Lifco AB (publ)

Thank you and good morning and welcome everyone to the Q4 2025 earnings call for LIFCO. We will start with the overall summary on page number two in our presentation. And we can start looking at the quarterly numbers where we can conclude that LIFCO Group then had a sales growth of 6%, of which organic growth was 4%. Acquisition growth 7%. And then we had, like many others in this quarter, a negative exchange rate effect. In our case, the negative effect was 5% on sales in the quarter. If we go further down, we had an EBITDA growth of 5%, net profit growth of 7%. And in this quarter, we had a strong growth in operating cash flow with an increase of 23%, thanks to our increased results and also some release of working capital. and earnings per share grow in the quarter with 7%. If we then look at the right-hand side of the graph and take the full year figures, we had a sales growth of 8% in 25, of which organic growth was 4% growth, acquisition contributed with 7%, and we had for the full year a negative exchange rate effect of 4%. EBITDA grew for the whole year with 7%, And net profit growth was 10%. And also for the full year, we had a solid operating cash flow of growing 11%. And our earnings per share grew for the full year numbers with 10%. And I'd also like to just highlight that the LIFCO board has proposed a dividend of 2.7 Swedish kronor per share, which is an increase of last year's 2.4 Swedish kronor per share. And this, of course, a proposal that will be finalized as a decision on the annual meeting. If we then go further to page number three in our investor presentation, we can have a little more deeper look at the different business areas. And if we start down with dental, we had overall a stable underlying organic development during the full year 2025. And also in the last quarter, the same pattern. And for the full year, sorry, both in the quarter, especially, and also for the full year, we had negative effects from currency, which then overall led to a moderate increase in profits of 2% for the full year numbers and 1% in the quarter. So quite stable underlying development in this area. In demolition tools, we have during the whole 2025 seen a slightly improving market conditions with some organic growth. And this is unfolding quite difficult year in 2034 when the markets were very weak in most part of the demolition tools area. The organic growth continued also in the last quarter, but was offset by even more negative exchange rate effects. when we translate our numbers into Swedish kronor. And during the Q4, the margin in demo tubes was slightly lower than previous year due to some product mix effect. But I would also like to highlight that we had the opposite situation in Q3. And this is an area where we have and have always had some volatility in margin between different quarters, depending on what products are taking a bigger share of the total in the area. For the full year in 2035, Demolition II scrolled the EBITDA with 9%, despite quite strong negative foreign exchange effects, and the margin for the full year period increased with one percentage point. If we then go further down and look at our system solutions area, we have now mentioned throughout the year that it's been a somewhat challenging year for many parts of system solutions. especially in the transportation products and special products area. They have actually faced more difficult market conditions compared to previous years. And the lower sales volumes in parts of these areas led to slightly lower EBITDA margins. If we don't talk a little bit about other areas, infrastructure products saw some improvements in 2025, both for the full year and in the quarter. And that's thanks to the same trend that we saw with demolition tools, that's slightly improving construction markets and infrastructure markets, making this area coming back organically. Environmental products had a stable development through 2025. And as you all know, contract manufacturing had very strong growth in the first nine months and more stable development in the last quarter of 2025. And during the last quarter, Syrsa Solutions improved EBITDA with 10%, also here negative foreign exchange but also of course helped by a number of acquisitions that contributed to this growth and margin was slightly lower than previous year due to also here we have some negative product mix effects that areas with slightly lower mortgage is having a better organic development in this area so if we go further to page number four we can then take a little bit of a step back and take a look at the longer perspective on LIFCO. But before we do that, we can then also give some information on how the EBITDA growth for LIFCO in 2025 was split. We had another year with strong contribution from acquisitions of 10% in 2025. And as you can see here, we had flat organic EBITDA development throughout the year. And this is then mainly due to the weak market conditions in parts of CISO solutions that has led to lower sales volumes and then shrinking organic profits in some parts of this. And then foreign exchange had a negative impact of 3% for the full year on the beta level. If we then look at the longer time period of this growth, we can then conclude that for the last 11 years, we have had an average growth from acquisitions of 12% per year average organic EBITDA growth has been six percent and I think now we have also had a couple of years with tougher market conditions so even with those years including that in the data we are able to grow on average six percent per year throughout the last 11 years and if we go further down on this slide you can see then also the split of the average organic EBITDA growth on different business areas dental Quite stable development with 1% growth on average per year. Demolition tools having a higher growth of 9% per year, and systems solutions then have had an average 11% organic growth over the last 11 years. And then we can go further into page number five, also a long-term perspective graph. And here we can just see that LIFCO has grown the beta, and now we're talking about CAGRs, compounded average growth rates, of 18%. from 2015 to 25. Earnings per share has grown 16%. Our net debt has actually been lower than at the time of the IPO. So we're now sitting at 1.1 interest-bearing net debt to EBITDA. We had a strong growth in operating cash flow, and also we've been growing our dividends with around 70% CAGR. Also on this slide, we also list how much we've spent on acquisitions in the years. And also on the bottom of this slide, you can see basically what we paid equivalent to the 100% ownership of the companies that we've taken in every year. And also the estimated profit impact of the companies that we have acquired in each and every year. And if you look into details of there, you can see that we continue to have, we're adding high margin, strong companies, and we're able to our, very hard work and very diversified screening of companies all around Europe to find very high quality companies at fairly reasonable valuations. If we then go further down to page number six, which is maybe the most important part if you take a long-term perspective, short-term cash flow is of course a volatile measurement. It can vary between months and quarters. And if you take a very long-term perspective, cash flow is the best way of measuring the underlying performance of a company, and especially when you measure it on the cash flow per share. And just to clear the data we have here, in this slide, we are looking at the free cash flow per share after CapEx and after all interest payment taxes, et cetera. And the only thing we don't include is dividends and acquisitions that we view as more decisions on the board level and annual meeting levels. So if you look at that measurement, we have actually grown cash flow per share with 22% CAGR since LIFCO was listed, which basically means nine times higher cash flow per share than back to 2014. So very strong development here. But this is also a fundamental part of why we're able to continue to grow LIFCO from acquisitions without stretching our balance sheets. If we then go further down to page number seven, we can also see on the more graphical level that our net debt GBT ratios are very stable. Basically, it means that we are using our free cash flow in a stable way to pay dividends and also make acquisitions. We have total net debt, including IFRS and our option debt for future payments. It's 1.7. It's down from one year ago. And the interest bearing net depth EBITDA is 1.1 times, which is also down from one year ago, despite all the acquisitions that we carried out in this year. And this obviously means that we still have plenty of room to continue our growth journey, both organically and from acquisitions. And I would also like to highlight that our M&A capacity is continuously increasing. We take every year some steps to develop this, and we did also very good development in our capacity in 2025. And then we can go all the way down to page number 33, where we just look at the acquisitions that we carried out in 25. And in total, we announced 17 acquisitions with a total estimated sales level of 2.2 billion Swedish krona in combined turnover. And once again, we have acquired in 25 acquisitions. a very good collection of companies. They have high margin, super niche, super specialized and strong positions in their respective niches. And I also like to highlight, and this is not new for 25, but in general, when we acquire these super niche, strong market companies, we also get very strong profit-oriented company cultures. So we're very happy to welcome these companies into the culture that's matching with Go in a very good way. So that's all from me, and then I'd like to open up for any questions. Thank you.

