Lifco AB (publ)

Welcome to LIFCO Q2 Report for 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions-and-answer session, participants are able to ask questions by dialing pound 5 on their telephone keypad. Now I will hand the conference over to CEO Per Waldemarsen and CFO Therese Hoffman. Please go ahead.

Good morning and welcome to the LIFCO Q2 presentation. And we can start as always by going into page number two in our investor presentation. And if we look at the second quarter, we are presenting a solid quarter overall with a sales growth of 11%. And in this second quarter, we had organic growth of around 5%. Acquisition contributed with around 7%. and we had a slight negative minor effect from currencies. If we go further down, we grew the EBITDA with 14% and obviously margin increased them from 22.5% in last year's quarter to 23.1%, which is a combination of organic development and also some effect of higher modern acquisitions coming into the group. And also the profit for tax, net profit grew healthy with 18%. Operating cash flow with 14% and earnings per share also grew with 18%. If we look at the first six-month period, after a little bit weaker start to the year, we grow in the first six months now with a stronger second quarter with 7%. EBITDA in sales. EBITDA grow with 10%. I can also go back and just mention the 7% sales growth in the first six months. It's also a 3% organic development and 7% from acquisition and obviously a higher negative impact of 3% in the first six months. For the six months, we grow profit for tax and net profit with around 13%. With that, we can go into page number three, the following slide, and look into the different business areas. And just to remind everyone, this is now the first quarter where we have split it out to business areas. So we have environmental technology and transportation products, which have been previously subdivisions under the CSUS Solutions. They are now sort of separated out. And the CSUS Solutions that we refer to in this page is now the remaining parts of CISO solutions or the previous CISO solutions. But going back to the first area, dental, we are reporting also here solid numbers growing in the second quarter with 5% and profit growing with EBITDA growing with 10%, obviously higher margin here, which is a combination of higher margin acquisitions coming into play and also some continued effect of positive product mix that we saw in the first quarter. And positive product mix in this area typically means that our own manufacturers or own products are gradually taking a bigger share of the dental business area. Going back 15 years ago, we were only a distribution business. We still have those companies in the group, but we have gradually, slowly, over the last 15 years, step by step, went more into own proprietary products. If we go to the second area, demolition of tools, I would say the second quarter was overall quite stable. Sales grow with 2% and profit with 3%, so stable margins here. If you take the full, the first six months figures in demolition tools, after the first quarter we had for that period, a negative mixed effect, which we also comment in our report that the demolition robots had a more difficult market conditions, especially in the first quarter, which have an impact on our margins, slightly low margins for the first six months in demolition tools. But overall, the second quarter was quite stable and in line with previous years. If we then go into environmental technology, we have quite good organic growth. leading to improved net sales of 10% in the second quarter and the growth also translates into operational leverage and higher margins. So we grew the EBITDA with 17% in environmental technology. In transportation products, the next area, we have a combination of acquisitions that are contributing and also strong organic growth in the second quarter so we grow sales with 22% and profits or EBITDA in this case with 26% also with higher margins. And I'd like to make a general comment when it comes to many of our industrial companies they had in 2025 it was probably the most difficult years for the industrial side of LIFCO in the last at least since the IPO in 2014. And this first half year has been a little bit of a comeback situation, more to normality in 2026. It doesn't mean that everything is perfect, but the suffering we had in 2025 is at least now a bit better numbers and better situation for many of the companies in 2026. If we go to the last area, the system solution, is now remaining three divisions it's our contract manufacturing our infrastructure products and our special products here we had in the second quarter also a strong growth of 19 percent also growing profit more 23 percent growth in EBITDA which is a combination of acquisitions and also organic growth in the segment overall I would say in most areas quite stable and good development we can then go into page number four which is the following slide, and that's just a slide that we take very seriously because it's measuring the most important thing, our growth in cash flow per share. And once again, the way we measure cash flow per share in this is the cash flow after capex and taxes and interest and everything. The only thing that is not included is dividends to shareholders and