Netel Holding AB

Welcome to Natel 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 key 5 on their telephone keypad. Now I will hand the conference over to CEO and President Jeanette Ruderskild and CFO Frederick Hellenius. Please go ahead.

Good morning and welcome to our presentation of our second quarter's results. My name is Jeanette Reiterskjöld and I'm president and CEO of Netel. And with me, I have usually Fredrik Helene, our CFO. During today's presentation, I will start by running through the key developments in the second quarters, as well as information about announced intended merger with Infria. I will also give you a market update and highlights from our recent business wins in the quarter. And Fredrik will then, as usually, go through the financials in more detail before I make a short summary and we open up for questions. Netea's performance in the second quarter followed the normal seasonal pattern with increased product volumes and improved revenue compared with the first quarter. Net sales declined in both second quarter and year to date compared with prior year, while adjusted EBITDA and the adjusted EBITDA margin also decreased. In the second quarter, net sales amounted to 725 million compared with 775 million last year and adjusted EBITDA declined to 24 million from 39 million. Year-to-date, net sales amounted to 1.3 billion compared with 1.45 billion, while adjusted EBITDA decreased to 34 million from 61 million, corresponding to an adjusted EBITDA margin of 2.6% compared with 4.2%. Activity remains high, particularly within infraservices and power, supported by strong demand from investments in critical infrastructure. At the same time, Telecom continues to be affected by lower volumes, although a new customers and flexible business model help mitigate the impact. The order backlog amounts to 3.7 billion, including 1.2 billion to be completing this year and is characterized by good profitability. Together with our continued focus on efficiency, commercial discipline and selective growth, this provides a solid foundation for the second half of the year. We are continuing to deliver on our strategy of growing with both new and existing customers. An important success factor is that we operate across three segments, infraservices, power and telecom, which give us a broader market exposure, increased flexibility and more opportunities to meet our customers' needs. The proposed merger with Infria is an important strategic step that will strengthen the new combined company's position and create a new leading northern European infrastructure service company with an annual revenue of approximately 5 billion. Expected closing of the merger is scheduled for the fourth quarter, and until then, Nettel operates as a standalone company, and we maintain the outlook for growth and margin improvement for the full year 26. On the 15th June, the boards of Nettel and EFRIA jointly announced our intent to merge the companies with Nettel as the absorbing party. The merger will create a leading northern European company for infrastructure services with a total revenue, as I said, of around 5 billion and over 1,200 employees. This new group will also generate significant synergies and strategic advantages as the companies complement each other in terms of service offering and customer exposure, operating partly distinct geographical markets. We are strengthening our financial position since prior to the merger, the board of Natel intends to resolve on a fully secured rights issue of approximately 127 million and to propose an over allotment issue of up to 75 million, which will contribute to balance combined capital structure. The right issue is fully secured through subscription commitments with 78%, 99 million to existing shareholders and 22%, 28 million, to new investors being main shareholders of Infria. The new share issues by Natel and Infria's well-capitalized balance sheet will have to provide the new group a balanced capital structure. In summary, the proposed merger strengthens the new company to a strategic position by creating a broader, more diversified and financially resilient group. The combined company will have an improved product portfolio, complementary capabilities and a stronger geographic footprint, supporting both larger contract wins and a higher volume of smaller projects. In addition, expected cost synergies, increased scale and clear organization provide a solid foundation for improved profitability and a smooth integration with a strong employee proposition. In connection with the completion of the murder, I will hand over to Martin Reinholdsson, currently CEO of Infria, a CEO for the new group, while Fredrik Helenus will remain in his role as CFO. This merger gives a combined company with a strong foundation and creates a well-positioned company with the scale, capabilities and financial resilience to continue growing profitably. Our preliminary timetable for the merger forward is now in July, the merger prospectus will be published. And in August, we will conduct extraordinary general meetings of Netel and Infria. And we expect in the fourth quarter that this growth, the Swedish company's registration office, Bolagsverket, registers the merger. You can find complete information about the merger at our website and you see the link in the presentation. Now, I would like to present some new wins and market update under this quarter from each division to show example of how we deliver on our strategy. Infraservices is also following the seasonal pattern with increased product volumes in the quarter. At the same time, we are carrying out the restructuring regarding a subsidiary that was acquired 22, where we intend to finalize the projects and close the business. In parallel, we're building up a new region within Natel, InfraEast. Natel InfraEast has over the past six months built up an order backlog of approximately 75 million. Excluding the effects from the company being wound up, Infra Services shows good underlying profitability with an EBITDA margin of 4% in the quarter. The growth of nearly 18% in the quarter compared to last year is a clear effect of our competitiveness and our ability to deliver quality in our customers' projects. Last year, Infraservices worked purposefully with both cost adjustment and establishing central functions for risk management and product calculation, among other things. These features were put in place at the end of the year and have developed efficient internal processes. We are taking advantage of this now that we see a high and increasing activity in many attractive local markets. In the quarter, we have presented two new customers, Familjebostäder and Uppsala Skofastigheter. In the power segment, Norway continues to deliver strong growth, following an increase of 40% last