Indutrade AB (publ)

Welcome and good morning on our behalf as well. As usual, let's start with the overall highlights.

In terms of order intake, we had a total growth of 5%, organically an increase of 1%, despite the uncertain market situation. Good demand from customers within pharmaceutical production, the process industry more broadly, and also the energy sector. And the majority of companies had organic order intake growth. Net sales increased 4% in total, organically it was unchanged. The EBITDA margin came in at 13.6%, excluding some one-offs, 13.3%. And continued improvement in working capital efficiency and record one operational cash flow of 644 million SEK. And three acquisitions completed so far in 2025. And the pipeline remains good. If we then turn to order intake and sales, as mentioned on the previous slide, demand was good with organic order intake growth, despite the increased market uncertainty. We had a positive book to bill with orders being 5% higher than sales. And there was continued variation between companies, segments and countries. with the strongest growth in medtech and pharmaceuticals, the process industry and the energy sector. Demand within infrastructure and construction was stable, while the general engineering customer segment continue in general to be somewhat weaker. In terms of sales, we grew 4% during the quarter, all related to acquisitions. Organically, it was flat. on the back of the lower order backlog coming into the quarter. During Q1 last year, we were negatively affected by the Easter holiday. And also this year, we had no help in terms of number of working days. If we then look at sales in a geographic perspective, the development within the Nordics was on an aggregated level flat from last year. Finland continued to be a bit weaker while sales to Norway was strong. And in Norway we had good development within valves and other flow related components as well as filters to mention some product areas. Benelux and UK Ireland were stable and Germany was a bit weaker. For Switzerland and Austria, the sales growth was high, driven by good development within the process industry and the pharma-related single-use area. In North America, sales was down. A difficult reference linked to last year with some larger projects during that time period was the sort of key reason. And sales in Asia was higher than last year. driven for instance by good development for products within the marine segment. I also want to briefly address the tariff situation, which so far have only had a marginal impact on demand. Our direct exposure to the US is limited, with total sales to North America in 2024 corresponding to less than 6% of the group net sales. As most of you know, we are mostly a Western European business group with many companies being strong local players. However, this situation is creating increased uncertainty and the effect on the global economy and thus the indirect effect is hard to predict. Our companies are proactively implementing appropriate measures, for example, review and trade flows, supply chains and commercial agreements. If we then turn to our profits, our EBITDA increased 6% in total to 1.1 billion SEK, and the EBITDA margin came in at 13.6%, however, supported by some one-off items. The underlying EBITDA margin was 13.3%, same level as last year. Our ambition and objective is to be at a higher margin level but this was not a complete surprise or unexpected. At the end of last year and also the first part of Q1, we expected a gradually better demand situation during the year. And a large part of our companies were therefore geared up in terms of initiatives for organic growth to increase. This somewhat higher expense level and the flat top line explains the EBITDA margin. The market risk and volatility have now obviously increased and many companies are now actively working to align costs to the situation prevailing in their respective markets. On a positive note, our gross margin was record high for a Q1 and acquisitions divestment margin accreted. Then we turn to the business areas and start with sales. As mentioned, we had no help from more working days during the quarter, despite Easter taking place in April instead of March. On an aggregated level, half of the company's organic sales growth in the quarter. Business area life science was the only BA with organic sales growth, mainly driven by sales of equipment for pharmaceutical production, including single use equipment. Infrastructure and construction was flat from last year. while the other three BAs show declining organic sales, mainly due to the generally weaker business climate and the lower order book coming into the quarter. Business area technology and system solutions is standing out negatively. They are the most global business area and are slightly more dependent on investments and CapEx decisions on the customer side, which is making their current demand situation more challenging than the other business areas. And then EBITDA profit in terms of business areas. The EBITDA margin improved in business areas infrastructure and construction and also life science. Infrastructure and construction is on a positive EBITDA margin trend, mainly due to effects from acquisitions and divestments. However, many company specific initiatives and other organic BA actions during last year also contributes. The main driver for the margin increase in life science was a strong organic sales growth and the other three BAs had a lower EBITDA margin than last year with the largest decline in process energy and water due to the organic sales decline and higher expense levels mainly linked to a higher activity level and inflation. Regarding acquisitions, we have made three acquisitions so far this year with an annual turnover of 390 million SEK. The first company is Ecoroll in Germany, which is a manufacturing company offering highly technical tools for mechanical surface treatment to a wide range of industrial segments and geographies globally. We also signed an agreement to acquire IPP on Ireland, which has an extensive machine product offering targeting the electronics and life science sectors. And finally, we also welcomed the Swedish technical trading company Ideus, who is specialized in customer specific metal components. Following the high acquisition pace in 2024, the pace has now been slightly slower. However, nothing dramatic. This can fluctuate over quarters. Despite ongoing market uncertainty, we feel that the acquisition climate in 2025 remains positive. We have a good activity in our acquisition processes and a strong financial position. So we are looking forward to welcoming more companies during the year. It's always relevant to repeat that the number of acquisitions should be followed over a longer period of time. As mentioned, high pace in 2024 and good contributions in Q1. Looking at the bridge effects from acquisitions over the last 12 months, we have added 55 million SEK to the group's EBITDA in the quarter. Furthermore, we can also see that the acquisitions are margin accretive. with an accumulated EBITDA margin of 15.9% for the quarter and over 17% rolling 12 months. Now I leave the word over to Patrick to comment more on the financials.