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 Lodea. A couple of questions from my side. Firstly, looking at the other operating income and expenses in the quarter, 60 million, that is seemingly the highest level ever, I think. What is behind that, do you say?

Hello, Carl. Good morning. You're right. We have not had that situation before, and we can be transparent. This comes from a fire in one of our subsidiaries that we had some time ago, where we had had extra costs, obviously, relating to moving the company and setting the production up. And with that, we have taken part of the insurance money that we received and put that as an operating income. other operating cases. For the full year 2025, this has not been any positive effect on the country. We've been a bit conservative in our bookies. Do you expect more to come? There could be some more, slight more coming in as we took a conservative approach around the full clearance of the insurance case.

Okay, that is very clear.

Sorry, the majority is 25 issue, yes.

Okay, and then it's Q1, if anything.

Difficult to say. But the way to look at this, if you want to be very detail-oriented around this topic, is that you can say part of the problems we had in our profit in this company was partly offset by this under-operating. Okay.

Okay, that is very clear. On demolition, you touched a little bit upon the mix and the margin in the quarter. It surprised me a little bit at least. Obviously, we've seen volatility before. Is it solely the mix you're referring to as less special machinery sold? or is it any other mixes and also on that note have you seen anything related to pricing that could also be one effect on the margin side?

So when we look you know it's relating to the mix and you refer I mean so when we say more sell more super niche machinery products we obviously have slightly higher margin compared to some of the other parts in this and we had So you can basically draw the conclusion that we had a slightly higher part of that in Q3 and slightly lower in Q4. And if you look at individual entities, we are strong in pricing. So it's not that that's the effect here.

