Midsona AB (publ)

Welcome to Midsona Q2 Report 2026 presentation. During the Q&A session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to the speakers, President and CEO Henrik Hjalmarsson and CFO Niklas Lundin. Please go ahead.

Good morning everybody and welcome to this presentation of Midsona's second quarter and first half year results. My name is Henrik Hjalmarsson. I am the president and CEO and with me I have Niklas Lundin, CFO. We're going to spend the coming 20-25 minutes with me going through an overview of the second quarter and first half year and Niklas then going through a bit more of the details. And after this, as usual, there will be plenty of time for questions. But starting with a brief introduction to us for those of you who might be new to us. So we are a European natural and healthy food group. Roughly 3.6 billion SEK revenue last year in seven geographies in Europe, roughly 700 employees and 50 own brands. We're well positioned in categories with structurally growing demand, driven by an increasing interest in health and sustainability, with a good combination of strong local brands, as well as a stable European platform with scalable European brands. And we have a vision to become a leading European player within natural and healthy food. First, I thought I'd start with an overview of the second quarter, starting here in the top left hand box on the right hand side with sales. So sales grew by 5 million SEK to 870 million SEK, an organic decline of 1.2%. The organic decline is driven mainly by contract manufacturing and as a result of the fire in our Spanish operation at the start of the third quarter last year, as well as in general more selective contract manufacturing activities. Very importantly, we saw an accelerated growth of our own consumer brands that grew by 2.3% organically in the quarter. proving that the strategy that we've set is paying off and the fourth consecutive quarter of organic growth on our own consumer brands. If we then go to the bottom left-hand side and look at our gross margin, we saw a continued gross margin improvement with our own consumer brands growth driving a positive mix that is driving a 1.2 percentage point increase of gross margin. In combination then with the cost saving program giving impact in terms of lower overheads, however, partially offset by very important increased investments in marketing for long-term profitable growth, we saw an improved EBIT by 16 million to 20 million SEK, as well as an improved EBIT margin by 1.6 percentage points to 2.3%. In the quarter, cash flow strengthened by 17 million to 22 million SEK, despite the negative impact from the takeover of the inventory connected to the Resenta brand that we took over from the 1st of June, which meant that we closed the quarter with a net debt to adjusted EBITDA of one flat, a considerable improvement versus last year, leaving us with a strong balance sheet, both in terms of the resilience, but also to be able to capitalize on strategic opportunities. Jumping then to a summary of the first half year, the storyline is pretty much the same. Again, a slight negative organic sales development of minus 1.2%, but also again driven by a conscious decline in contract manufacturing, as well as an impact from the fire in the Spanish operation. As I mentioned, the organic growth of our own consumer brands accelerated in the second quarter means that we've got a 1.2% organic growth of own consumer brands in the first half year, offsetting then some of the decline on mainly contract manufacturing. Gross margin in growth by 1.1 percentage point, again driven by mix production efficiency and good price management. And then in combination with a cost saving program delivering an improvement in EBIT of 24 million to 65 million SEK and an improvement in EBIT margin of 1.4 percentage points to 3.7%. Cash flow improved by 16 million to 56 million, positively impacted by the insurance settlement in Spain in the first quarter and negatively impacted by the acquisition of the Resenta inventory here during the second quarter. If we look then a bit at the highlights by division, starting with division Nordics. So in Nordics, we saw an organic sales growth of half a percent with the own consumer brands in healthy growth, partially then as a spillover