Lifco AB (publ)

2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now I will hand the conference over to CEO Per Waldemarson and CFO Therese Hoffman. Please go ahead.

Thank you and good morning everyone. We can move directly into page number two in our investor presentation where we look at the group's overall financial performance in the first quarter. And it was overall on the group level a mixed quarter with mixed outcome in various parts of we had a 15% growth in sales driven by around 8% organic growth, particularly strong growth in sales institutions, which we'll come back to in the next slide. We had also strong growth in acquisitions of 8% in sales. If we go further down and look at EBITDA, we grew that with 17% and we had slightly higher EBITDA margin compared to the previous year. This EBITDA margin is driven by very strong performance and demolition tools and offset by slightly lower margin in system solutions. The profit before tax grew by around 20%. Cash flow only grew 3% in the quarter. Cash flow obviously is more volatile between quarters and this first quarter we had slightly higher tax payment than compared to last year and also some working capital build up. We can then go into more details in page number three in the presentation. If we go down into the different areas in dental, it was a quite normal quarter, low single digit growth both in terms of sales and profit. We had here some positive effects on a later Easter in this year compared to last year, which had some impact on the growth. If we then go further to demolition tools, we grew sales with 10%, which was a combination of organic growth and some acquisition growth. We had a very strong margin of 25% in the quarter, which is basically due to organic profit improvements in several parts of this business area. EBITDA overall then grew with 37% in the quarter. Just to continue commenting on demolition tools, we actually saw after a quite long period of time of what I've called weak market conditions now, we saw some first indications of slightly improving market conditions in this first quarter of 2025. Having said that, we have to keep in mind that the first quarter took place before the most recent turbulence relating to tariffs, etc. We just have to wait and see how this plays out going forward. We don't have more visibility around that than anyone else. But at least so far so good, because in terms of, and I'm talking about slight improvement, we're not in the situation we saw in 2021-22 where the markets were very strong, but improvements from the quite low level we had in 2023 and 2024. In sister solutions, we had a very mixed performance in the first quarter, if you go further down in that segment. Overall, the business area grew with 24%, but EBITDA only grew with 15% due to some mixed effects of growing stronger in slightly lower margin areas. And also some weaker profit levels in three of our subdivisions, environment, technology, transportation products, and special products. We had a little bit lower organic profit development compared to last year. If we then also make specific comments around contract manufacturing, we have now, during the second half of 2024, we had very strong deliveries coming out from contract manufacturing. That also continued in the first quarter. And we have, however, now in early April, some indication that this is now turning back to more normal levels again. But visibility here is very low, so we cannot say more than that. We have not a long order book in this business area, so it's really related to what happens to pay for it. But we see some indication of going back to lower normal levels in this quarter. And once again, the lower margin then of .6% in the business solution is then a mixed effect of lower margin in contract manufacturing and some weaker organic profit development. If we then go into page number six and look a little bit at Teslo, I just want to highlight that we have updated page number six with some updated data. It's measuring the free cash flow per share after CapEx and before dividend acquisitions. And they still do that, but we have also now deducted in all time, in every year here in this graph, we have deducted also dividends to minorities. We have in our companies some minorities, and when we pay out the dividend to them, that should of course be deducted in this graph, and that has now been updated. The cash flow per share must obviously be measured over long time periods, as cash flow can vary between quarters and even years. It has been on a little bit stagnation level the last two years. And the main reason for this low growth is of course that we did experience quite weak market conditions and demolition tools in 23 and 24. If we then go further into page number seven and just quickly look at our depth position, we are staying now at 1.1 times interest bearing net debt to EBTA, which is a very healthy level, and we stay there despite quite a large number of acquisitions in the last 12 months. Obviously, we still have plenty of room to continue making acquisitions when we find the right opportunities. And I repeat myself from previous calls, we remain very disciplined in terms of the business we decide to acquire and also the valuations. And as always, the exact timing on when different deals materialize is always difficult to forecast. But we continue to work very hard and actually expand our search for great companies all around Europe. And then we can go into page number eight and just take another step back and look at the long-term historical performance of LISCO. And once again, we can conclude that we are coming out of two years of quite difficult market conditions for demolition tools, which has led to lower than I would say historical growth in 23, 24 and so forth. And we saw some indications of some improvement market conditions for demolition tools in the first quarter. But once again, the situation, the global economy now is of course very difficult to forecast going forward. But I think you can also conclude from this graph that despite this situation, we've been able to grow our profits also in 23 and 24, which is a strong indication of, you know, we have a great diversification in the group. We also have maybe even more importantly, very strong management throughout the LISCO system that is steering the companies and the portfolio in the right direction. And if we then go to page number 13, I just like to also a little bit take, you know, take a look at what we're actually doing with our portfolio. Just want to remind everyone that we have been since the end of 1990s, developing a very strong operating model on how we steer companies in LISCO. It all starts with having hundreds of motivated and very action-oriented, result-oriented managers in all our companies. And equally important, we also have a quite large team nowadays of very experienced former managers that are now taking the ownership representative roles in all these portfolio companies that govern this process going forward. That's extremely important and something that takes many, many years to develop. And I just would like to mention the great work that takes place throughout the LISCO system and how crucial that is for our performance. The other points on slide 13 is just also a reminder for everyone. We continue and we have always done focus on, you know, going up in margin, becoming more differentiated and not focusing on the volume segment. We do that in all our businesses across LISCO. And we've done it for many years and continue to do that. That's also one reason why we've been able to expand our margins over the last decade. We continue to run LISCO in a very simple way. Despite being a quite large company overall, we keep the entrepreneurial spirit in all our companies and we make sure that the most important people in the subsidiaries can shine in such a model. We are focused on outsourcing wherever it's possible. So basically only doing what's necessary in-house and have the focus on the typically the product development and the sales. And then sometimes we have to do a little bit of production because of the situation in that specific niche. But in general, it's important. And then cash flow is a strong focus in all our companies. Also, when we acquire companies, it's a very important part of our screening to ensure that we can own the company for a very long period of time with strong cash flow generation. And we do all of this with a very long-term perspective and try to do things a little bit better every year. So with that sort of overall comment, I'd like to open up for any

