Indutrade AB (publ)

14.8% last year, but still a high level and a clear step up sequentially from 13.7% in Q2. We had a record high Q3 gross margin of 35.5%. Margin accretive acquisitions and divestments supported as well, but the EBITDA margin was dampened by the lower organic sales and somewhat higher organic expenses. In terms of the organic expenses, around a percentage point year over year increase in absolute numbers. I would say that the expense situation overall is in control. There is still a cluster of companies which can improve somewhat. However, a majority of the companies are growing and it's likely to see some expense increase linked to this. Looking at the net sales per business area, as mentioned, the same number of working days in the quarter, but the slightly lower order book coming into the quarter and strong references resulted in a slightly negative organic sales development for the group as a whole. Organic sales was up 3% in business area, process, energy and water. For instance, many of the Swedish companies had a good development and the development within the finished process industry also improved. In technology and system solutions, sales was unchanged. Infrastructure and construction and industrial and engineering continued to be impacted by the weak general business climate. Business area life science had a 5% organic sales drop due to the strong sales to Novo Nordisk the same period last year. Excluding this life science would have had a positive organic sales growth of 6%. The business area had a continued good development within the single use area and also the medical technology distribution during the quarter. The EBITDA margin improved in two of the five business areas with the most significant improvement in infrastructure and construction. mainly due to acquisitions and divestments. Life Science managed to improve the margin despite the lower organic sales. They had a strong gross margin development due to a favorable product mix, some currency tailwind, but also good work on pricing in many companies. In the other three business areas, the EBITDA margin was basically in line with last year. Since the beginning of the year, we have added 10 new companies to the group with total annual sales of approximately 1.1 billion SEK. After a somewhat slower start of the year, the acquisition pace improved in the third quarter with six acquisitions completed. In quarter four, we have so far welcomed one company. We are working with several projects in different stages So we look forward to welcome a few more companies in the remainder of the year. Our new organization with business segment leaders are also generating more internal leads than before. Looking at the longer trend, more importantly, we are stepwise increasing the number of acquisitions per year, as can be seen in the yellow line to the left. although number of acquisitions per year can be a bit volatile. Looking at the bridge effects from acquisitions over the last 12 months, we have added 140 million SEK to the group's EBITDA in 2025. Furthermore, we can also see that the acquisitions are margin accretive with an accumulated EBITDA margin of 16.4% for the quarter and over 17% rolling 12 months. By that, I leave the word over to Patrick to comment more on the financials.