payments for acquisitions. So it's the pure cash flow of the operations in our view. And since the IPO in 2014, we have grown the cash flow per share with around 20% CAGR, also improving slightly in this year. Of course, cash flow can vary quite heavily between quarters, and you have to look at this in a very long-term perspective. We can go in then to page number five and look a little bit more into our financial position. we have a stable situation. We actually have a lower net debt to EBITDA of 1.8 times EBITDA. It was 1.9 a year ago. And that's the net debt including all the option debt and also the leasing liabilities. If you look at the pure interest bearing net debt to EBITDA, it's also down from 1.3 last year to 1.2 this year. And this As I normally say, this also leads to plenty of room for further acquisition and we are, as always, continue to increase our capacity, our way of finding great companies in many different geographies and different sub-sectors and that work is continuing step by step. However, as I always say, the timing and how and when the acquisition materializes can vary and will vary within you know quarters and even six months period. So we continue and have many interesting discussions as always ongoing and the timing is always difficult to predict as we are extremely focused on buying really good companies for reasonable valuation. And with that we can move a bit further down to page number 13 which is a little bit lifting the high-level picture of LIFCO again. I just want to remind everyone how we work and also especially give a huge credit to the entire LIFCO team and all the great people that are working around LIFCO. This is a slide that we've had for many years describing how we work. Before we even get to this page, everything starts with selecting highly differentiated companies to acquire. that have a sustainable business model and very interesting subsectors that we believe can be interesting to develop over long periods of time in the future. And then the second point is that we have a very good team of senior, experienced former or current manager-directors in our subsidiaries. that gradually take the coordination role and the cultural leadership role in all our different subsidiaries that we have. And the job of these people is the most important job is to recruit and coach new MDs into each and every subsidiary. So we have a potential for very good growth of these highly differentiated companies. And then obviously we come into this slide and then we Number one is that we have to have very motivated managers and we work very hard to ensure we have that. And once we have them and the coaching has taken place, we let great people have a lot of responsibility in different subsidiaries. And we've seen over now several decades that they can lead to very good results, both in terms of growth and margins. The second point here is extremely important for us. As I mentioned, we focus on highly differentiated companies and we try to make them even more differentiated over time. we focus on customers and product areas where there is the potential for sustainable profit growth. And we also are willing to sacrifice situations where there is more competition or where we cannot be as special as we want to be. And there we sometimes shrink out of these segments and continue focusing on areas where we can make the biggest difference. And I like to emphasize how important this is. In a decentralized model like LIFCO, an industrial conglomerate like us, it's very, very important that we focus on areas where we can make a huge difference and not go into segments where volume is the only way to make models. And that's very important for us. And then we have a situation where we can have these decentralized models that really work efficiently and have very simple, efficient, and entrepreneurial companies. And we try to have in each and every company a very strong focus on sales, on product development, and assembly. and the people that are doing this job should be the shining stars in our model and not have a bureaucracy level in between. We try to outsource as much as we possibly can, which leads to an asset-light business group. Most of the companies we acquire, they're already outsourced from day one. If they have some insourcing, we try to, over decades, step by step, make them more efficient. The focus that that creates is very important because you can spend more time in the company developing new products that are better and more valuable for customers, you can also think more about how to do global safe expansion of the products that you have developed instead of focusing too much on what machinery that is going to be installed in the production. And then we have a very strong focus on cash flow. We have different measures to implement that and also incentives in the system for that. And maybe the last part, the most important, we are doing this as a multi-decade project. So we don't, even though we focus very much on the profits every month, We also invest time step by step in activities to create long-term growth in all our companies. So with that, I would like to open up for any questions. Thank you very much.

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 Opo Tani from Goldman Sachs. Please go ahead.