from the first quarter where we saw slightly less growth on the own consumer brands, partially linked then to the shift of a launch window from the first to the second quarter. Gross margin strengthening in the Nordics by 0.7 percentage points, driven by mix, but also a healthy continued production and logistics efficiency. And in combination, that means that we saw a considerably improved EBIT margin, then fueled by the gross margin improvement, as well as cost saving. But as I mentioned before, partially then offset by conscious investments in marketing activities to drive our long-term profitable growth. Looking then at Division North, we saw a weak sales quarter with an organic sales development of 3.7% negative, mainly then driven by our own consumer brands in the quarter. POSITIVELY, OUR OWN BUSINESS-TO-BUSINESS BRANDS TRANSITION CONTINUED WELL, WITH THE SALES STABILIZING AND PROFITABILITY CONTINUING TO IMPROVE, AND THE GROSS MARGIN IMPROVED IN THE QUARTER DESPITE A SLIGHTLY NEGATIVE SEGMENT MIX THEN, DRIVEN BY THE WEAKER DEVELOPMENT OF OUR OWN CONSUMER BRANDS, BUT MAINLY DRIVEN BY THE IMPROVEMENTS IN PRODUCTION AND LOGISTICS EFFICIENCE. Looking at the Vision South, we saw an organic sales decline of 7%, driven by the lower contract manufacturing activities in Spain, which is completely linked to the fire that we saw at the start of the third quarter last year. Pleasingly, our own consumer brands grew by 6.6% with a continued strong growth in French grocery trade. And we also saw a materially improved gross margin driven by a continued efficiency improvements as well as a more positive sales and segment mix. If we look then instead at the portfolio by product groups, starting with the organic products, we saw a total organic sales development of the organic assortment of minus 1%, driven then mainly by contract manufacturing, and again, to a not insignificant degree, linked to the fire in the Spanish business. Our own organic brands continued in growth, albeit Division North in the court of them being the negative exception. but in general showing that the marketing and innovation activities that we put in place across the group is delivering both organic growth but also improved profitability. And despite that growth, as I mentioned, not sufficient to offset the development on contract manufacturing then linked to the fire in Spain. Looking at health foods, we saw an organic growth of 3% driven by the larger brands. This is partially then a recovery after a week of first quarter. And as we mentioned in the report for the first quarter, partially then linked to the shift of a launch window. But the growth that we see is a clear link to the strategy that we set and the investments we're doing in growth, both in terms of innovation, as well as in marketing, such as for Friggs, which I'll come back to in a little bit. And contract manufacturing in continued decline on the health food side, but a very conscious result of a more selective approach as we optimize for profit. And then lastly, on the consumer health side, a sales decline of 9% organically, so a fairly weak sales quarter, mainly linked to a weak seasonal performance on a number of seasonal products earlier in the quarter. more linked to the back end of the flu season and later in the quarter, partially also linked to a weak start to the mosquito season. We also have pockets of conscious optimization for profit in the consumer health product portfolio, which is partially impacting the top line performance. And linking them to portfolio, a slight follow up on an example that I mentioned during the first quarter presentation, which is the launch of protein cakes under the Friggs brand. So a new range capitalizing on a strong protein trend, one of the fastest growing trends in the market, offering a natural and protein rich product with 23% protein based on lentils and peas. This has been rolled out during the second quarter with very positive receipts, both on the customer side as well on the consumer side. And as we can see here on the top right hand side, a healthy growth in the quarter supporting clearly our overall own consumer brands growth in the quarter. And we've also supported this quite materially in terms of marketing activities, both supporting the launch as such, but also driving