Yes, thank you, Bo. Yes, total growth for orders and sales in the quarter was plus three and minus two, respectively. Year-to-date orders have also increased by three percent and sales is slightly down minus one. Book-to-bill close to one, slightly below, but as Bo said, impacted by seasonal variations during the quarter. Year-to-date, it is above one. In quarter three, we further improved the gross margins, reaching 35.5 versus 34, so a really good improvement. However, last year's figure was impacted by inventory write-downs in a few companies, so the underlying improvement was not as high as shown in these numbers, but still a clear improvement. On a year-to-date basis, our gross margin remains ahead of last year's level. EBITDA decreased with 3% in the quarter and also 3% down also year-to-date. If you look at the margin, the EBITDA margin for the quarter, that was 14.6 compared to 14.8 last year. Good improvement, really good improvement then from quarter one and quarter two. We had some non-operational one-offs items during the quarter connected to earnouts and goodwill right down as we have from time to time. But the net effect during the quarter was close to zero. As a side note, as maybe a few of you have noted group items, appear as unusually high this quarter. I would say this is, however, a wrong conclusion. It's a bit unfortunate, but it actually relates mostly to our routine concerning management fee, which we, for tax reasons, push out to the business areas. This was last year done in quarter three, which lowered group items last year. So that's the main reason for the increase. Yes, continuing further down in the P&L, finance net decreased 31% in the quarter and 16% year-to-date because of both lower interest rates and also lower debt level. Tax costs increased 17% in the quarter and 3% year-to-date. The higher tax costs is due to an unusually low tax level last year that came from the one-off situation, operational one-off situation we had last year. Earnings per share decreased with 4% in the quarter and also year to date. And I will show a graphical trend on the following slides. Return on capital employed. is at 19% and that's unchanged from last year, but slightly below our targets. Operational cash flow was unchanged at the good high level and I will also elaborate on that one on the coming slides. Net debt EBITDA end of the quarter is at 1.4 versus 1.6 last year. So an improvement in that area as well. So moving on to the cash flow. Cash flow, as I said, was unchanged from the same period last year and at a good level. Total organic working capital was down in the quarter versus last year. And despite more normalized inventory levels, our companies actually managed to reduce it further sequentially and also compared to last year. Cash conversion is continued on a high level right now, trending on a rolling four quarter basis at a level of 133 compared to net profit less capex. That's a good and strong level. We're closely monitoring the working capital efficiency and despite the lower organic sales, the ratio in relation to sales improved again during the quarter compared to last year. Continuing to the earnings per share amounted to 1.5%. 85 SEK compared to 1.92 last year. The decline is of course mainly related to the lower operational result. Lower interest costs continued to compensate but was offset by the higher tax costs I talked about earlier. Zooming out, looking at the longer perspective, the average growth in the three and five year rolling four quarter perspectives was was plus two and 10%. And lastly, the financial position, which we think remains strong and solid. The interest bearing net debt decreased versus last year from 8.8 billion to 8.1. mainly due to the strong operational cash flow combined with a slightly lower acquisition pace during the year. And our net debt ratios are stable and low from a historical perspective. Net debt equity ratio was at 48% compared to 56% last year. And net debt EBITDA was 1.4% versus 1.6%. And if you exclude earnouts, it is then 1.3 end of quarter three this year and 1.4 last year. To summarize, our financial position is strong and that is, of course, a good fundament for continued value accretive acquisition and also organic growth initiatives. Then I leave back over to you, Mo.

Thank you. We've also included a slide elaborating a bit on, you can say, the broader cost situation and linked to headcount. So as we have talked about for some quarters, demand and sales in some of our companies have been challenging and expenses, headcount and productivity have increased in focus. All of these companies are running cost reduction activities, including headcount reductions. However, more than half of our companies are still growing, and for these companies it is sound to continue with growth plans and to selectively add headcount and cost. This slide shows the organic change in FTEs among companies growing, respectively declining order intake. By the end of Q3, headcount is reduced with 6% compared to the last year in the companies with the declining order intake. Further reductions are planned for Q4. In the companies with a positive order development, we have increased headcount with 2%. In a decentralized organization like Indutrade, there is not a one-size-fits-all approach. Rather, individual actions are being implemented continuously. Overall, our companies and MDs are managing the challenging market situation in a good way. However, there is also a strong principle embedded in our culture to continuously improve. By that, we sum up the key takeaways of the presentation. The positive demand development continues. Order intake up 3% organically. Slightly lower organic sales, mainly due to challenging references. Strong EBITDA margin of 14.6%. Companies continue to work actively with adapting costs to their respective market situations. Market uncertainty remains for the upcoming quarter. Slightly larger order book and higher acquisition pace provide some comfort about the financial performance trend. 10 companies acquired so far in 2025 and still a good pipeline. All in all, a strong platform for long-term sustainable profitable growth. By that we say thank you and open up for potential 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 Carl Ragnarstam from Nordia. Please go ahead.

Good morning. It's Carl here from Nordia. A couple of questions from my side. Firstly, thank you for sharing slide 14. Quite interesting. Can you talk a little bit about your plans ahead on this slide as well? I mean we can see minus six percent after the companies with declining order intake it sounded like you would like to continue to take down it even further and also on the companies growing by two percent I mean with positive order intake growth will you try to keep it at around two percent or

will it yeah what is the plan there obviously you want to achieve operating leverage I guess you will try to keep it at that as low as possible right so good questions and relevant question it's the answer I mean broadly Indutrade is a big aggregation of 200 and plus companies as you know and it's sometimes difficult to have a clear, elaborate view to convey to you linked to this. But as you say yourself, we will continue to reduce cost expenses in some companies with a challenging market situation. There has been steps taken already up until now, but there are actually situations where actions were taken perhaps already in Q3 now and the effects of those actions will be seen more in Q4. So there is a cluster of companies where cost reductions will continue and for the majority of the companies, there is a small clusters of clear growth cases and they grow Yeah, quite significantly, you know, we have a handful of companies which have had full shifts, you know, in their perspective, quite a lot of new colleagues, but the broader majority is, as you say, Carl, that we will probably grow with inflation more or less I would say in that cluster where there is a more normal, more normalized sort of organic growth development.