Hi, good morning, Per. Good morning, Teresa. Thanks for taking my question. Maybe three from my end. Firstly, on system solutions, at least based on how it was previously reported, it was quite solid across the three segments. Do you mind just sort of giving a bit more detail on what's driving that and maybe what's driving that in environmental technology and then the various subsegments? Secondly, on demolition and tools, organic growth seems to be sort of losing its edge. Could you kind of go through how that trend addresses expectations and sort of forward-looking outlook for the rest of the year? And then just lastly on mix, margins seems to be positively surprised. Could you just go through dental has had sort of positive mix for a few quarters now, so anything surprising there? And also maybe the same question for demolition and tools, just because Again, mixes a headwind to margins, so maybe any thoughts on that? Thank you very much.

Thank you. There were quite a number of questions, and I'm not sure I really got all of them, but I'll try my best. I think the first question was regarding system solutions. And I think for this quarter, it was pretty solid across the board. Maybe I could mention, I don't know if we specifically asked for it, there is a reason we didn't mention for the first time in quite a while anything about contract manufacturing because we had quite stable development over there and in this specific quarter when it comes to contract manufacturing we had actually quite good growth quite stable development in the areas that had you know strong growth since now almost two years so that was more of a normal quarter but other areas had quite good growth in this quarter and just to remind everyone this can vary between quarters depending on how deliveries play out and so forth. But in this quarter, it was pretty good across the board. The question around demolition tools, I think I can only repeat what we said in the last Q2. It's been overall, the demolition tools area peaked around 23 level and then had a very difficult 24. We saw somewhat of a comeback in 25 and then we had maybe a bit surprisingly to many observers, a bit weaker start in Q1 2026. In this quarter, I would say overall stable, but given the uncertainty in the global economy and especially the areas where we have more CapEx-related products, there's still a lot of uncertainty around those areas. So the machinery sales, for example, although this quarter was quite stable, It's still very difficult to predict what would happen there going forward. And then the last question was regarding mixed effects, if we go specifically into dental. I think in these first six months we have two things that come into play at the same time. We have done some super niche acquisitions in the recent 12 months that increase our margins. we see the general trend that we had for some time, that we have a little bit better development in our own product areas, in our own proprietary products. On top of that, maybe we haven't had any sort of negative surprises in the last six months that also helps. So I think these three things play together. And I guess the mixed effect was also referred to demolition tools. And I can only repeat, we have slightly higher margin in our machinery port if you compare to our attachment side. The attachment side has been more stable and developing, you know, a bit more positively the last six months and therefore we have over the first six months period a little bit of a negative mix effect where we have slightly, you know, slower development in our, you know, higher modern ports. In the second quarter it was more stable but for the first six months period. I don't know if I answered all the questions there, but maybe if you have any follow-up, please feel free to.

Largely, you largely did maybe just one follow-up on transport products. Growth there was 22%. I think you've done so in that segment in previous quarters, but sort of was driving quite strong organic growth there.

Well, I would say that last year, I had a general comment here early on that 2025 was the most difficult year in more than a decade for our industrial companies, including transportation products. And this year, we felt that the markets were a little bit more, you know, I wouldn't say maybe fully back to normal, but at least more friendly to us. In general, we feel that things are coming back across the board in this year. But keep in mind that last year was very, very difficult. And the reason maybe, just to be very clear, the reason things looked on the top line, maybe not as bad last year as it felt, was that we had this extra growth from contact manufacturing throughout most part of 2035 that made the numbers look a bit strange. But under the hood, there was a lot of difficult situations in 2035 in many of our industrial exposed companies. So these first six months have been a bit more valuable.

Great. Thanks very much. Thank you.

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

Thank you. Good morning. Follow up there on contract just to understand like if there's anything left, so to say, of those one or fewer larger contracts, for lack of better words, that was really supportive. I mean, have they now run through their course and now it's just another kind of leg up in general product deliveries and so on. I'm just trying to think about volatility and comparables.