Yes, thank you, Bo. Yes, then total growth for orders and sales was 5% and 4% respectively in the quarter. Book to bill was positive, orders 5% higher than sales and above one in four out of five business areas. And as Bo previously mentioned, our gross margin was strong, record high actually for Q1, 35.4%. EBITDA increased with 6% in the quarter, driven by effects from acquisitions and currency, but negatively affected by the dampened organic sales development and slightly higher expenses. The Vita margin improved to 13.6 in the quarter. But again, then, as Bo mentioned, we had some one-offs during the quarter, primarily connected to earn-out revolutions, which had the net positive effect of 27 million. So if you exclude these, the margin was 13.3 in line with last year. We, of course, then aim to be on a higher margin than this. But the important note is that Q1 is historically seasonally low margin quarter for us and additionally the backlog coming into the year was slightly lower than last year. Moving further down in the P&L the finance net increased with three percent and if you look at the interest net included in the finance net It was lower than last year, but this was offset by other financial items, primarily financial currency effects. Tax cost increased by 5% for the quarter, corresponding to a tax rate of 23%, which is in line with last year. Earnings per share increased with 6% in the quarter, and we will look at the separate slide on that later. Return on capital employed, amounted to 19% that's slightly lower than our target and in terms of cash flow Q1 is seasonally the weakest quarter but we had a good development during the quarter up as much as 32% lastly the net debt to EBITDA ratio was at historically low level of 1.3 by the end of Q1 so move on and look to look on the cash flow more in detail and it is as i said then record high for the q1 amounting to 644 million in the quarter and the improvement versus last year relates to both the slightly higher result and in combination with more favorable working capital movements during the quarter So diving into the capital side slightly more, the organic inventory levels are basically unchanged since year end, but we've had an underlying decreasing trend on the inventory side since beginning or mid-2023. So the level at the end of Q1 this year is around 5% lower than the same period last year. As we mentioned before our companies are relatively capitalized and there is a continuously strong underlying operational cash flow coming into the group and that's reflected in a good cash conversion as you can see from the slide. Right now trending on a rolling four quarter basis at 137% compared to net profit less capex. and in terms of working capital efficiency and that also improved compared to the same period last year so earnings per share the EPS development has as you can see from this slide flattened out the last two years due to the the weak organic development but also then increased interest costs this quarter we managed to increase earnings per share in line with a beta improvement and that's an increase of six percent from 1.61 to 1.71 per share and looking at the zooming out and looking at the long-term perspective the the growth in the three and five year rolling four quarter eps uh we were uh seven percent up on the three-year trend and 13% on the five-year trend. Then lastly, looking at the financial position, the debt development, the interest bearing net debt decreased since same period last year, but also sequentially, despite MQ1 being a seasonally low cash flow quarter. Improvement in cash flow is, of course, the main driver for this reduction, but also then a slightly lower acquisition pace in the beginning of the year. So looking at debt ratios, historically low, I would say, net debt equity ratio at 47% compared to 55 last year, and net debt EVTA 1.3 versus 1.5 last year. And if you exclude earn out liabilities, which we of course include in the measurement, then it would have been 1.2 versus 1.4 last year. summarize debt ratios are low debt maturity profile is well balanced and we have a strong financial position going forward so by that i move on we move over to boo again thank you then time to conclude in terms of the takeaway message here organic order intake growth