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.

Can you hear me? Hello, who is this? Hi, can you hear me,

but it's Carly from Rodea. Hi, Carl. Hi, Carl. Yes. Hello. Okay, great. Good. I didn't get an operator voice. Sorry. So just a couple of questions here. Firstly, on system solutions, I mean, quite an usual margin drop from a historical perspective. You mentioned product mix. So, I mean, is it purely contract manufacturing you're referring to? I mean, obviously, you mentioned also environmental tech and transportation having a sort of a negative trend. So both of those questions, I would like to delve into a bit. And also when you talk about the negative trend, are you talking to short-term negative trend or a negative trend that you've noticed for a while? And yeah, and what is behind it?

That's a good question, Carl. And I think the answer is, as always, there's many things, coming into this one number. One reason is obviously that when we grow a lot in contract manufacturing, we have slightly lower margin there. So that has a mix effect. But that's not the whole explanation of the margin drop in this quarter. There's also some companies that had, I would say, a little bit bad luck quarter. So maybe the margins were a little bit lower, which is normal. You have different subsidiaries up and down. But we have a little bit of that. And then we had a few other companies that maybe had a little bit of weaker market conditions coming into play and hence lower margins coming in. So this is all playing together into this quarter. So it's a combination of, I would say, bad luck is a wrong word, but a little bit more one-time effects that probably will not be the next quarter. Some companies that are experiencing weaker development, and then you have this mix effect where we grow much stronger in a relatively lower margin segment. These are the three areas playing together.

That's very fair. And you mentioned contract manufacturing, perhaps here in April coming down to more normal levels. The problem to me, at least, is that I don't know what the normal level really is. Maybe you don't either. I'm not sure. But what is the normal level? Is it sequentially flat? Is it back to pre-contract? And also on that, how fast are you able to take out costs if volumes would come down?