I wouldn't really describe it like that. I think what happened it's actually now it started I think about two years ago the growth in contract manufacturing that was very high for a while. And now it's sort of stabilized, maybe not at the peak level that we saw in some, I can't remember exactly, it was nine or 12 months ago, but it's more stabilizing on higher level compared to how it was two years ago. SPECIFICALLY IN THIS QUARTER, AS I MENTIONED BEFORE, WE SAW QUITE STRONG GROWTH IN MANY OTHER AREAS IN CONTRACT MANUFACTURING AND MORE STABLE DEVELOPMENT COMPARED TO PREVIOUS YEAR IN THE AREAS THAT TOOK OFF TWO YEARS AGO. SO IT WAS A BIT DIFFERENT TYPE OF QUARTER. SO RIGHT NOW, YOU CAN SAY IT'S VERY DIFFICULT TO PREDICT, BUT RIGHT NOW WE SORT OF grinding along in the areas that took off two years ago and we'll see how that develops and other areas are now at least in this quarter had a strong momentum and we'll see how the future develops.

All right and my second question correct me if I'm wrong here but within environmental would it be fair to assume that the marine side of things is doing well and then the follow-up would be I know that you are very agnostic in terms of M&A but kind of just your view when you assess the marine market for M&A opportunities?

Well the short answer is that without going into too much specifics you know it was in general a solid quarter for the environmental area so they consist of quite different type of companies but we saw quite strong growth including the marine market but just to keep in mind the business we have in marine is a very much an aftermarket driven business so it's not an area that even though top line can vary but from a profit development is very much driven by a stable and continuous growth in aftermarket. So it's not coming only from one area, environmental products development. The more general increase in this corner.

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

Thank you very much.

The next question comes from Dan Hymer from SEB. Please go ahead.

Yes, good morning, Per. Just two follow-ups from my side. Maybe starting a bit on the comment you had about the industrial part of your business, just a little bit better first half here. I know a lot has happened throughout the quarter with your political uncertainty in the beginning of the quarter. Did you see an impact from that increased level of uncertainty in April and then later catch up in June or was it sort of even performance throughout the full quarter and quite limited impact from what's happening in the world?

Thank you. Difficult question to answer. I think you're right. There's a lot of geopolitical insecurity or instability but we sort of got used to that now the last I would say four years. I would say, maybe I should say it this way, these first six months have been a bit strange. I don't know if you've seen that in other countries, but I think the difference between months has been the biggest that I've ever seen in the last 20 years. And I cannot really make a good conclusion of that. So there's been intra-months, but it's not so clear that it has to do with geopolitical wars, et cetera, et cetera. I have a hard time making good conclusions. So probably you guys who are following many companies can help me better interpret what has happened in the first six months. But just to give a little bit of flavor, you know, it was, but I think it also has to do with the holiday shift in central Europe and so forth. But for example, this quarter, you know, April was okay. May was very weak and June was good. And we saw similar effects actually in the first quarter, it's a bit strange because you would argue that March in theory would have been a weak quarter given what happened in the Middle East in the beginning or late February, beginning of March. But I have a hard time making, you know, very good conclusions around this, but I can only mention that this is how it's been looking for us around this.

Yeah, fully understood. And maybe on the organic growth in the quarter of 5%, a bit of a catch-up from Q1. I know there's a little bit of different comps in Q1 and Q2, but still, in terms of pricing, are you pushing more price increases now when you have a little bit higher transportation costs and fueling prices, or is it sort of a good mix between volume and pricing in this quarter?

I mean, I think if you're referring to extraordinary price increases due to short-term price hikes in the value chain that takes normally a little bit of time in some companies but in general we are you know every year no no matter how the market is we we are inspiring and and we are ensuring that our companies are gradually you know adapting their pricing and developing better products with higher value for customers and stuff like that so it's a constant work in let's go I think the short-term impacts that could actually be you know a little bit take some time, but some companies can be, of course, very quick, depending on the situation, how you work with audiobooks and deliveries, et cetera. But I think in general, so far, it's more of a general grind that took place in this year. Sorry, Dan, but if you compare it to how things were when the inflation really peaked some years ago, then it was much more dramatic. Now, of course, we are also implementing some extraordinary price increases in specific sectors, the raw material has a more clear relevance for us. Other than that, we normally do our normal price adjustment as we go along.