despite increased market uncertainty with prospects in several large customer segments. We had stable sales and stable profit levels, really good operational cash flow and a strong financial position. Slightly lower order backlog in combination with higher market volatility post April the 2nd leads now to that many companies are actively working to align cost to the situation prevailing in their respective markets. Three acquisitions completed this year and a good pipeline positive outlook. All in all a strong platform for long-term sustainable profitable growth going forward. And by that, we end the formal presentation and open up for questions.

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. Question comes from Carl Ragnarstam from Nordia. Please go ahead.

Good morning, it's Carl here from Nordea. A couple of questions. Firstly, I think we could jump into the gross margin and cost side again. You gave some comments on it, of course, but the gross margin again looks quite healthy, I think, up a bit year to year. I guess you're pretty satisfied on that side. However, I still struggle a bit on the cost side, which is still an issue as I look upon it. If we take a step back looking into Q1 last year, then we said that you had a cost overrun. Then it started to come down during the year, and now we seem to be back at it again. Historically, given Indutrade's high decentralization, you manage so well with the balance between growth and taking out costs quite quickly. What is the difference this time around? Is it a more difficult market environment, which I of course acknowledge? Yeah, how would you explain it? And also finally on that side, I know it's a long question, but how do you look at this sort of cost growth balance for the rest of the year and when you think that you are sort of on par again?

Well, obviously very relevant comments, questions. agree that we are happy with the gross margin as we said it was record high for a quarter one and I think maybe the best ever or the best second best ever for Indutrade so the companies are doing a really good job in terms of managing direct material direct labor pricing so that's good which is very comforting in a situation like this it would be worse if it was the other way around with low costs and or a low gross margin, I would say. And then commenting on the cost situation, this time around, as you said, last year we were not at all satisfied with our overhead cost expense levels in Q1. And then the companies worked on that in Q2, Q3 sequentially. And at that time in Q1, we had a very recessionary outlook in terms of the market demand. Right now, or I would say towards the end of last year and also in the beginning of this year, we had a more positive outlook in terms of the market demand. We expected and the companies expected more consequential growth during the year and I think felt that they could take some activity costs and potentially refrain from downsizing effort because there was sort of light at the end of the tunnel. So that's one aspect. The other aspect, as you bring up in a more historical perspective, I think can be commented with that we have actually worked more with organic growth as a key strategic initiative the last couple of years within Indutrade. And it's usually so in general that you need to invest before you harvest. So there has been some, I would say organic growth initiatives in product innovation, in product range extensions, in different types of business development initiatives, in some companies where there have been good reasons for that and strategically good plans linked to this. So that's probably also to some extent an explanation that we have the situation we have. So part of this is deliberate. But I would also say that there is a bucket of companies where perhaps they should have been a bit more cost conscious also Q4, Q1 here now and maybe been a little bit too interested in organic growth versus managing their cost situation. long answer here now but all in all I would say that the culture the value system is extremely cost conscious in the group so we talk about expense overhead cost now the sort of the direct labor is under control and in our companies and especially the trading companies it's basically office people if I express myself that way and they are not very headcount heavy, as you know. So to reduce with one or two headcounts for smaller companies is a quite big decision. So if they then see light at the end of the tunnel, as I said, they might refrain from that if that's soon to happen.

Yeah, so... No, I totally agree with you. I clearly see your point there. But when I look at line items, obviously they're not always correct. I can see that it's admin costs increasing, which is, I guess, one way to, I guess, grow organically, but maybe you're, of course, better than me in it, but I'm not sure if that is, it would be probably selling expenses that should grow more, right? And we have seen admin costs in industry come up from five to now 7.2%.

is it the right line item that is actually growing right now you think or how should we see that yeah i don't know patrick if you want to yeah on sort of from the from the accounting side i it's difficult sort of to judge from the sort of group pnl on that sort of high level impacting not only organic things but it's it's a lot of other things acquisitions as well and and so The concrete initiatives that Bo talked about and the additions that we have done, they have for sure mostly been on the business side, salespeople, marketing activities, products. So for sure, even though there are, of course, other increases as well, but the majority is for sure on the business side. And that's where the companies are adding, if they are adding, I would say.