And on the mix side, is it a mix you see in the quarter that could be sustainable over more quarters ahead?

is it more of a temporary as we've seen before lift goes selling a few less machinery of a certain uh a certain niche i you know i think you know if you look at the full year numbers we've increasing our margins if you look at q3 we had very strong margins compared to species and now we have a little bit the opposite effect in q4 so i think it's way too early to draw in a major conclusion around this and i think we've seen this over to over If you go back over the last 10 years, we have this, you know, one percentage point more than difference between quarter is, I would say, quite normal in this area. It's on a high level. And we have to look at a little bit longer time periods here to draw more conclusions. For sure. The main message for this area is that we saw some comeback in 2025. We're not on booming levels. It's not a heyday that we're seeing at all, but it's coming back from quite a depressed situation in 2024. Okay.

Okay, very clear. And the final one, if I may, is on contract manufacturing. Sorry for bringing that up. I know that you're not super willing to talk too deep in the bias of subsidiary or sub-segment. But entering Q1, I think comps will be even tougher to some extent. So should we see that you keep this level flat year-over-year? Should we see that also coming up in Q1 here as well? Or, I mean, how should we look at the volatility we've seen historically and also how you manage your procurement with the, I guess, budgets you have for that segment in order to minimize the risk of over procuring too little?

Well, as we talked about this a few times in the last 15 months here, and we had sort of a hiccup in Q2. In Q3, Q4, we've seen a more stable development. So that's where we stand right now, and that's what we can see right now. So based on that, you know, it looks stable. But as you know, this has changed quite quickly during Q2, so we have temporary slower development in Q2. But But all we can see now is that it's quite stable. And when it comes to the material, I think, you know, we have, you know, based on what happened in Q2, we have, you know, stepped up in many of our operations in being prepared for this. But, of course, if demand changes very quickly, it will have a short-term impact on maybe cash flow and that situation. But we managed that quite well. If you look at how we end up 25, you know, we have very strong cash flows in this part of the operations.

And as you view 2026 right now, did you see a quite flattish sequential development of this business, or is it cyclicality we should consider entering 2026 in this, I mean quarterly?

So if you take the first quarter in 2025, we had very strong development last year. But we also have now quite strong development during the fall, and we're matching our Q4 for 24 numbers quite well. So I think that's the best estimate. I can't give you any better estimate than following the trend that we're seeing right now. The visibility is maybe in theory quite longer, but in reality we saw in Q2 that we had to be very careful in predicting too far ahead in this area. But right now we see stability. So that's the best guess. 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. On dental wear, anything worth highlighting in terms of a similar question really on the other segments in terms of mix or anything like that on the margin then?

I think in general in dental we have maybe a should answer this question in a more long-term perspective. We have had now for a number of years an increasing trend where we are becoming more and more of a manufacturer, partly through acquisitions and partly also through the organic development of the companies we have. And I think we saw that trend also in 25, where we had slightly more difficulty in our distribution companies. They are becoming less and less important part of our profits in this area. And I think that's also the trend we saw in 25. And as I mentioned probably a year ago, hopefully we are now reaching a point where the sort of transition of Lifco Dental Group into a company with own products and own R&D and unique proprietary products is reaching a point where we can hopefully see some high growth in coming years. But it's too early to say whether that's in this year or it takes another year or so before we're at that point.

And then on the M&A side, the past, if I look at this correctly now, the past three years, the margin of acquired units has been even above 25 and in some cases even closer to 30. So I understand that is not on its own a focus area for you, but just how far can you go in terms of finding these very high margin companies and thereby have a clearly still margin accretive effect on the group?

Well, we don't really look at it like that. Our target is not to get margin accretive acquisition. Our target is to get really good companies that we can own forever and that are super specialized and they suit the model of having independence within the LIFCO group in a very entrepreneurial and decentralized manner. And we have learned over the last 20 years that companies with high, strong margins over many years and very specialized product offering is very suitable to gradually continue to develop within the LIFCO system. So that's why we probably end up having a higher appetite for those types of companies. But having said that, whether the companies have a margin of 22% or 30%, that's difficult to predict what it will be in the coming years. Because we can also accept companies with high margins and not super high margins. But we tend to really feel more safe about the corporate culture and especially the position of the company when we've seen a long history of high margins so that we don't only see great products, we also see very great institutions. So we will see. It's my normal answer to this. We cannot promise that they will always be creative. And I think maybe that's not so important. The important thing is how we increase our free cash flow per share. in a very good way and their high-model companies one way of doing that.

Yeah, sure. And my final one is just on the growth excluding currency and acquisitions inside systems. Is it without giving any direct number but would it be fair to assume that that number was positive during the second half?

I don't have six-month figures here in front of me, but I can say that it became better in the last quarter. But we're not, as I always say, we don't celebrate victory. You have to see some longer-term perspective, but it felt a little bit better in the second half or maybe in the last quarter. I don't have the specific six-month figures in front of me right now, but But the feeling we have, and I'm sure about the fourth quarter, it wasn't better. But it was a difficult year in 2025. But at least, if anything, it's a good – it's better to have a little bit better feeling in Q4. But it's a little bit too early to celebrate victory that the markets are coming back across the line.