I normally would not comment on what's happening in early April. But since we have these extraordinarily good deliveries now, three quarters in a row, and we have seen a little bit weaker start in April, we have to measure something now. But we don't know what that means for May and June, to be quite frank. So it's very difficult to forecast. Because the visibility is quite low. We work with OEM customers. We don't have the full visibility on what's happening further down the value chain in this situation. So we don't know. And the second question, of course, if volumes are going to go down, then it would be some time to adjust going back to normal. But we are historically being quite fast on that. But it will take some months to get things back to normalize the level of if that continues. But right now, we don't have visibility to draw any major conclusion on that. It was more a highlight, given that we have now three quarters in a row, and we saw a little bit weaker start in April.

But I guess in order to be able to take out costs, you must have some kind of view what the normalized level really is. Is it half of the contract uptick that you've seen? Or do you think that the contract, will it go down to pre-contract, you think? Or is it a long-term contract that will continue for many years? Or how do you view the contract overall?

No, but it's not that we lose. It's volatility on the customer side. It's not that we have lost any customers or anything has changed in that trouble we were going through. So it's unclear around this field. So I think we cannot go into further detail here, Carl, than just we have to address it. It's very early indication. And it might also come back later on. So we just saw that it was slightly weaker in April than it was in the first quarter. Therefore, we have to highlight. And I think we have to leave it like that for now. And then we have to follow this going forward. Yeah, so it's unfortunately a bit more volatile the last year in this area than we normally see. But this is life sometimes.

Sure. Okay, thank you. And the final one from my side is, you touched upon it. I know the visibility is low. I also know that you don't want to comment on things happening post-March in this case here. But looking at the tariffs, the US trade war, have you noticed any sort of impact on demand in recent times here? I guess it's mostly in CapEx driven companies, I guess from might be hesitancy from consumers to push the button to invest or start a project. Have you seen any of that yet?

I think it's too early to say, Colin. The major part of this turbulence, I thought it was two or three weeks ago. So it's a very short term. And we did close orders in the last few weeks as well. But does that mean that things will continue to be great in May, June? We don't know. So it's too quick to say. But yeah, you can say that we have still seen the order coming in in April. I don't have the full visibility on what level is compared to people. It's not like a Lehman Brothers situation that we're experiencing. Things are moving around and things are materializing also now. But does that mean that May and June and the rest of the year will be great? No, we don't know. So it's too early to say.

Okay, thank you so much. Thank you.

The next question comes from Zeno Engdalen-Ricciuti from Handlesnake. Please go ahead.

Yes, good morning, Per. Thanks for taking

our questions. Starting out in demolition and tools, of course, as you said, a very strong quarter. Could you maybe elaborate a bit on the segment that we were looking at, the earnings growth? You didn't mention that there were any special orders and say that it's organic growth behind it. But can you elaborate a bit

more on the performance there?

No, and the reason we didn't mention that because there was not one specific order or any project that drove the profit levels in this quarter. It was more strong performance in quite a large number of areas in this area. And I think parts of this has to do that volumes were a little bit better. And then we've done a little bit of cleaning up, reducing, getting the organization a bit more streamlined and being ready for this. And then you have this quarter. And then we had, coming back to quarterly variations, there was no negative impact in this quarter, which I mentioned just previously on solutions, we had some companies where maybe the profits were a bit lower than we would expect in one given quarter. So this can also vary. In this quarter in demolition tools, we didn't have that effect, you can say. So it plays together and then therefore the margins are very strong. So it's not one specific delivery. And it's actually good performance in different parts of the mission tools playing together. But not, you know, we're not seeing crazy good markets. We're just saying that we saw an improvement from the levels we had last year.

Yeah, that was my follow up. If there is any or several particular end markets that showed particularly strong performance, if it was more contraction or demolition related or forestry.

Those actually in all areas are a little bit better. You can see. Having said that, we also have some specific, you know, some, now we go into very detail, we still have some areas where they are now maybe suffering a little bit for some reason later, later problems, you can say. And so it was not the perfect quarter in that sense. But so we would probably have some areas here that we still have weaker conditions also going forward. But the major part of this area did quite well across the board.