They are accounted under admin costs then.

Again, it's difficult to judge from the group P&L, so I don't have that bridge for you exactly what sort of that increase rates. I mean, you have other things as well, not only organic things. You have effects of acquisitions over time, depending on their categorization of cost, etc. So it's really difficult to look at the group P&L and draw those type of conclusions. I don't have a better answer now, unfortunately.

Okay, perfect. Just to clarify, you wrote that you had negative impacts from divestments of 33 million. Is it the write down or is the transaction costs included? What is this 33 million?

um it is related to i mean we did the divestment and in the beginning of the year which uh which i think we already mentioned in the q4 q4 report but uh it's in the infran infrastructure construction business area and it's we have a we have a sort of book loss on that uh on that divestment okay okay yes okay very good

And finally, I mean, we've seen a few divestitures in construction and infra. How many more? I mean, I just looked at the one you wrote about this time. It's been lost making since at least 2019 when I look at it. How many more companies do you think that you have up for potential divestiture still in the segment?

Very few, I would say. It's not zero, but it's not ten, it's not five even. So it's very few.

So I think we have made... And are they loss-making as well?

We have still some loss-making companies in that segment, unfortunately.

Okay, perfect. Okay, thank you so much.

The next question comes from Zeno Engdahl and Rick Chudy from Handelsbanken. Please go ahead.

Yes, good morning. Thanks for taking our questions. Just a bit of a follow-up to the outcomes on the margin and that you were in kind of a similar position in Q1 last year where you managed to improve quite quickly. Do you think that the cost measures your companies are taking will have a similar speed in terms of margin recovery as we saw last year.

Yeah, definitely Q2 will be better than Q1. But this time, as I said, it's a little bit different from market situation perspective. Last year we felt was a little bit more clearly a recessionary market situation or at least sort of a very flattish outlook and now this if we exclude the tariffs which we can't do in a sense but if we still do that we were on a trajectory to actually improve in several segments and sectors and geographies and some of that I think will continue so hopefully top line will will be okay. The reference sales-wise in Q2 is going to be more difficult than what we had in Q1. But all in all we expect a step change between Q1 and Q2 in terms of profit margin. And then it's difficult to predict things now with the volatility from the tariffs and maybe not so much the direct situation but the indirect situation and perhaps mostly in our segment or business area technology and system solutions which is more global and and you know they have situations potentially with a swedish company selling to a uk company selling to an american company and the american company being afraid of tariffs avoiding importing from europe and potentially buying from from a u.s source instead and so on But it's predominantly in that business area, less so in the others, but not completely, you know, free from that sort of second type of impact.

Yeah, that's very clear. And when you're speaking on the tough references in the next quarter, are you mainly referring to, or is it both sales and margin or either or?

I think we had 14.8% EBITDA more than last year, which is a high level for us. So that's obviously a difficult reference in a sense, but also sales wise, we had a rather good sales as I remember in quarter two last year.

Yeah. And then it's from your comment, if it sounds or is it fair to interpret that the quarters started out quite well and finished in, so to say, worse from a relative perspective?

No, actually in a clear majority of the business areas it was the other way around, that January, February was weak and March improved. In one business area it was the other way around, that actually March became even weaker. But 80% of sort of of in the trade or so had the other trajectory that January, February weaker and a pretty good March.

Okay, interesting. And my last questions on life science, I think you mentioned that that single use saw a bit better, say,

demand was that correct can you elaborate on the single use yeah but that's there was huge pre-buys linked to covid and as we have discussed several quarters that stock is now normalized and we also still see an underlying demand for single use production equipment not not obviously only linked to COVID, but a lot of other, can be cancer treatment areas or more sort of smaller, if I say so in size, pharma related areas and also more biopharma related treatment areas where the batches are produced in these more silicon-based production systems rather than the big stainless steel systems. So I would say the industry is predicting underlying growth and we also see step-by-step signs of this now.

Okay, thank you. Those were my questions. Thank you.