Okay that is very clear and thank you and on order intake it's good to see that orders are picking up in pace. I guess two questions on that is of course firstly if you see the quite healthy momentum continuing so far also I mean both during the latter part of the quarter but also now so far in October and secondly we saw quite strong order intake in life science if you can try to help us divide it by sub segments there thank you.

Yeah, we are all eagerly waiting on the market pick up more broadly and really look for signs to hold on to and build on. And as you know, the broad Indutrade organization is the glass is half full. So they are more definitely more optimistic than the other way around. I would say that it's slight positive views, attitudes towards the market broadly. But there are still more of a flattish broad trend also. Few segments decrease now, I think. So it's more a sideways movement, but still some optimistic points here and there. And I think you already know most of them apart from life science, which I will comment on more separately, as you asked for, I would say. For us, there are pockets in the energy sector, which is clearly positive. There are pockets in water, wastewater. which are clearly positive. Defense related areas, aerospace related areas. And now I would say that inventory levels broadly in a lot of segments have gone down. So even if projects have been moved forward, a lot of companies within complicated process industries and so on they need to move on with some definitely maintenance projects but also improvement projects in order to run their operations efficiently so there are maybe not green fields but definitely brown field improvements which needs to take place here and there we see that a little bit more and more I would say so I don't want to say that the market has turned broadly. It's more a sideways movement, but still a little bit more optimism, I would say, when we talk to our companies. In terms of life science, it's clearly the single-use segments where also the inventory levels have decreased and they are ordering products. And there are a number of sort of more complicated diseases which needs lower volumes, both developed and produced in these single use systems in the life science area. So I think there is a good underlying growth for several years to come in that area. But then there are also in the medical technology area we see also good momentum, I would say. But that's difficult to express in segments because it's more a collection of individual companies rather than clear segments we have there. So it's a little bit more broadly MedTech related, I would say.

That's very clear. And the final one, if I may, is on life science again here. Strong margin development despite the tough Novenodes comps clearly. Of course, you touched upon single use as one effect. Could you help us give any insights into how much it grew organically in the quarter single use, either on orders or top line? but also what effect it gave on margins. Thank you.

I can't give you sort of numbers on that specifically, but it's not only single use which is contributing to this. It's also clearly the medtech area. So it's a combination, I would say. And I should also comment on Novo Nordisk. So we have it's absolutely less than five companies relating to Novo Nordisk in a big significant way. And our companies are still, even if volume has gone down significantly to that customer, those companies are still on an above Indutrade average EBITDA margin. So they are still managing the situation in a good way, margin wise. And in terms of Novo Nordisk, what we are picking up is that the large factory capacity capacity building project they have in Kalumborg, where some of our companies are involved, will continue. So there will also going forward be some significant ordering take at some point linked to further capacity expansion projects actually. So it's not all. Some day-to-day business with Novo Nordisk is is significantly down because they have reduced what is it 5000 headcount in Denmark or companies don't have the same relationships it's a little bit you know wait and see mode for some of those projects but some of the key big capacity building projects will move on as we understand it.

Okay that's very clear thank you.

Thank you.

The next question comes from Carl Boakvist from ABG Sundahl Collier. Please go ahead.

Thank you. Good morning. My first question is on, I would say, both PW and TSS. It seems like, especially in TSS, ordering intake has been good both in Q2 and Q3. And I was just curious to hear about the comments I believe you made early in the year right after Liberation Day in terms of customer decision inertia, if we call it that, and if this has then improved.

