Indutrade AB (publ)

Welcome to the Indutrade Q4 presentation for 2025. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Bo Amvik and CFO Patrik Johnson. Please go ahead.

Welcome and good morning on our behalf as well. Let's start with a summary of the year 2025. It was a year with market uncertainty and continued dampened demand, although conditions improved throughout the year. We improved operationally and financially gradually during the year, and we also further strengthened our long-term strategic capability as our new segment structure now is fully established. In terms of financial numbers, 2% total growth in order intake, organically also plus 2%. Net saves decreased by 1% in total, of which minus 2% organically, driven mainly by backlog reductions during 2023 and 2024. The EBITDA margin of 13.8%, excluding extraordinary runoffs in the year, the EBITDA margin came in at 14.1%. The cash flow was continued on a high level, and the financial position of the group is very strong. In terms of acquisitions, we acquired 13 well-positioned and profitable companies during the year, with a total annual turnover of 1.3 billion SEK. The board proposes a dividend of Swedish krona 3.1 per share. Looking at the Q4 highlights, Organic order growth of plus 3%, with positive development in many companies and all larger customer segments. Three out of five business areas grew organically, and the remaining two were stable from last year. More than half of the companies had organic order growth. The strongest demand from customer was within energy, water and wastewater, and infrastructure and construction. Net sales decreased by 1% in total. Organically, it was unchanged. The reported EBITDA margin came in at 13.3% compared to 14.6, the same period last year. However, underlying EBITDA margin was strong at 14.9%, excluding the extraordinary one-offs in the quarter. And this we will comment more on later in the presentation. Underlying EBITDA more than last year was 14.3%. Cash flow from operating activities amounted to 1.6 billion SEC in line with a high level last year, and there were continued inventory reductions from our companies. The acquisition pace was good in Q4 with four announced acquisitions, and the pipeline also remains good, both short and long term. Moving into order intake and sales trends, demand continued to improve and was stronger than last year with positive development in many companies, customer segments, and geographies. Development was generally positive in all larger customer segments, and the strongest performance was seen in the energy sector, water and wastewater, and for companies with customers within infrastructure and construction. Order intake improved in the majority of the companies and was up 3% organically. Order intake was in line with sales, which is good, as book-to-bill is seasonally weaker during the second half of the year. As you can see on the slide, currency has a large impact of minus 4%, which together with a minus 1% from divestments impacts total growth on orders and sales materially. Adjusted for currency and divestments, the underlying situation is clearly better with plus 7% growth in orders and plus 4% in sales. Organic sales development was strongest in the industrial and engineering business area, and also infrastructure and construction grew organically while it was weakest in technology and system solutions. Looking more specifically at the sales per geographical market, sales to Sweden was flat from last year and down in Denmark due to the high comparables from last year when we still had some deliveries to Novo Nordisk from the large order we received two years ago. Finland was stable from last year and Norway stronger. Development in Norway is mainly connected to flow technology products for water and wastewater, aquaculture, and marine applications, as well as other products for infrastructure customers. For the rest of Europe, sales growth was strong in Benelux, mainly due to good development within bands for power generation, and also single-use products for farmer production. UK Ireland and Germany was down as a result of the generally weaker business climate in those areas. Sales growth in Switzerland and Austria was strong, with good developments for companies with customers within infrastructure and construction and medtech and pharmaceuticals. Sales development in North America and Asia is normally slightly volatile, that was down compared to last year, and among other things related to companies within business area technology and system solutions having a weaker demand on the back of the tariff situation. Total EBITDA decreased 10% from the same period last year to 1.1 billion SEK, corresponding to an EBITDA margin of 13.3%. However, this quarter was strongly affected by extraordinary one-offs, primarily connected to two companies in the UK within business area technology and system solutions. Patrick will elaborate a bit more on this later in the presentation, but I want to highlight that they are non-recurring and extraordinary, and you shouldn't expect these type of items from Indutrade. Adjusted for the one-offs, the underlying EBITDA margin was strong. at 14.9% compared to the underlying EBITDA margin of 14.3% last year. The gross margin was continued at the high level of 35.4% and even stronger than last year if you exclude these two UK companies I talked about. Organic expenses is under control. As mentioned earlier, organic sales growth was strongest in the business area, industrial and engineering, with positive development in many companies, for instance, infrastructure, machinery, and railway rolling stock. Infrastructure and construction also had a slightly positive development, however, from low levels, as the demand has been dampened for many quarters. We saw, for instance, strong development in the water distribution segment. In life science, there was a strong development in several areas, for example, single-use companies and broadly in the medtech segment, but was offset by references connected to sales last year, as I mentioned earlier. Also, process energy and water had tough references in many companies. And the main reason for negative development in business area technology and system solutions relates to project revenue recognition adjustments linked to the UK situation I spoke about earlier. Without those adjustments, the organic development was minus 2% connected to the lower sales to the US. Moving into EBITDA margin development per business area. As mentioned, the total gross margin was strong, which is driven by multiple factors like mix and currency, but it's also a sign of quality in our product offerings and strong pricing power. Industrial and engineering improved EBITDA margin as a result of the strengthened gross margin, but also leverage on the organic sales growth. Infrastructure and construction was close to last year's level but was negatively affected by a lower gross margin in a few companies. Life science also improved EBITDA margin despite strong sales references from last year, mainly due to positive product mix with good sales development from some high-margin companies. Process energy and water and technology and system solutions had a weaker EBITDA margin compared to last year. as a result of the organic sales development and slightly higher expense levels. The one in technology and system solutions I mentioned earlier is recognized as group items outside the business area, so no impact on the beta from that in the BA. In 2025, we welcomed 13 profitable and well-positioned companies to the group. with a total annual turnover of 1.3 billion SEC. The acquisition pace was lower during the first half of the year, but increased significantly during the second half, with 10 acquisitions completed in the second half. In the fourth quarter, we announced four acquisitions, where the acquisition of ATM Group marked our first acquisition in Spain. ATM is a technical trading company specialized in single-use components for life science applications. We have many similar companies in the single-use area in other geographies in Europe. So, this acquisition is a good example of our ability to expand into new markets in a controlled yet optimistic way. We have gradually strengthened our acquisition resources, and our business areas work independently with different projects. This together with business segment leaders being more proactive in the acquisition work and internal pipeline generation is a strong platform to use in gradually increasing our acquisition pace going forward. The pipeline is good, both short and long term, and I look forward to announce the first acquisition in 2026 very soon. Looking at the longer term, We are stepwise increasing number of acquisitions, although number of acquisitions per year can be a bit volatile. Looking at the bridge effect from acquisitions over the last 12 months, we have added over 190 million SEC 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% for the quarter and 16.4% for only 12 months. Good to know that this includes transaction costs, so the underlying margin is even higher. By that, I leave the word over to Patrick to comment more on the financial situation.