Question comes from Matt's list from Kepler Shoebrew. Please go ahead.

Yeah. Hi. Thank you. A couple of questions. I mean, orders looks pretty good from my point of view anyway. But do you see any sort of customers being sort of a bit concerned about the potential tariff impact and so on? I mean, do you see pre-buys on components and so on to stock up ahead of potential supply chain issues going forward?

We have seen extremely little of that in our companies. We have more read about For example, a lot of export from Irish pharmaceutical companies to the US in March and so on. But we haven't really seen it too much. Maybe it's also a lot of semiconductors, electronic components from China, Asia being shipped to the US again February, March. But sort of in a normal in the trade company, it's been not very significant at all.

Great. And then, I mean, we have seen quite good performance by the Swedish currency. And just if you can update me on the sort of operational impact there, maybe something on procurement and also on the gearing side.

Yeah, if I take that question, then in general, I think a stronger, I mean, if you look at the margin impact, an EBITDA margin impact of a stronger CIEC, it's not big, I would say. In general, I would say that top line moves as much as bottom line for us. So we don't move margin that much when currency changes. So that's the first statement. The other one that we have a lot of trading companies, as you know, and a strong Krona in general means better purchasing power for these trading companies. And there are some buying in dollars, but definitely even more so in euros. So they have a bit of a sort of a good momentum now, I would say. part of that needs to be transferred to the customers but the part of that will also help us so there's a you know slight positive effects embedded in that that's that's my hope and belief and on the gearing side i would say we we uh We aim to have a sort of an even, we have of course an exposure on other currencies on the debt side, which means that the debt is actually going down slightly now, but we try to match it with the EBDA exposure. But looking at the absolute debt value, it is going down thanks to the Swedish coronavirus being strong.

Okay, great. Thanks a lot.

Question comes from Carl Bokvist from ABG Sundahl Collier. Please go ahead.

Thank you. Good morning. I apologize I was a bit late on the call but could you clarify the comments you made in the starter regarding larger orders in the US I believe?

It's not super significant for Indutrade we have We have one company in the US and we have, I think, eight, nine companies having sales companies in the US. And then we have some companies obviously exporting to the US and some of them have. You know, it can be capex driven projects where. Someone in the US is building a large energy facility or something like that, and some of our companies receive a big order to that. So we have some of those situations a year ago and less so this year.

I think we had a couple of projects in the energy sector and also I think in the engineering sector last year, which was delivered Q1 last year. So a bit of tough reference. I think it was mainly technology and system solutions and also in process energy and water. I think they are the strong references in the US last year.

All right. Understood. And then most questions have been asked here earlier. But I understand the comment you made earlier regarding how this year It's a bit of a different situation to last year, but nevertheless, just when looking at it, is there any kind of calendar effect involved here, i.e. that some of your businesses are perhaps ramping up cost at the start of a new year, and then the volumes might not have improved as they had hoped? I'm just thinking about this comment here in, for example, PW and TSS. or into low organic volumes overall and you say higher expense levels which led to margin pressure.

Yeah I'm not sure if I fully understand what you're after here but we don't I think more generally it is so that companies expected a better market demand situation. They refrain from pure cost reductions, which would have meant, I think, laying off people because this is overhead expenses as the problem relates to some extent and they were in some aspects having product development obviously that didn't start this quarter but maybe In quarter four, they geared up in terms of product development, business development initiatives and things like that to be ready for a better 2025. I think that's the simpler, more general explanation. But cost is obviously something we control and we can decide to do something about it. So I feel that we are in a much better situation now with really good gross margins. And then some of the companies will align costs now and some will probably continue to see a better organic growth situation based on their investments and also based on a somewhat better segment. There are different niches which definitely will continue to grow.

Understood. And then I apologize if this has been asked, but now you did say a bit of... For many companies, March was better than the earlier start of Q1, but is there anything you can say on how April has... Not surprisingly bad, if I say so.

All right. now we okay yeah so no not nothing which is significantly negative more more an okay start i would say all right good thank you that was all from my side thanks minder if you wish to ask a question please dial pound key 5 on your telephone keypad more questions at this time so i hand the conference back to the speakers for any closing comments yeah then we say thank you for listening in and for good engaged questions and we took we talked to you going forward so thank you for us