the long term brand equity of the Friggs brand. A few words on the gross margin development in the second quarter, starting with or first of all, very pleasingly seeing that we've got a gross margin growth in all three divisions, starting with the Nordics, as I mentioned partially before. So an improved product mix with a higher share of own consumer brands And then in combination with good net price management is sufficient both to offset the slight negative impact that we've seen on transportation and partially on packaging as a result of the development in the Middle East and the impact that has had on energy prices. But overall also supported by a continued healthy production and logistics exhibition. Division North then, not as positive with an 0.3 percentage point growth, partially then as a result of a negative sales mix with a weaker development on our own consumer brands. But the expansion is then supported by continued improved production and logistics efficiency, as well as a continued improvement of the B2B business in terms of strengthened margins. And then lastly Division South with a considerable improvement in gross margin with a material positive impact from sales mix with a decline in contract manufacturing activity and healthy growth on our own consumer brands. And this substantial positive mix impact is sufficient to also offset a somewhat weaker production logistics efficiency as we're continuously scaling up capacity to meet the demand. I thought I'd take the opportunity to also briefly link the performance of the quarter back to our strategy and the three strategic levers for value creation. The first one being then to invest behind selective power brands where we're prioritizing investments behind selective brands where we see the biggest potential and in order to strengthen the brand's competitiveness and long-term profitable growth. And one clear example here in the quarter is the progress we're making on the Frigg's brand with the launch of the protein cakes but also the marketing investments we're driving and where we're also seeing a clear payoff in terms of a healthy growth. We're also continuing to leverage our strong local positions with good progress on our local organic brands, strengthening growth as well as profitability in the quarter, then Division North being the one exception. And lastly, cost and capital efficiency, where I've already several times mentioned improved production and logistics efficiency as one driver of the across the board improvement of our gross margin in the quarter. And I think looking at this in a slightly longer perspective, it's positive to see, looking here over the past few years, starting with the organic growth on our own consumer brands, where we're targeting a growth of about 5%, that whilst we clearly have some work to do, we have made material progress over the past years, going from a negative 3.3% organic growth rate in an annual pace to a positive 2.2%. And doing the same comparison on our EBIT margin, we've taken that over the same period from 0.8% to 4.4%. And while doing this, strengthened our cash flows and considerably strengthened our balance sheet. And as I mentioned before, now at a net debt to adjusted EBITDA leverage of 1.0%. So, made some clear progress towards our targets whilst obviously recognizing that we have some work ahead of us to continue to deliver those improvements to meet the targets that we have set. And then very briefly, our short-term priorities for the quarter to come, very much in line with what we saw for this quarter, in the sense of continuing to ensure the focused implementation of our strategy to accelerate profitable growth, investing behind our strongest brands, leveraging our strong local positions. Secondly then, more technically leveraging the growth momentum that we have on our own consumer brands, now four quarters in a row, and showing healthy own brand growth here in the quarter. So continuing that to take both innovation and marketing initiatives to fuel that continued growth. And lastly, getting the final pieces of the puzzle in place in terms of the long-term profitable growth plan for the Spanish business. With that, I'm going to hand over to Niklas, who is going to take you through the finances in a bit more detail. Niklas, please.