Thanks, Bo. So, let's dive a little bit deeper into the data. Total growth for orders and sales in both the quarter and for the full year was plus 2% and minus 1%, respectively. Positively, book-to-bill is at one in quarter four and above one for the full year. And as mentioned earlier, there is a seasonality in the book-to-bill where the first half of the year is normally stronger than the second. In quarter four, the gross margin was at 35.4 versus 35.7 last year, but impacted by the one-offs in the quarter. Excluding the one-offs, it was higher than last year. And for the full year, the gross margin remains ahead of last year, even including the one-off section. Expenses not in the table, but they are, as I said, under control and increased organically only marginally with around half a percentage point excluding one-offs. Edita decreased with 10% in the quarter and 5% for the full year as a result of the one-offs in the quarter. And talking about the one-offs then. We had the non-operational one-offs connected to earn out and goodwill write-downs as we have from time to time. And then the net effect of those was small, minus 3 million. But then in addition, we had an extraordinary one-off items of in total 125 million from two UK-based companies in the business area technology and system solutions. Where we identified the need to reassess the project, in terms of cost estimates and also degree of completion. Particularly related, actually, to a few large projects with long lead times that have both new complex technology and custom application areas. Excluding these one-offs in the quarter, the underlying EBITDA margin improved to 14.9 versus 14.3 last year. Moving further down into the P&L, finance net decreased by 5% in the quarter and 14% year-to-date because of both lower interest rates and lower debt level. Tax cost decreased 10% in the quarter and 1% year-to-date. Earnings per share was also impacted by the one-offs in the quarter amounting to 1.72 SEK in the quarter and 7.03 SEK for the full year. Return on capital employed declined slightly to 18%. Also, that's mainly due to the one-offs in the quarter. Operational cash flow was unchanged from the very high levels last year, and I will elaborate some more on that on the coming slides. Net debt EDTA end of the quarter, end of the year is at 1.4, a low level, same as last year. So, let's move on to the cash flow. the cash flow, and that is, as I said, in line with the record high levels of last year, amounting to 1.6 billion in the quarter. Improvements versus last year, last year, less than the strong underlying results in combination with continued good working capital reductions. I think it's good to note that the one in the quarter had no impact on the cash flow. It's a bit of sort of proof that they are truly one of costs. The organic inventory levels continued to decline sequentially and in relation to sales. And the ratio is now at a very good level, almost historically low levels. As we mentioned before, our companies are relatively capitalized, and there is a continuous strong underlying cash flow reflected in a good cash conversion. as you can see also from the slide. And it continues to trend on a rolling four-quarter basis on above 130%, which is the ninth, actually ninth consecutive quarter with a cash conversion on that high level. The working capital efficiency also continued to improve. Moving on to looking at the earnings per share development over time. And for the quarter, it decreased 14% to 1.72, mainly due to the one-offs we have spoken about. For the full year, it amounts to 7.03, which is a decrease of 7% versus last year. And we are obviously not satisfied with EPS development. Besides the one-offs, it is, of course, related weaker demand and result development the last two years. Full focus is now to come back on good growth levels and momentum is, I think, is good. Good growth levels in line with our targets and also with that deliver earnings per share growth. And lastly, commenting on the financial position, the interest-bearing net debt decreased both sequentially and versus last year from 8.2 billion to 7.6, driven by the strong operational cash flow. Our net debt ratios are stable and low from a longer historical perspective. Net debt equity was 44 versus 49 last year. Net debt EBTA was, as I said, 1.4 in line with last year. And if you exclude earn outs, they were at 1.2 compared to 1.3 last year. And if you look at the financial net debt, which is the part of the debt that relates to borrowing that needs to be refinanced, that is historically low at 0.9. And in the quarter, Issued a new five-year bond loan of, in total, 1.3 billion at the margin of 1.13 against three months , which I think shows our strong position in the credit markets. So, in conclusion, our financial position is very strong, creating a good room and opportunity for value acquisitions and also organic growth initiatives going forward. So thanks from my side, and I leave over back to you, Bo.