It's a relevant question for that business area. It's our most international business area and the business area with most customers into the North American market, US market. And they still feel that there is... some difficulties to close projects linked to the tariff situation. Most of, most of that business is, is indirect for us, I would say. So it's more that maybe we have Western European customers who sell into, to, to the U S then, then direct sales, but there is also some direct and, and the, there is a little bit wait and see type of mode on in that market still I would say so I think as a business area they are picking up but also from slightly lower references I think so they are moving the right direction but a lot of those customers TSS are tending to is industrial engineering related companies so it's still not going to be a super significant pickup I don't think but the somewhat improving market situation hopefully as the tariff situation are stabilizing and at least companies can plan for certain investments with more reliability around it.

Understood and my second question is just regarding M&A and the acquisition landscape. Any particular regions you find particularly active and or interesting at this point in time?

I would say that it's Western Europe broadly. Nordics still very interesting. Germany, we see a growing population. effect from Indutrade becoming more and more known step by step. And we have also a full-time resource in Germany now since a while back. Our segment leaders are more and more in Germany and also Northern Italy. We have also a full-time resource there since some time back and he's providing more and more leads every quarter, I would say. We are maybe a little bit more geographically hesitant to the UK. But otherwise, I would say Western Europe is, there are pockets of opportunities everywhere there.

Understood. That's all from my side. Thank you.

Thank you.

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

Yes, good day. Thanks for taking our questions. I've also got a couple on M&A. Just following up why you're hesitant a bit to the UK if it's related to the underlying market.

I think there are less and less winning industries, winning larger engineering industrial companies in the UK in a regional global perspective. I think you need to be in a context where the broader environment makes money, is successful, is growing. And unfortunately, I think it's a little bit less of that in the UK than other Western European countries. So it is more linked to that, I would say. But there are obviously, we can still find really jewels in the UK as well so it's not that we have completely shut down in terms of looking for companies in the UK but a bit more broadly business environment which is a little bit more challenging I think.

Understood and also on the M&A side when we look at the acquisition pace which has been quite good in Q3 especially compared with the first half of the year If we relate this to the last time you passed the acquisition machines, let's say at the end of 2023, we saw a bit of a catch-up effect in the beginning of 2024. Would you say that what we're seeing now is part of a catch-up?

Yes, I think it's partly been a catch-up, which we have also communicated earlier that we expected that in Q3. But we also, as I very briefly, I think commented on in my presentation that the new organization with a new platform of defined segments and appointed segment leaders since a bit more than a year and a half back now. They get more and more warm in their clothes, to use a Swedish expression, and have had more time to build pipelines, create relationships and so on and so forth. I feel maybe comfort is the wrong word, but I'm optimistic in terms of what this investment in resource organization is potentially generating now going forward. So it's two things. It's a catch up and it's to some extent also an effect going forward now of a stronger acquisition resource machinery.

Very clear. And regarding the new organization, would you say that in recent times your expectation on when they are fully up to speed has changed or is it? couple of years until that is fully operational.

Yeah it's people they're all individual some pick up extremely fast have a little bit more experience since before and some are a little bit more in new into the situation so yeah it's probably Difficult to say a time on it, but we are definitely not at full sort of speed linked to this right now. That's still to come.

And also if I can comment, internal lead generation is a sort of a really long term work not all companies you contact or of course for sale and you need to build up the pipeline and over time it generates more and more acquisitions than so so it's sort of even if they are working you know in the in the really right way and with good pace it takes time for it to end up in closed transactions that's correct very good thank you that's all for me thanks

The next question comes from Johan Dahl from Danske Bank. Please go ahead.

Good morning, everyone. Just two quick questions. First, on the gross margin, you talked about the pricing actions in life science, but looking at the other parts of the group, is that also sort of a positive trend, or is it flat or perhaps even more challenging in those parts? Secondly, I was just wondering on the portfolio, I saw you made some divestiture here in the quarter. Is there more sort of portfolio pruning actions going on in Indutrade right now?

Thanks. I think our companies in general are extremely good at transferring costs to the customers and defending gross margin. So I think we... I expect us to be at a good gross margin level also going forward. So nothing dramatic to plan for in terms of all of a sudden a decline again or something like that. So I think we are at a good level and we will hopefully defend and stay at a good level. In terms of pruning divestments, I think... We have probably done most of that short term. So you can never say never, but most have been done short term and not the same sort of number or effects going forward.