year, with growth of 20% in the quarter and around 8% for the first half of the year. In Sweden, negotiations are also underway for many new and exciting projects. During the quarter, we launched several new products with customers such as E.ON, Elvia and Svedavia. The contract with Svedavia, a new customer for us, is for a product worth approximately 40 million. We have overall responsibility from the design phase through the completed construction, including the delivery and installation of high and low voltage switchgear, backup power solutions and several new power stations. This major assignment is a testament to our expertise and ability to deliver future proof solutions for critical products. Over the past year, Nutella has been building up a targeted industrial initiative in the power segment, both in Norway and Sweden. The initiative is being carried out in coordination between the Norwegian and the Swedish organizations and is intended to strengthen our position in customer segments where in the past our presence has been more limited. Through selective recruitments, we have brought in specialized expertise and market knowledge that allow us to offer a broader range of services to customers with comprehensive needs for electrification, capacity, and resilience. This initiative is targeted at such customers as industrial companies, defense-related operations, public sector entities, and other larger customers. This industrial initiative complements our established power business and enables a more diversified customer base, a stronger market position and improved conditions for long-term profitable growth. In telecom, we see clear effects of lower volumes in both mobile and fixed networks. The telecom market is undergoing a transformation whereby our traditional customers are moving from hardware installation to service and maintenance. This means that our customers are reducing their investments, which we have noted in all three of our geographic markets, with volumes and our profitability falling in a quarter. However, we can adapt to this declining volume more easily due to our flexible business model. with a high share of subcontracting in our telecom projects. We see a topline with reduced sales of 21% in the first half of the year. Our strategy to renew customers in the telecom segment is successful, and we have, for example, won contracts with the Swedish Transport Administration. and the property company Stångåsdaden during the second quarter. This work continues, but will not fully compensate this year for the declining volumes of our traditional customers. However, our flexible business model will help to reduce the impact of the volume loss. Our two larger new agreements with the Swedish Transport Administration are framework agreements and cover the design and construction of telecom mast and towers for the new European railway communication system. The agreements are three year with the possibility of extension until 2030 and an estimated value of just over 130 million by 2030. Both the design and the construction of the master towers are currently underway. So let's move on to our financial performance in more detail, Fredrik.

Perfect. Thank you, Conette. Good morning, everyone. For those of you that have been listening to our conference calls and read our previous reports, I guess that the seasonality in our business is likely viewed as a recurring theme, but certainly it is explaining very much about the expected progress between the quarters. The second quarter here added around 26% in comparison to the first three months of the year. And the net sales in the quarter decreased slightly on the year-on-year comparison and amounted to 725 million. With the now stronger NOC, we noted positive contributions from the FX. The contributors in general are the Infraservices Operations with an additional 30 million in the quarter and continuous growth from our Norwegian Power Business. The transformation in the telecom market, however, with operators providing significantly lower rollout volumes, continued to impact net sales negatively, as communicated, and the telecom division decreased sales for 22%, obviously impacting the overall top line for the group. The backlog amounts to 3.7 billion end of June, down slightly from last year and the previous quarter, however, including important additions with new clients. We have Svedavi and others as referred to by Jeanette. The backlog end of June implies a slightly lower order intake in the quarter, but during the year we have benefited from our strong contributors within power and especially in Norway. And as recently communicated, we have now also added important wins within both infra services and telecom during the second quarter, adding light on the necessary volumes to continuously support our process for improved financial performance and margin growth. We view the markets, especially within infra and power, to be characterized by high activity, and we have been and are currently reviewing, calculating, and submitting many bids for new interesting opportunities. With a reported backlog of 3.7 billion in total, we now have around 1.2 billion to be produced during the second half of 26. As Conette said, we maintain our guidance for growth and especially improved profitability for 26. And we view the remaining volume to add to reach that guidance to be balanced and in line with expectations for a second half year. The adjusted EBITDA in the quarter amounted to 24 million, slightly below last year in line with our communication regarding the first six months of the transition here in 26. The power operations in Norway continues with a strong momentum and many good performances, increasing the profitability for the group. Just as we said during Q1, we continue to believe that our seasonal patterns will be visible and that we do expect that a stronger H2 will contribute to the overall improvement for this year. The intended merger with Nefria has implied additional costs recognized during this quarter. The adjustments of 27 million in total in the quarter included nine regarding the ongoing merger process. The complete information regarding the process and the costs in relation to both the share issues and the merger will be communicated in connection with the prospectus registration and obviously the EGM notices. In addition to the adjustments for the costs related to the merger, we have also adjusted for restructuring activities, including 11 million regarding the closing of the operations within one subsidiary in the Info Services Division. With these fairly high level of adjustments in this quarter, we note a negative EPS of 0.63. But again, we have now started H2 and we look forward to continuing the development and progress during the remaining part of 26, adding new