Good. And we summarize the key takeaways. Continued organic order growth of plus 3% and stable organic sales. Growth of plus 7% and plus 4%, respectively, if you adjust for currency movements and divestments. We had a strong gross margin in the quarter, and the expenses are under control, which resulted in an improved underlying EBITDA margin of 14.9%. I also would like to comment, I also would like to make one additional comment on the projects with the one-off effect we spoke about earlier. The projects are in the absolute final phases of completion based on the current information and analysis of the projects. All costs have now been accounted for in a prudent way. The two companies are independent from each other, but they have shared a couple of senior managers. There are also indications that they should have realized these deviations and accounted for them earlier. These persons have left the companies during last year. Again, this is an extraordinary situation which would not be expected in the Indutrade group. Going forward, the market uncertainty remains. However, a slightly larger order book, higher acquisition pace, and lower references provide some comfort about the earnings trend. Thirteen companies were acquired in 2025, and all business areas operate independently with acquisition projects and with a strong focus on internal pipeline generation. This provides good conditions for a gradually increasing acquisition pace. We are now fully focused on delivering annual growth of at least 10% per year over a business cycle and a stable EBITDA margin of at least 14%. We have made deliberate strategic investments in our platform. Now it's time to harvest. By that, we close the presentation 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 Zeno England Ricciuti from Handelsbanken. Please go ahead.

Yes, good morning and thanks for the presentation and taking our questions. Just quickly on the projects, the comment you made now, Bo, it sounds like it was maybe a bit related to these individuals. So my question is how you ensure that anything similar does not happen in the rest of the group, so to say.

Yeah, I feel certain that this is non-negotiable. I've been in this role now for almost nine years, and we have had nothing at all similar to this. And as far as I know, Indutide has never reported anything like this before my time either. We obviously have internal control functions. We have boards in all companies. We have our external auditors. business control functions on business area level, on group level. We have an internal bank. You know, we have a lot of professional sort of controllable processes and standards, which eventually will catch up with the wrongdoings in different ways, which is also did this time. But if you have persons who, deliberately hide things and they are in responsible positions and they cooperate. It can take some time, which it did.

Very clear. And just lastly, is it the very extraordinary circumstance that you put it in the group items and not the business area?

Yeah, exactly. They are reported. The result effectively is reported on group items, and that's correct. But it impacts the gross margins. It's related to these projects.