Thank you so much, Henrik. And hello, everyone. Let me start with a financial summary for the quarter. Net sales was up by 5 million SEK, including recent impact of 11 million SEK. And adjusting for currency impact, the total organic growth rate came in at minus 1.2%. And in line with Henrik's earlier comments, gross margin developed well during quarter two in all our divisions. Total gross margin improved by 1.2 percentage points and was positively impacted by improved efficiency, price increases, and a good sales mix, where our own consumer brands developed well. In consequence, EBIT improved by 1.8 percentage points equivalent to 16 million SEK. And apart from increased gross margin, we saw a positive impact on EBIT from the cost reduction activities initiated in 2025. This was, however, partly offset by increased sales and marketing initiatives. Net financing costs continue to improve versus last year, this quarter with 5 million SEK, driven by the more favorable conditions in the new financing agreement, as well as lower indebtedness. Net result landed on 12 million SEK, including an additional 4 million SEK in costs related to the factory fire in Spain, classified as items affecting comparability. Moving on to cash flow from operating activities. It came in at 22 million SEK and although negatively impacted by continued seasonal build-up of inventory, as well as a one-time effect related to acquisition of Resenta finished goods, this was an improvement of 17 million SEK compared to last year. As Henrik mentioned earlier, the quarter ended with a leverage of 1.0, a substantial improvement versus last year. Now moving over to the sales development for the quarter. And as already mentioned, net sales increased by 5 million SEK equivalent to 0.5%. Structural growth from Resenta explains 11 million SEK and FX translation an additional 3 million SEK. So the organic sales development was negative with minus 10 million SEK equivalent to minus 1.2%. And now let's shift focus to the right hand side of the slide and onto the graph. And although overall negative organic growth, we were glad to see the increasingly good traction of our own consumer brands showing organic growth of 2.3% in the quarter with a larger prioritized brands as top performers. And as Henrik previously mentioned, On a rolling 12-month basis, organic growth of our consumer brands has improved by 4 percentage points versus Q2 last year. The business-to-business branded business in Germany is still under transition to focus on profit over volumes. And in Q2, new, more profitable contracts replaced old contracts with less profitability, leading to net sales in line with last year with continued positive effects on margin. Licensed business declined by 1.7%, mainly referable to certain consumer health brands in the Nordics. And finally, our contract manufacturing business showed a decline in all our divisions, mainly related to discontinued less profitable contracts within the Nordics, as well as effects from the fire in Spain in July last year. So let's head over to the quarterly EBIT development compared to last year. Lower volumes resulted in 1 million SEK less contribution, but this was offset by a clearly higher gross margin of 1.2 percentage points, improving profit by 14 million SEK. This improvement, including the impact of Resenta, which was in line with expectations, was driven by lower staff costs, improved efficiency, less scrap, pricing and a good sales mix. Sales, marketing and administration expenses were down a further 1 million SEK net, including recent impact, also in line with expectations. We now see the full effect of our cost reduction program from 2025 This positive impact was, however, largely offset by increased investments in direct sales and marketing activities in order to facilitate future profitable growth. The FX effect from translation and revaluation was 2 million SEK compared to last year. And to conclude, EBIT landed on 20 million SEK with a 2.3% margin an improvement of 1.8 percentage points or 16 million SEK versus last year. And on the right hand side, we illustrate the quarterly and the rolling 12 EBIT development during the last two years. And it's encouraging to see the gradual improvement, the rolling 12 EBIT increasing to 157 million SEK by this quarter end, which is 48 million SEK higher than by the end of June last year. and consequently rolling 12 EBIT margin has improved from 3.0% to 4.4%. Let's continue to the quarterly cash flow. And in Q2, we saw continued buildup of inventory, which is partly seasonal. Inventory levels were also impacted by purchase of finished goods related to the recent acquisition. Accounts receivables came down to more normal levels after the payment delays we experienced in Q1. However, this positive working capital impact was partly offset by a decrease in payables. And to summarize, operating cash flow landed at 22 million SEK, an improvement by 70 million SEK compared to last year. And the right hand side graph illustrates the cash flow trend displaying an increase of rolling 12 operating cash flow by 65 million SEK compared to Q2 2025 to 245 million SEK. So we're approaching the end of the financial review summarizing our cash and debt situation. The quarter ended with 745 million SEK in available cash. And worth mentioning versus Q1 is that Q2 cash wise has been impacted by dividend, 32 million SEK, as well as the first payments related to the recent acquisition, 42 million SEK. Available cash represents 21% of the last 12 months sales, which is a very healthy level, continuous. Right hand side net debt increased to 317 million SEK, including the IFRS 16 related debt of 101 million SEK. This means a continued historically low net debt in relation to adjusted EBITDA, including resenta pro forma effect of 1.0 times. The current leverage is well within our financial target, establishing our strong financial position going forward. And that rounds off the financial review. So back to you, Henrik.

