthening across key functions, and the company is finding its operational rhythm. Electrification remains stable with solid margins and are International markets, particularly Ireland and the UK, and Finland continue to perform well, even as the Swedish residential market remains weak. Immobility is still under pressure, but we are now stabilizing the business through focus and cost control. Cash generation and liquidity have clearly improved, giving us room to move with control into the next phase. Looking ahead, our focus is clear. Execute the group roadmap under one leadership rhythm. Continue to drive efficiency and rebuild trust, and stay ready to accelerate when the market turns. In short, Garo is becoming a more structured, predictable, and resilient company, step by step. Next slide, please. Thank you for listening, and we are now ready for questions.

Thank you, Jonathan. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two to exit the queue. And finally, when preparing to ask your question, please ensure that your device is unmuted locally. Our first question today will be from the line of Sophia Sawling with DNB Carnegie. Please go ahead. The line is open. OK.

Thank you so much for the presentation. A couple of questions from my side. I will start with immobility. So you mentioned a tough market in home charging segment and the more focus on public chargers ahead. How would you assess this market segment in terms of your own position, your product offering and also the competitive landscape? That's my first question. And maybe I can add also that what countries are you focusing on?

Thank you. Just let me to be clear, we are remain committed to home charging, but we are not competing in the low price consumer race. We are focused on the professional home charging where quality and safety matters most. And also developing our web tool and our app to be ready to relaunch them at the end of the year again to make it easier and simpler for installers to use our products. We have the same focus on all our markets, I would say.

Okay, so it's not that you are now preparing for a new focus and new investments in public. It will then be rather close to what you have done more recently as well.

No, I wouldn't say that. We still remain committed to the market. But what we have been working on now, firstly to make the platform stable as it has been over the last year, hardware. Now we're improving the software so it becomes easier for our installers to use it.

Okay. And when do you expect this software then to be more updated? Will it be beginning of 2026 or already end by 2025?

We are beta testing now, so we will release it as soon as possible, hopefully by the end of the year.

Okay. And also another question then on immobility. So you continue to have EBIT losses in this quarter as well, but And what is your expectations here and plan to reach break even within this segment? Do you only need more volumes? Or could you do more cost measurements within this segment? Is it possible? Or what is your plan here to meet break even?

The plan is to work our way through our stocks. We are still, as many of our colleagues in the mobility business, very much high on stocks. Still due to the component crisis that was a few years ago. So the plan is to continue to chew on the stock and releasing as much of our products as possible across all our markets. We have A very distinct plan for all our country managers committing to volumes now, going into Q4 and also for the whole next year.

Okay. All right. Okay, let's move to electrification. So you mentioned actually that it's quite strong operations in UK, Ireland and the Finnish market, which... It's a little bit different from other construction related capital goods companies in my view. What would you say is the underlying factor why these regions are strong for Garo during the quarter?

I would say for Ireland it is a factor driving for many years now quite a high GDP that leads into investments. And the segment of data centers is still very active in Ireland, where we supply a lot of components from Garo Ireland. And the UK is for us sort of an emerging market still. We have been in the UK a few years, but now it's starting to really pick up, I would say. That is more the whole range of our products going out in the UK that is creating this. It's a huge market compared to Sweden. Residential planning is around 300,000 new apartments or homes in the next year compared to Sweden. That is around 28,000, roughly, the prognosis. So that is picking up a lot. In Finland, it's basically... We are very strong in car engine heaters. That is mostly the segment that is going strong in Finland for us. Finland as a country hasn't turned into immobility quite strong yet. It's a bit slower than Sweden and for sure Norway. But this is the season now for car heaters in Finland.

Okay. So this... Would you say it's typical for this quarter, or do you expect to continue high or at least solid demand in this region ahead?

Yeah, we see a high demand, and we see also immobility picking up in Finland, which is really, really fun for us.

Okay, great. Okay. And then just a final question on the financial situation. If the e-mobility now segment doesn't improve and it's quite a lot of uncertainty related to construction market, how do you view your financial situation at the moment and into 2026?

As I said, we are continuing to work our way through the stocks. And 2026 will be tough for us on immobility for sure. But we are seeing that the plan is working. We are pulling out more from the stocks. As some of you remember, we still have, I would say, from one of our... I would say it's very high focus and commitment now from our country managers and we are staying this course and I think the forecasts will show that we can do this. But I would say it's a very tough race but it's doable. We know how to do it and the only solution is to sell

Yes. Okay. Thank you so much for answering my question.

Thank you. For any further questions, please press star followed by one on your telephone keypad now. With no further questions on the line at this time, I'd like to hand the call back to Jonas Claren for some closing remarks.

All right. Thank you all for listening. It has been a pleasure. I wish you all a good Friday. And this is all for us. Thank you.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.