Yeah, and was it, so to say, great across the board through the whole quarter, did you see an improvement towards the end on a relative perspective?

No, it was quite

spread out throughout the quarter. Okay, very good. I'll get back in line. Okay, thank you.

Question comes from Carl Boekvist from ABG Sundal Collier. Please go ahead.

Thank you. Good morning. My question or some of those that I want to ask have already been answered. So the one I am curious about is when we look at systems solutions right now, it's been an upward trajectory in margins over a long time. We started reaching roughly 20% margins in 2021, then it's been 22, 24, 24. And yeah, now we're back here. But based on the current company compositions in systems, is there any way of kind of saying what the normal margin interval should be for this division?

It's always very difficult

to say what is the normal margin in an area where you have different market exposure and some cyclical volatility in the areas, some very stable areas. But I think the margin levels we have had in the last years is a good indication for a normalized. But then once again, what is the normal market? That's maybe the most difficult question to answer. But I don't think that coming back to our portfolio of companies, we have very strong market positions. There's a reason why we can have high margins in these businesses. They are very niche and they add a lot of value to their customers and they are very specialized in their segments. So we of course see potential for long-term continued margin expansion in all our areas, including systems solutions. Short-term, it can obviously be volatile. And this quarter was of course also partly impacted by when you grow more in the lower margin part of a business area. But overall, we're not worried about the long-term margin development of the area as a whole. Short-term, we can also have volatility obviously.

Understood. And then we follow up just in general, but perhaps mainly focused on demolition and systems. But a bit technical. But when it comes to volume sensitivity, let's say that we do now get a situation over the next 12 to 24 months at least of improving volumes. How sensitive or how positively affected do you think the margins could be from a volume improvement compared to what you have disclosed on several occasions regarding well, continuous pricing, but also mix on many occasions helping you?

So just to understand the question, are you assuming that volumes will be good in the next 12 months? Is that what you're assuming in the question?

Well, if we get an upturn, so for example, I mean, I'm not pointing out that you said things are looking up now in demolition and that this should be extrapolated. I'm not saying that. But if we say that volumes start to improve on a kind of more longer-term level, that it's not going to be just one quarter here and there, that volumes actually begin to improve. How positively affected could we be from that kind of just volume uptick?

I think the quick answer to that question, of course, is the volume goes up, then you have some positive operational leverage effect on that. But on the other hand, if you look at how we manage to keep margins very strong in the quite weaker market conditions, that maybe is also an indication that we are quite good in handling variations around that. But obviously, the theoretical answer would be that if we get more volume, we should get some benefit out of that. But we'll see. We don't know if we'll get more volume in the next 12 months. That's a big unknown.

Yeah. And it wouldn't be a kind of adverse effect that the most volume-sensitive parts have a negative mix associated with them, for example. You

mean a mix of… To be honest, the last… Okay, now I understand your question, Carl. The last two years, it's been a little bit weak across the board in demolition tools. You can always have that impact, obviously. Let's say we started growing a little bit more in the slightly lower margin part that could have an impact. But we have not… Maybe it could be some effect around that. Maybe that's also a little bit what helped us the last two years, we had a little bit more stability in the high margin. So that's a good part. That can also come into play. But I was more referring to volume across the board if you get operational leverage effect that of course will help us out. But you know, there can of course be some factor around that. But it's very difficult to know. I think in general, all areas in demolition tools saw a weaker market condition in the last two years. Then it can be slight variation in between and timing effects of different quarters, et cetera. But if you measure it over a two-year period, it's been pretty much across the board. All

right.

Thank you for that. Of course, if you take maybe the attachment tool bases, they are more only exposed to infrastructure demolition and construction related, whereas some of our machinery products are of course exposed also to that, but maybe also to some industrial sectors and other sectors, which maybe didn't fall as much. So yeah, fair point. You could make some theoretical analysis around it. It's very difficult to know exactly how the market conditions play out at any given point in time.

Yeah. Understandable. Thank you for that. Okay.

Thanks. More questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much for listening and for the questions. And I wish everyone a good Friday. Thank you.