Karnell Group AB ser. B

Good morning and welcome to Canell's Q3 2026 earnings presentation.

I'm Petter Molinius, the CEO of Canell Group, and I'm joined by our CFO, Niklas Svensson. As we announced with our preliminary figures from October 12, the third quarter is the strongest in Canell's history in terms of profits, with broad-based growth in both business areas. As usual, I'll begin with an overview of the quarter. Niklas will then take you through the business areas, our value creation per share, our cash flow and the balance sheet. I'll close off with some information about the acquisitions work that we are on doing and the key takeaways before we then open for questions. For those of you who are joining us for the first time, Canel is an active long term industrial owner. We acquire and develop small to medium sized industrial technology companies with strong positions in their respective niches. We operate with a fully decentralized model. Our companies run their own businesses supported by a lean central team. Focusing on M&A, capital allocation and ownership. Today, Canel comprises of 20 companies across Sweden, Finland, the UK and Italy. And we're employing around 860 people. And with that, let's turn to the quarter. Net sales grew with 33% to 582 million SEK, out of which 18.8% was organic. EBIT A rose 73% to 120 million with an organic EBIT A growth of 42.6%. The EBIT margin was 20.6% compared to 15.9% a year ago. And this is the highest quarterly margin we have reported as of yet. Net debt to EBITDA excluding IFRS 16 is down to 1.4 times from 1.9 at the end of the second quarter. What I'm most pleased about is how broad the growth was. Several companies in both business areas made significant contributions by gaining market share and through new customer relationships that we have been working on for some time. The high demand from a single customer that we have commented on earlier this year continued in the third quarter. The company increased EBIT A organically by around 10 million SEK. And that's roughly one third of the Group's organic EBIT A increase in the quarter. That's clearly a lower share than in the first half year, but that shows that the growth is becoming more broad based. These orders have short lead times and our visibility is limited, and we still don't consider these demand levels sustainable in the long term. In our product companies, we had a few larger deliveries and price adjustments that took effect ahead of our cost increases. Adjusted for these temporary factors, the underlying development is still good. Q3 is also our seasonality's strongest quarter, so the results should not be seen as a new normal level. In terms of markets, we continue to see mixed conditions with some improvements in Finland, but I would say that the largest contribution is growth our companies are creating themselves rather than any broad market recovery. Zooming out of it, looking at how our margin has developed over time, Since our IPO, the rolling 12 months EBITDA margin has moved from around 11% to 16.7%. And the last quarter, we passed a target of 15% for the first time. And this quarter, we moved further above that level. The 12 months figures, including this year's temporary effects. So I would also focus rather on the direction than the exact level. And our target is defined over a business cycle, and it's sustaining it what matters. For the first nine months, our EBIT A grew 68%, to 286 million, and that was organically EBTA growth of 41%. Cash flow remains strong. Operating cash flow was 135 million in the quarter compared to 46 a year ago. And 256 million of those were for the first nine months compared to 89 last year. And with that, I'll hand over to you, Niklas.

Thank you, Petter. So let me walk you through the financial details for the quarter and starting off with the Group. Net sales increased 33% to 582 million, with organic growth of 19%. Acquisitions contributed 15%, while currency effects were neutral. On the right hand side, you can see that EVDA increased 73% to 120 million in the quarter, The organic EVTA growth was 43%, acquisitions contributed 31%, and curacy was a marginal negative 0.5%. As Petter mentioned, part of the result reflects temporary factors, and the third quarter is seasonally our strongest. But at the same time, the improvement was broad-based, and we have significant contributions from several companies in both business areas. Acquisition costs during the quarter were limited. It was 0.9 million compared to 1.9 million last year. Moving to our segments, product companies delivered net sales of 310 million, up 25%. Organic growth was 12% and acquisitions contributed 13% points. EBITDA increased 54% to 71 million and organically EBITDA grew 30% and acquisitions contributed 25%. The EBITDA margin improved from 18.4 to 22.8%. Several companies grew organically by gaining market share and the margin was also supported by temporary effects such as larger deliveries and price adjustments coming through ahead of cost increase. And at the same time, a few companies developed weaker than last year. The recent acquisitions have continued to perform in line with our expectations. Turning to niche production companies, they had another exceptionally strong quarter when net sales increased 45% to 271 million with organic growth of 28% and acquisitions contributed 17%. EBITDA increased 87% to 64 million and organic EBITDA growth was 57% and acquisitions contributed 29%. The margin reached 23.6, which is up from 18.4. The high demand from a single customer continued, but as Petter mentioned, the growth is now clearly more broad-based than before. Together, the two business areas remain evenly balanced, and product companies represented around 53% of group net sales in the quarter, and niche production companies the other 47%, which is in line with the year-to-date split. Before we go into the cash flow in more details, we have added a new slide this quarter showing how our development translates per share and in relation to the capital that we employ. On the left, you see operating cash flow per share on a rolling 12 month basis, and it reached 7.2 kronors compared to 3.3 kronors a year ago. So we've more than doubled while the number of shares have been largely unchanged. On the right is our return on capital employed and from this quarter we use an updated definition EBIT A in relation to the average capital employed over the last four quarters. The change is made so that the key ratios better reflects the return on the capital tied up in the operating activities. And on that basis, return on capital employed reached 16.4% up from 14.7% last quarter and 12.5% a year ago. Rolling 12 EBD has grown from 221 to 349 million over the past year, which is clearly faster than the capital that we employ. And it shows that both our organic development and this year's acquisition are generating good returns on the capital that we invest. Turning to cash flow. Operating cash flow for the quarter came in at 135 million compared to 46 million in the same quarter last year, and the increase is mainly driven by higher earnings. But working capital also contributed positively with 19 million compared to negative 20 million last year. For the first nine months, Operating cash flow reached 256 million, up from 89 million a year ago. And working capital has tied up 20 million so far this year compared to 86 million last year. And this reflects our continued focus on core working capital and our work to smooth cash flow more evenly across the year, moving away from the old pattern where most of our cash flow landed in the second half. On a rolling 12 basis, operating cash flow reached 387 million, an increase of 121% compared to 175 million at the same point last year. And it's the strongest level we have reported to date. And that corresponds to cash conversion of 111% of EBIT A. Finally, our capital structure. During the quarter, we made an extra repayment on our revolving credit facility, and interest-bearing debt decreased to 726 million from 771 million at the end of the second quarter. Compared to 370 million at year-end, the increase reflects debt grown for this year's acquisition, UBA and Flex7. And cash equivalents stood at 188 million, giving us a net debt excluding IFRS 16 of 537 million. EBDA excluding IFRS 16 on a rolling 12 basis was 390 million, resulting in a leverage ratio of 1.4 times, which is down from 1.9 times at the end of the second quarter. and well within our financial target of normally not exceeding two times EBITDA. The decrease is driven by strong cash flow and by this year's acquisition, now contributing with more months of earning in the role figures. Total financial debt was 867 million, including lease liabilities under IFRS 16, putting all options and continued liabilities. And with that, it concludes the financial overview, and I hand back to Petter before we open up for questions.