Okay, very clear. Maybe just finishing on acquisitions you've done so far this year. Pipeline, is it at normal levels and you have a lot to work on going into the second half of the year? Can you just give a few words on that as well? Thank you.

Yes, we have a lot of things to work on. to the second half of the year. We are very quality oriented and we try to stay very disciplined. Sometimes you get a release and everything comes into play. Maybe you make five deals in one month and then suddenly you make only four or five deals in six months. So that can vary a lot. But if you go under the hood of what's going on, the activity level continues to be extremely high. and, of course, higher than ever as it grows every year. So we have more discussions than we ever had, but that's normal for us. We grow a little bit every year in how we look at things. But everything, all the scores have to be aligned to make a deal happen. So we have to continue to work very hard, and hopefully we get some more closings and transactions in the second half, but very difficult to predict. And we should not predict that. I think it's very dangerous to put targets or we should always be willing to walk away if we don't feel comfortable fully confident because when we buy a company we're going to keep it forever and it's a big obligation from our side but the short answer is yes we are very active in looking for new opportunities fully understood I think that was all from my side so thank you very much Per thank you

The next question comes from Gustav Bernebled from Nordia. Please go ahead.

Good morning, Per. It's Gustav here from Nordia. I thought maybe just to come back here to the contract manufacturing part of the business. Just wondering if you are experiencing any sort of worsening component shortage related to your business, particularly, I guess,

related to electronics parts or the EMS business if you can say anything regarding that and if you have seen any pre-orderings in the quarter as well I think we're quite into details there but yes I think there has been there is a component difficulties but we're quite used to that now in the recent history we had a situation like this coming quite frequently so yes that is the situation we are handling that quite well but in some areas you know we would like of course to have you know quicker deliveries and more supply but overall it's not the major problem on the LIFCO group level like this but in specific situations yes that can be a problem.

Okay perfect that's clear and then just to come back a bit to demolition and tools I mean it sounds like overall know H1 was a bit weaker particularly I guess Q1 but if you just look at the demolition robots are you seeing any trend shift in that market then maybe it sounds a bit better in Q2 as it sort of increased gradually during the quarter or rather stable throughout yeah I guess you could say first quarter was tough and it was a bit better in second quarter so yeah I think that's a short answer

But we're quite far away from a good momentum, especially when it comes to more construction related use of the machinery. So that has, if you compare to how things were three years ago, we're quite far off from that level. But that doesn't mean that we think that will come in next quarter or even the next six months. So we take it as always a very conservative approach on the future but long term we hope that one day things will be very good for this segment as well we just don't know when.

That's fair and just finally on the environment technology maybe you said this before sorry for that but just Just on the margin side, is there anything that's pushing margins up here? I think it's quite impressive. Or should we assume that this is a good reference point also going forward?

I think many of these companies, we have high margin companies with high margin on product sales and also some of them in aftermarket sales. But when you get organic decline, it's very difficult to protect margins and vice versa when you get some positive decline. organic development, it's quite easy to have an operational leverage normally. So that's, I think that's the simple explanation that, you know, we have, you know, we have organizations with, you know, product developers and Salesforce, et cetera, et cetera. And when we have, you know, better leverage on those organizations, we tend to get better margins. So that's what we saw in this quarter. Okay. That's very clear.

Thank you very much for taking my questions.

Thank you. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay. I'd like to thank everyone for dialing in and also for the good questions. And we look forward to continue developing LIFCO and see all of you in the next quarterly report in October. Thank you very much.