Understood. And a question on the industrial engineering, which saw a strong margin. I think we commented that it was from lower levels as well as the business environment currently in this step. ability to deliver on this level going forward as well.

Generally, I'm quite optimistic that all business areas have opportunities to improve organically 2026 versus 2025. even if there is not a dramatic business cycle improvement around the corner, there is slightly, I would say slightly better environment and more optimistic perspectives when we talk to our companies. So I expect a gradual improvement during the year, and we have now seen two quarters in a row organic order intake improvements. So I think we are trending step by step in the right direction and hopefully this will continue in 2026.

Thank you. And just a last question for me that's M&A related. You previously made some comments about possibly looking into some larger acquisitions and when you maybe also more prioritized that. organic growth possibilities of what you acquire. Relating to the average size of the companies acquired in 25, do you make any particular reflection about it?

I would say that they were generally smaller on average than we usually acquire, and it would perhaps be surprising That would also happen in 2026, so I think it was not the common average size for a, in a full year perspective on Indutrade. Our primary focus is to buy companies around, I'll say, 15 million euros in size, and that will be the intention also going forward, but sometimes we find companies which are a bit larger and if we feel that they still are managed by good entrepreneurs who are engaged in their business in the same way as in our general size scope of companies, we are also interested in them. If we are finding really much larger companies where the owner is not really too engaged and it's more like an externally recruited management team without large financial ownership in the companies, we are, I would say, less interested because that's not the typical type of individuals we, would like to have engaged in the companies we buy. So that's a bit of a divide in terms of our interest. So you will probably see mostly, hopefully, the 15 million euro type of size, but sometimes a bit larger, and then it should be where management has been very engaged in the companies, also the ownership side.

Very clear. Thank you. I'll get back in line. Thanks.

The next question comes from Carl Ragnarsson from Nordia. Please go ahead.

Good morning. It's Carl here from Nordia. A couple of questions from my side. Looking into the organic pace, the sales pace, you grew orders 3% when about sales. organically. On the other hand, Q4 is a bit of a small order quarter, but still at one. So could you help me a bit understand the backlog dynamics and how comfortable you are in the organic sales trending up here, I guess, from Q1 and onwards?

I'm quite confident that that will happen. There is a better order backlog, as you say yourself, and we see an organic momentum, which is positive and has been positive for the autumn and fall here now. Also governments in a lot of Western European countries are step by step increasing their infrastructure investments, defense investments. So it's not going to be a super significant step up in Q1, but this trend, I assume this trend will continue, and at some point, order intake will also be realized in sales. And, yeah, so I'm having an optimistic outlook for 2026 in that perspective.

That is very clear. Thank you. And on the gross margin, looking at the underlying gross margin, I assume that it's around 36.5%. You mentioned divestitures. You mentioned acquisitions. You mentioned mix effects. So could you help me unpack a bit on an adjusted basis these things? these levers and I would also assume that life science was an important cross-margin driver you mentioned single use coming back strongly so how do you look at the sustainability of these this quite good gross margin as you have on an adjusted basis in the quarter do you want to start Patrick from your side and then I can finalize with some comments

Yeah, I mean, we don't have a sort of a full detailed bridge on that, but it's sort of the gross margin improvement is sort of driven by multiple factors, and you mentioned a few then. We are, when companies, as we've talked about for a long time, our companies are good with pricing in general, so I think that's sort of the starting point, but then you have on top of that, I think you have favorable mix. And I think life science is a good example with the single use area growing with good margins and also many of our medtech companies have good margins. So that's also increasing down the buying margin. And then actually currency then because we have a lot of trading companies in Sweden benefiting from the stronger SEAC. So those are the drivers. I can't give you sort of a breakup of that. Is it sustainable? I think it is. I think it is. And also, you mentioned water acquisitions and divestments, those impacting. So I think it is sustainable. But of course, it will be difficult sort of to push it dramatically more up, I would say.

Yeah, I agree with Patrick. I think that's been one of the key trademarks of Indutrade for a very, very long time, that we have stable gross margins, and I've spoken about this in a lot of other calls also, that the DNA of an Indutrade managing director is really to protect gross margin, and I think they do that in a really good way. The risk factor at some point is maybe the currency. Otherwise, I think we are handling things really well. But I think we will handle that also well. But if that swings against us in this perspective with several percentage points, that will be maybe demanding in some situations. I think this will continue at a good and stable level.

