Hanza AB (publ)

on the clear way towards the financial targets for 2028. We see a sales growth of 70%. We have an organic growth of 9%, slightly lower than the 20% we had in Q1, but it is a little bit seasonal, but it's still a strong organic growth. Eric talked about the shortage of components. We do not see more than a minor effect on the sales in Q2. So the 9% in organic growth is not depending on the increased prices on components. We have an operating margin for the comparable units of 9.2%. 3% compared to seven a year ago. As Eric mentioned, we have BMK on seven and a half percent, a couple of percentage points or two percentage points higher than in Q1 and in line with what they had in 2025. And here we expect the margin to continue to increase quarter by quarter. We have, as an effect on the Horizon project, and in order to increase the profitability over time, we have taken one-time cost. We have reduced employees, mainly in BMK, and we have decided to wind down the operations in China and also done an MBO operation or decided on an MBO in Finland. And this will, as Erik also mentioned, be approximately 160 employees that will be reduced within the group and approximately 160 million SEK in sales that will be reduced when these actions are done in the end of the year. And this leads to that the group's adjusted operational margin is on a stable level on 8.5%, 7% a year ago. And when we see the comparable units of 9.3% and we compare it to the 9.7% in Q1, I'd like to remind you that Ledan is now part of of the comparable units for the full quarter. It was only one month out of three in Q1. So that's one of the reasons for the slightly reduction in profitability margin for comparable units. Erik spoke about the cash conversion and the financial discipline. And we can this quarter also report A strong balance sheet and a strong cash flow, 273 million SEC in operational cash flow, net debt compared to EBITDA on 1.4, and a quite good cash position of 773 million SEC, and equity to assets ratio, which is also strong, 45%. And this... is important, and we have said this many times, that having a strong balance sheet gives us the possibility to continue to invest, to expand, and also what we announced last week, do acquisitions like the Forteco carve-out deal, and without increasing the number of shares, we can do this with our own financial resources and new credits. Looking into the segments, and we see the segments in main markets and other markets, they are fluctuating depending on the type of products, the customer, what customers are increasing and decreasing. But we also see strong, stable development of both these segments and remember that we will adjust the reporting into the new organization of regions starting from the beginning of 2027. We have main markets being more or less on the same net sales level as in Q1 and a stable margin on 8.5% and for comparable units really strong margin of 9.7% segment. Other markets slightly down from Q1, but still on a stable margin, 8.5%, and for comparable units, 8.9%. Looking into the acquisition that we announced last week of the SELECTED FACTORIES FROM FORTECO. WE WILL PAY INITIALLY ON THE ENTERPRISE VALUE OF 144 MILLION EUROES. IT'S NET DEBT FREE WITH NORMALIZED WORKING CAPITAL, THIS 144 MILLION EUROES. AND THAT IS approximately eight times the rolling 12 months EBTA that we pay on the initial consideration. There is an additional purchase price capped to 56 million euros. So the total payment for this acquisition is 200 million euros. And it's based on organic growth. in sales in 2026 and 2027. So we will pay in two tranches in the beginning of 2027 and the beginning of 2028. Both the initial payment and the earn out will be paid with existing funds and the credit facilities. There are no financial conditions and the closing expected to be, I would guess, early in Q4. And it's subject to normal regulatory approvals and also approval from certain Forteco financial stakeholders. And this is how to our first half year would look if we make and perform and include the Fortico factories. We would increase from 5.2 billion to approximately 6.2 billion. So quite big company and well on the way to the 14th billion SEK that we have as financial target for Hansa 2028. The Fortaco factories we expect to, as a start, deliver on approximately 9% on EBITDA margin. We expect this to have a positive contribution on the EPS from the beginning, from the acquisition. and we will integrate this as we normally do into the Hansa cluster model and expect to increase the margin not only in the acquired companies but also in total Hansa. And the effect on the Hansa balance sheet and cash flow, we expect the net debt to continue to be below our financial target of 2.5 times the EBTA. We expect the equity to asset ratio to still be above our financial target of 30%. And just to remind you, the Hansa 20... 28 targets, net sales of 14 billion SEK, an EBTA or margin of at least 9%, and equity to assets ratio of 30%, and again, net debt to EBTA of maximum 2.5%. Looking into the shareholding structure, no major changes from end of Q1. What we have seen in Q2 is that both Erik, the chairman Francesco Francia and the board member Lars-Ola Lundqvist have increased their holding in Q2. And by that I leave back to you Erik.