Yeah, yeah. Always nice to be optimistic ahead of a full year. So, okay, that's all from my side. Thanks.

Thank you. The next question comes from Op Otani from Goldman Sachs. Please go ahead.

Hi, good morning, Per. Thanks for taking my question.

Maybe just to, do you mind sort of going into the other segments in system solutions, what you're seeing there, and maybe marginally on the other segments of contract manufacturing?

Excuse me, the line wasn't very good for me there. Can you please repeat that question?

Sorry. Could you hear me?

The line is not perfect, so please speak slowly so I can follow you.

Okay. I was just wondering, do you mind going into a bit of detail on the other businesses and system solutions other than contract manufacturing in terms of trends you're seeing there, and then maybe margin outlook and margin contribution from those businesses?

We don't communicate margins on these divisional levels, but I can give you a little bit of a flavor of how last year was overall. As I mentioned, we saw the strongest development obviously in contract manufacturing, which we've discussed in previous calls. Then we had a stable development in environmental products overall. Infrastructure products we saw, as I mentioned in the call here, we saw throughout the year a slight improvement from a relatively tough 24, and that is a little bit the same trend that you can see in demolition tools area, that 24 was a very difficult year for many construction and infrastructure exposed companies, and 25 then was slightly better. And then if you look at the more difficult areas, which was in transportation products, and special products. And there in transportation products, we saw a slight improvement, actually, from the week situation we had throughout the year in Q4, whereas in special products, it still was not, you know, we could see some weaker market conditions for some companies also in Q4. So that's basically the summary of the trend in those areas.

Okay. That's very clear. And just on margins, I think in sort of Q3, Q2, you kind of talked that sort of costs were maybe a bit too high in some business areas due to growth investments. When thinking of margins in Q4, sort of any margin improvement driven by sort of those coming out, some of those costs coming out, and sort of when we look at margins going forward, it best feels good to boost margins by sort of taking costs out as well.

Sorry, the line is not great, but can you please repeat that again? Sorry, I can't really hear you. You referred to something in Q2, Q3, which I couldn't really hear.

Apologies. Maybe just thinking of margins and cost out. We talked about costs were maybe a bit too high in certain parts of the business in H1. Is there still scope to take those costs out in H1 this year, or that was largely done in H2 last year?

So if you look at our cost reductions in LIFCO, they've been, you know, basically all our portfolio companies, they act when they see a change in market demand. So in 24, the majority of our cost reduction, of course, took place in the demolition tools area where we had very weak market situations. And they are now improving in 25. And then in solutions, obviously, we have companies then addressing the weakened market conditions throughout 2025, especially in transportation and special products. But having said that, some companies have very high margins and very little fixed costs, so they can do only so much to compensate in this. And others have, of course, more opportunity, where you can say, in general, the lower the margin, the more you have to address and more things you can do to fix it. But in LIFCO, we are built on a culture where we have very action-oriented managers, and we continuously... work very hard on the management level in LIFCO to ensure that we have that in all our companies. And they do a really good job in addressing the market situations locally. And that happens immediately. It's not the centralized steering project around it. So I think it was a highlight that I'm very happy about how different managers are executing this in LIFCO way. So it's not like we sit here with a plan and now LIFCO will do this and that. Instead, we see continuous things happening in our portfolio companies.

Okay, thanks very much for taking my questions.

Thank you. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Jakob Markin from Danske Bank. Please go ahead.

Hello, and good morning. Thank you for taking my question. Just a short one on the demand side. If you can help us to get some understanding of where you see, you know, demand picking up. As you spoke about, I mean, how do you see that in the different geographies, you know, North America versus Europe and the rest of the world, if you can help us, and especially maybe on the demolition and tools part and the infrastructure part?

Well, I think in demolition and tools, we've had now, of course, we are quite, in all our areas, quite exposed to Europe. Demolition tools, of course, are more global exposure than the others. And, yeah, in 2004, it was especially difficult, I think, in Europe. U.S. North America was holding up a bit better in 2004. 2025, we have a mixed picture when it comes to North America. We have some areas holding up quite well despite tariffs and the situation there, whereas others have seen more situation. We haven't really understood why this is, but it's still possible to go in North America in 2025 for some companies, but not so clear. In Europe, we saw a slight improvement. in 25 i think one of the more difficult markets maybe not so much related division tools but in general was uk during 2025 um and i can only go you know historical when i give i don't give any predictions about how the markets will go going forward but but it's been pretty much um yeah pretty similar for us around europe okay perfect thank you thank you

There are no 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 thank you for the questions, and I wish everyone a nice Friday. Thank you.