And if I sort of, only one additional input, I think currencies, of course, one, if you talk about risks in the gross margin, maybe also, there is still a dampened, we don't have a super strong business cycle, and it's a little sort of dampened market still. Fewer larger deals projects in the market than you would see in a higher growth environment. And when you have more daily business rather than bigger deals projects, the margins are slightly better. So a good business cycle with more projects is maybe slightly dampening gross margins.

Very clear. Coming back to SG&E, you touched upon it a bit. It seems to have flattened out quite nicely. So if organic growth comes back, as you alluded to before here, how much could you hold back on cost? Is it more low performers you're working with, perhaps fully offsetting the needs of hiring in some other growing companies?

We work with... and expenses quite actively, as you know, over the last two years, and we have had our ups and downs, and the culture within the group is the glass is half full, and they are opportunity driven. I think we collectively have learned to watch certain parameters and not least headcount I think is even higher on the agenda than it perhaps was before. So I think there's going to be a resistance in the system somehow to add headcount, which is going to be more obvious now than perhaps it was before. So some learnings from what we have experienced and some benefits from that going forward. So there we will keep track on cost versus sales ratios and things like that in a good way.

Very good. And to find a very quick answer to that, Organic growth, sales growth minus one in life science, what is it adjusted for the Novo Nordiskomps, roughly?

In the quarter, I think it was 3% almost, I think, or something.

Yeah, almost. I think you have to correct it with around 3%, and so then plus two.

Okay, very clear. Thank you.

Thank you.

The next question comes from Ope Ohtani from GS. Please go ahead.

Hi. Good morning, Bo. Good morning, Patrick. Do you mind just talking through sort of like four margins from here? Performance in Q4 was quite strong, and so do you mind just talking through what's driving that, but also are you done with the cost that you've done here today as we thought through sort of last year?

I must apologize, but I didn't exactly hear your question. Which business area did you refer to?

Oh, no, sorry. It was just our margin for group. So Q4 was quite strong, and so should we extrapolate that as we look forward to 2026? And so were there any key things driving margin? Was it sort of just the strongest margin, or was it the M&A accretion as well?

Yeah, I think you have picked it up yourself in a good way in that sense. It was a good gross margin, and M&A is also accretive, and costs are under control, so I would say that all those factors have implications on that, obviously.

And if you, I mean, if you look ahead into quarter one, think in general you have a seasonality during the year which is good to understand that quarter one is normally slightly weaker and then margin normally comes back a bit in quarter two and is the strongest in quarter three and then quarter four is maybe sort of an average in line with quarter two sort of that's the normal seasonality and then you could of course have But you start there, I think, so normally slightly lower in quarter one than quarter four. Then, of course, it depends on organic development. This is sort of one key driver. Here we all have a slightly higher backlog supporting us going into the year, but still no sort of super strong cycle yet. But again, slightly higher backlog.

Great. Thanks very much. Understood. And maybe just switching gears and talking about M&A, could you give any updates on the phasing of gel activity through the year? So is it kind of carrying on from the pace you saw in Q3 and Q4? And could you also just give an update on divestment activity? a few minor transactions maybe largely related to constructions, but any updates on divestments would be appreciated.

Yeah. If you look at Q3, Q4, we are basically adding around half a billion or 50 million euros on sales values in those quarters and approximately five acquisitions per quarter there. And I definitely think that pace will continue in Q1 and onwards in 2026. And medium-term will even increase versus this. But short-term, that this pace will continue into the next coming quarters. should not really expect any divestments. It can happen. It probably will happen, but it's not very common. And I think we have done those we wanted to do relating to this business cycle situation and so on.

not a very active divestment sort of agenda going forward great thanks and maybe just lastly um technology and system solutions organic affair minus six um do you mind just talking to the drivers there is that related to a situation in those two businesses you've talked about all the other trends driving that yeah so if you exclude that uk situation they were at minus two uh

And that's our most international business area. So they have sales into North America and not least the U.S. and also to China, Asia. And there has been some weaker sales short-term into the U.S. linked to the tariff situation. There has also been some impact in China. They have had more of a bi-local policy since a couple of years, as you probably know. But I think most of our companies have realigned, replaced some of that and found other geographies and opportunities. So I think step by step, Also, TSS will improve in terms of order intake and sales, and that that will happen during 2026.

Great. Thanks very much for your comments, and good luck with Q1. Thanks.

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 participating and asking good questions and wish you a good continued day.

The host has ended this call. Goodbye.