Thank you Lars and let me conclude by bringing the different parts together. Q2, we delivered 9% organic growth, 9.3% operating margin in comparable units, and 273 million SEK in cash flow operations. PMK improved its margin, and we see an increased order intake, also secured the important first defense and security orders. Horizon will improve efficiency in our manufacturing processes. platform and Fortaco acquisition will strengthen the technologies. And if there are three things to remember from today, and I think it was interesting with Lars pointed out that we will still have a strong financial situation after this large acquisition. So it's really good. So if there are three things to remember, I would say that we are growing with equality that creates financial freedom. and we're using that freedom to put ANSA 2028 into action. And with that, we are happy to take your questions.

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. The next question comes from Anton Ingves from Nordia. Please go ahead.

Yes, hi and good morning Erik and Lars. Thanks for taking my questions. Starting off maybe on the defense orders here and the sort of first major order in BMK. Are you able to sort of quantify this a bit more and maybe elaborate a bit more of your expectations here in this segment for 2027.

The challenge we have is that everything is secret. The only thing we can say is that we have from a well-known defense company, a new defense company, for Hansa, so we are working with, of course, with Sov and Patria. But new defense company, a substantial order and an interest for more orders. I wish I could tell you more. It has to be revealed by the segments, our customer segments later on. Sorry about that.

That's fair, but seems to be quite a good opportunity then. And sort of on the defense order intake in remaining of hands, so you still see a sort of pickup here for stronger, even stronger deliveries in 27?

Yes, yes, of course. Defense is here to stay for sad reasons, but still, and what they need is, of course, mechanics. So this Portaqua acquisition is really something that comes really well, and also having units in Poland, the important area for the defense industry. So we expect orders to increase and we have already very good relations with the companies as I said in Scandinavia and now we are moving on in Germany so we expect this to grow.

Okay, perfect. That's clear. And on the Horizon program, obviously taking some measures here with closing of the site in China and the two factories of the management buyout in Finland. I understand you cannot give sort of an exact answer here, but are you planning any further actions going forward in this program?

Of course, that's something we cannot reveal, but I would say that we have done the major steps. For us, it's important now that we're able to focus investments, resources, capacity to larger units and also take on larger customer orders coming in. That's a very important step, this horizon. But we have done a lot of actions already and also things which are not on the dimension that we should report in. in Q2. I wouldn't expect any more large activities.

Okay, that's very clear. And on the CAPEX side, I know you had some 100 million SEK here in tangible CAPEX during the quarter, quite a big pickup compared to last year. What is this mainly related to and what do you expect here for the full year 26?

We did an acquisition of a strategic factory in Finland, Johansson factory, and that was the main activity in Q2. And CAPEX goes a little bit up and down between the quarters, but on a longer perspective, we do not see any increased need of capex. It will be on the same level as we have seen before and of course increasing when we have an organic growth. We also see that the acquisition of the Fortaco factories will actually decrease the need of capex going forward since we will have, be buying companies that are well invested.

Okay, perfect. And sort of on the demand here during the quarter, obviously strong organic growth here, but did you see any change in momentum during the quarter and sort of related to that, the momentum here heading into Q3?

No, no. So we have a good momentum. The only thing I said was regarding this industrial machinery and systems where this fluctuates between the quarter. Other than that, we have a strong demand. So you're in a good position. And that's also why it's so important, coming back to your previous question, that we have this strong cash conversion because it makes it possible for us to increase capacity either through acquisitions or through expanding our current facility like Lars pointed out and you also.

Okay, understood. Very clear. I'll get back in line for now. Thanks a lot.

Thank you. Thank you.

The next question comes from Marcus de Velius from DNB Carnegie. Please go ahead.

Hello, Erik and Lars. Congrats on the good report. A few questions from my side, please. coming back to the shortage we saw with electric components. Could you give some more color on this? Would you say that it's more of a problem now versus sort of the beginning of the quarter and maybe going into, is this more a BMK type of problem? If you could shed some light there.

Yes. So, First of all, like you state, this is an area for electronic components. That's the shortest area and more directed to these specific areas. We have been able to navigate through the second quarter without any material impact on operations, also in BMK. So far, so good. We have a really good sourcing team, both centrally and locally. The uncertainty remains, so we need to continue with this work. But we haven't had any major impact, and I think that in this kind of is always in the beginning it's hardest and you find ways to work and find alternatives and so forth so I can not promise anything but we have been really good on working with this so far.