All right. Johan, if I elaborate on the gross margin a little bit, I think we saw positive development in the majority of companies in most business areas. So maybe life science stand out a little bit, but for sure not the only And then pricing is, of course, one important thing. And then mix. And I think we've seen a positive mix with stronger gross margin company sectors have been improving slightly more than others. That's an important piece in the puzzle. And then also currency. Actually, since we have a lot of trading companies in Sweden with stronger currency positions now, importing goods products in dollars and euros, improving the margin slightly. So that's also a contributor. Yes.

Good, thanks.

The next question comes from Robert Redden from DNB Carnegie. Please go ahead.

Yeah, hi, Patrick. I just wanted to come back to that parent group or overhead cost in the EBIT table, 82 million. You said last year it was low due to some... internal cost development. But 82 is still a high number. Is this a number we should be expecting going forward on a time?

Yeah, I would say that the 80 is more relevant sort of ongoing quarterly value. I would say maybe slightly high. Maybe it is around 70 or so would be sort of an... And a quarterly level that's sustainable, I would say.

All right, perfect. And then generally on FG&A costs, you had that slide showing the DFT reductions. But in Q3, did you have much of an impact from those reductions? I mean, that was the reduction from a year ago when they did that. take effect and in terms of year-over-year cost development, did it have full effect or half effect or not so much in Q3 this year?

I'm not sure if I fully understood your question, but if you look at total overhead cost and SG&A, but also then more sort of operational or manufacturing related overhead, which Bo included when he spoke about the development of overhead costs. And they increased somewhat during the quarter compared to quarter three last year, like a percent or something like that. So, ideally, we want this to go down slightly further, but I think we have it under good control, and I think you should expect it to be going sideways going forward.

All right, yeah, because my question was, if you bunch together all of the SG&A cost items between gross margin and EBIT, they were growing quite a lot faster. year over year. So I was thinking this 6% FT reduction you had in the businesses with weaker demand, that that maybe didn't have so much of a cost effect in Q3, but because of the timing?

I think the reduction of the people, that's end of quarter three compared to end of quarter three last year. So that's sort of the timeframe of that slide, that number. But I mean, given, and we have also more things on the headcount side that we have initiated and that will be sort of implemented or executed during quarter four. And these things will, of course, also have a cost effect, yes, during the quarter. So I think from that perspective, we will have lower costs. But then there are also other things on companies that are growing. They are also doing slightly more things, et cetera. And the net of all this, I don't want you to sort of expect a big reduction during quarter four. So I think it's more fair, realistic to estimate sort of a sideways movement of costs.

All right. Okay. Thanks.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Mats Lis from Kepler Shuvru. Please go ahead.

Yeah, hi, thank you. Three short ones from my side. You mentioned the different things that affected your orders and say the price mix currencies. Could you be a bit more specific about price and volume?

I think it's difficult for us to be more specific there Mats.

But in general, we can say, I think our companies are still increasing prices, but it's not the levels that we saw during, if you go back a couple of years, it's more sort of, I think that sort of pricing routine is more normalized now. So it's more of the normal one to 3% increase per year. That's embedded in the numbers, but we don't have an exact sort of quarterly number now.

And then I, well, just for support, going forward then, what's your feeling about the comps going forward in the fourth quarter, year-over-year comps there? How do you feel about that?

The quarter, if you look at top line, I think the references are normal to slightly lower no sort of significant change but slightly lower I would say.

Great and finally I mean you mentioned the opportunities there and the list of acquisitions you have And you mentioned the geographical opportunities, but could you say something about the opportunities in the different business areas? Where are you? I understand you can't be so specific, but...

Yeah, but we obviously see opportunities, work with opportunities in all business areas. And sometimes they play out differently over time a bit. I would expect life science to... I mean, they have a good momentum, good pipeline. All of them have a better pipeline, but yeah, life science is strong. I think process energy and water is strong. Industrial engineering is also strong. Maybe somewhat, there are good pipelines in all five areas, but maybe those three stand out a little bit.

Okay, great. Thanks a lot.

Thank you.

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

Then we thank you for listening in and asking good questions and wish you a good day. Bye-bye.