Okay. Thank you very much, Niklas. And with that, we will open up for questions. Operator, please.

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 Alice Beer from ABG Sundahl Collier. Please go ahead.

Hi, good morning, Jens Mell. Just starting off, could you quantify how much the shift in the launch window in the Swedish market affected sales? Just trying to get a better understanding of the underlying developments in consumer brands, excluding this time effect. Thank you.

In all fairness, it's very hard to isolate that effect, particularly with the dynamics going on in the market and also the investments we're making for growth. So we'd be guesstimating a bit too much to be comfortable giving a real number. It is an impact and we are seeing that in the strengthening of the consumer brands growth. But another way to phrase it is that we We don't see that as the only reason behind the strengthening of the growth on own consumer brands from Q1 to Q2. So that shift does not explain the full strengthening. But we also see a general positive momentum, but hard to give an exact number.

Okay, fair. Moving on then on the marketing spend, selling expenses rose in Q2 behind priority brands are described as gradually driving sales. What's the expected marketing spend run rate for H2 and what organic growth rate do you expect that investments will start paying back at the EBIT line rather than just in the gross margin?

To answer the second question first, we do expect a continued positive development of the growth of our own consumer brands and that the marketing spend is part of that. We don't expect, in terms of group profitability, we don't expect a material increase versus the levels that we've seen in Q2. So at about the level or slightly even below the relative level that we saw in Q2, which is slightly higher than the level we saw in Q1 is what we're expecting going forward.

Okay, thank you. And then on the North Europe was rather soft on consumer brands. and you blame this on changes, partly on changes in promotional campaign patterns. Is this a timing issue that reverses in Q3, Q4 or a reset in promotional intensity that sort of lowers the run weight for the rest of the year?

I think that there are three impacts. One is that the early and quite severe heat wave that we saw, we typically see those in continental Europe, but we typically see them in July and August rather than June. That had a slight negative impact on consumer behavior. We did see an overall slightly lower promotional pressure, and then we saw a promotional timing shift. But that effect actually was slightly positive in Q1, so we don't see that material reversing in Q3 and Q4. We obviously expect the momentum of the brand performance to improve, but we're not expecting a material impact reversal over promotion timing.

Okay. Perfect, moving on to Risanta then. The Risanta product equipment handover is set for autumn 2026. What are the expected one-off costs or disruptions to Nordic margins during that integration window and does the 130 million annual sales guidance for Risanta assume any cross-selling into existing distribution or is this a standalone run rate?

To answer the second question, first, the 130 million assumes fairly limited cross-selling, or basically no, to be fair, so it's pretty much a run-rate business performance. We do expect a longer-term opportunity or upside on that, but not to be materialized this year, given that the focus will be on a robust integration, including the supply chain side. There will be some one-off costs related to Resenta and the move in quarters three and four, which is whilst we expect the basis of the business case that we also shared at the timing of the press release, i.e. a run rate sale of roughly 130 million and a gross margin slightly below our average level. We do expect that to convert into a positive EBIT contribution for the rest of the year, but a positive EBIT contribution on a slightly lower level that we'll see in average during next year because some one-off costs. But we do still expect a positive EBIT contribution for the rest of the year.

Okay, and then just a final question for me, or really two questions in one, but looking at the contract manufacturing, first, is there more of this sort of pruning still to come, or has the book already been cleaned up to the point where sales should stop declining? And then secondly, what does done look like? I mean, once the low-margin contracts are done, does contract manufacturing settle as a smaller but stable part of the business? Will it start growing again, or will it just keep shrinking as a structural trend?

Good question. I think what we should remember in terms of the contract manufacturing is that the majority of decline we've seen on contract manufacturing actually relates to the fire in Spain. And that effect will obviously phase out during the third quarter as the fire occurred at the very start of the third quarter last year. When it comes to the pruning work that's been going on, our expectation is that the majority of that has been done. The biggest impact of that has actually been in the Nordics, and the biggest impact has been on the health food side in the Nordics. We are optimizing capacity, I would say, particularly in Division South. So there could be some pruning or optimization left to do, but the majority of that has already been done. So what we'll see here during the third quarter and definitely fourth is that the effect from the Spanish fire will be phased out and we have done the majority of the pruning that we're expected to do, at least for this phase. I think the next step will be if we need to release or not if but when we need to release further capacity to allow for the consumer brands growth.

Okay, great. Thank you. That's it for me.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. Thank you very much for listening in, everybody. And we wish you all a fantastic summer.