Very good. And are there any other types of shortages that you've noticed?

Not really. We are not restricted by shortages, no.

Okay. And then just looking at the margin sort of recovery story for BMK. The main market underlying is strong at 9.7, if I remember correctly. Could you go into this sort of recovery story? Because if you compare it to Leiden, for example, if I remember correctly, it was a lot of sort of capacity constraint driven. What should we expect sort of year-end margin-wise when we look at BMK?

May I start, Lars? I'm sure you'd like to comment this, but I think it's really important that this is something you should have an attention on. We have acquired a company called Lidl and we acquired a company called Orbit One. Both of them came in with margins much lower than the Hamsa. And they were inside... these comparable units now. So with this acquisition that came in below a margin, we have restored the margin. Now we have 9.3%, including these units. Now the margin is downloaded by the next acquisition, BMK, but the previous acquisition has done really well. That's the conclusion you can see from the 7% to the 9.3% margin increase from last year to this year, that we have been able to restore the margins in the acquisitions. And I think that is one of the skills we have and also we see that on the marketing side but also on the sales side we have talked about many times that when Leren came into Hansa the sales almost exploded we see also that PMK inside Hansa we have sales synergy so there's an advantage the company we are acquiring performs better inside Hansa than it did as a standalone company and now over to you Lars no I think you answered in a good way I

I actually do not have anything to add. Of course, we cannot give you any forecast on the coming quarters. What we said in the report is that we expect BMK to continue to increase the profitability from this 7.5% coming from 7.2% last year. So that's an ongoing work in line with what Erik said, that So we have been able to increase the margin in the companies that we have acquired.

Is there any structural reasons why B&K shouldn't be able to sort of reach this strong underlying margins?

No. No, I'd say it's a fantastic company that serves a much higher margin. It's a family-owned company, maybe without the clear focus on the commercial side, more on the technical side. So I think that's what we're adding to this fantastic company.

Okay. Thank you very much. Those were my questions.

Thank you.

As a reminder, if you wish to ask a question, please dial poundkey5 on your telephone keypad. The next question comes from Thomas Blixted from Pareto Securities. Please go ahead.

Good morning, Erik and Lars. Three quick questions. I'll take them one by one. First on the working capital development, again, very good in Q2 given the growth. I guess some of it was related to factoring and just wondering if you could give some color on the impact here and whether this working capital level is sustainable going forward.

You know that our CFO, Lars, has a black belt in working capital.

Absolutely.

Good morning, Thomas. I saw you mentioned that the 30 million in positive change in working capital, you expected that to be from factoring. Actually, this time you were wrong. It's not any effect from the factoring. So it's just good working with reducing the working capital.

Any particular drivers that I should keep in mind going forward?

No, I would say that 30 million with the size of the balance sheet that we have, is not a major figure. We normally see in Q3 that we need to increase the working capital a little bit due to vacation period, but otherwise I wouldn't say that there is any sort of sustainable driver for this.

Okay, okay. Thank you. And then the second, a bit technical question, but I saw that the costs from business development decreased to just 1 million in Q2, which explains, I guess, a few basis points of the underlying margin expansion. Is this a new sustainable cost level, do you think?

The third segment that we report shall be close to zero or not have any major cost unless there are any special projects. We distribute all the normal operational costs for central function. They are distributed out to the main market and other markets. But of course, next quarter, it can be that it a few costs that we are not distributing, but I expect you, based on the size of Hansa, that the third operational or non-operational segment shall be not important at all for the total view of Hansa.

Thank you. And just the last question, a follow-up on the CAPEX. You mentioned that Fortico will not need a lot of investments now. Is that because utilization is currently low and you can quickly ramp up, or did I misunderstand?

Maybe I was not clear, but the fact that we do this acquisition of the Fortico sites will lead to the investments in our current business within Hansa will be reduced. And also what we see is that the factors that we take over have good standard, they are well invested. But on the other hand, this heavy mechanic industry is more heavy on machinery and equipment and has a higher percentage of depreciation compared to what we see in other parts of Hansa.

That's very clear. Thank you. That's all for me.

Thank you.

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

Okay. Thank you for your questions and for joining us today. I'd also like to thank all our colleagues who continue to support our customers throughout the holiday season. And to those of you taking some time off, I wish you a restful and enjoyable summer. Look forward to speaking to you soon again. And thank you. Have a great summer.