interesting projects and again, improving our overall performance. The operating cash flow in the second quarter was minus 31 million. And just as in Q1, this was in general in line with our expected seasonal pattern where we need working capital during the early phases of the projects and whilst ramping up the production. The cash flow is slightly improved from last year, but the first six months are very similar. June and the end of this quarter, however, provided very important answers to us where we noticed increased invoicing of approximately 300 million in total for that particular month. That further supports our view that we will note improved cash flows throughout the year and that the cash flow released during the second half of the year or particularly in Q4 will be visible once again. Liquidity-wise, we have 228 million in available funds and we are fully compliant and well in line with our financing agreements. An important addition regarding the financing agreements is that we in this report account for short-term debt as our agreements runs with a maturity end, end of June, 27. But as we communicated in connection with the intended merger with NIFIA, we have a secured financing ensuring long-term financing upon the completion of the merger during the fourth quarter in 26. Turning to the division-specific financials, Infraservices reported sales of 184 million in the quarter with a growth of 17.6%. We note important contributions from both ongoing and newly won projects and agreements after the startup phase and long winter during Q1. As said previously, we still need to add additional projects and volumes for the yearly production on our way to improved financial performance. However, this is again viewed as a fairly normal current trading of the Infra Services business, where we typically have relatively shorter projects and projects with lower volumes being both started and finalized intra-year. The EBITDA for Infra services in total amounted to minus 3 million or minus 1.4%. However, this then includes the previously mentioned 11 million adjusted for the group level. Excluding these effects, Infra services performs quite well and showcased an EBITDA margin of approximately 4% with healthy projects in an active market. Our new operations, the operations that will replace the Business Current Planner Closing, has during the first six months already added approximately 75 million in new order volumes. The high activity in the market is still to be viewed in the light of high competition, but the need for our services will remain in both the short and long term. Within power, we reported sales of 269 million, a growth of 0.5% in the quarter and an EBITDA of 4 million or 1.5% EBITDA margin. As discussed during Q1, we are still working on a transition with Sweden Trailing last year. We are winning new projects and ramping up production. Norway once again turned to growth from the short-term negative development in the first quarter this year, now growing more than 20% and utilizing on the momentum in that region provided by the positive project achievements they have managed to provide during the last couple of quarters. We continue to win interesting contracts now or once again also in Sweden with recent additions with E.ON and continue to work for the full transition for the power operations. Market activities within power remains good, enabling additional growth and continued focus on client and sector diversification, where the focus strategy within the industry segment is viewed as both important and positive for the development 2027 and onwards. Looking at telecom, I said previously the transformation of the telecom markets with operators providing lower rollout volumes impacted our net sales and profits negatively in the first quarter and continuously here in the second. This transformation is visible in all three geographical markets, Sweden, Norway, and Germany. Yet we partly mitigate these effects from ongoing frame agreements, good performances from our German team and their operations, and through the important wins with new clients such as Trafikverket in Sweden. Our telecom division generated 272 million in sales in the quarter. That's down 22% from last year, with an EBITDA of 6 million, translating into a margin of 2.3%. We continue to work on our cost savings and improved performances across telecom in order to support a transition with improved financials. Though when reviewing the second quarter in 26 and the year-on-year development, one needs to consider that last year was positively impacted by the one-off effects that we saw last year from the reversal of previous provisions for closed projects. Rollout volumes within fixed and mobile networks are significantly lower, but our strategy aims at identifying and working on new opportunities in addition to traditional volumes within the telecom sector. I believe there are and will be a need for our skilled teams and expertise in Germany for the prolonged rollout of fiber networks and within the Nordics for the industries within the defense and public sectors and other parts of the overall telecom markets. All in all, I think that we present a second quarter well in line with our previous comments on seasonality, and we continue to allocate our resources focusing on the expected improvements during H2. In addition, of course, we very much look forward to the intended share issues and merger within Fria, from which we'll gain several advantages with improved financial stability. The process of the merger is currently focused on prospectus workstreams and expected EGMs end of August before the expected closing of these transactions during the fourth quarter 26. And I believe that sums up the financials and we can jump back to Jeanette and listen into a few closing comments.

Thank you, Fredrik. And I will finalize today's presentation with some concluding remarks. Natel operates in sectors that are crucial for a more resilient society. Electrification, digitalization and the need to modernize aging infrastructures makes our role increasingly important. As I previously emphasized, the competitiveness of the future is not just about growth, but about the ability to build robustness over time. With strong expertise, long-term customer relationships and a flexible business model, Natel is well positioned to grow profitability and create long-term value. For the full year 26, we expect growth and especially margin improvement, given the savings measures we did last year and during this year and the market conditions we see today. The process of merging our Swedish operating companies is proceeding as planned. The first seven applications have been filed with the Swedish Companies Registrations Office, Bolagsverket, and we expect the companies involved to merge after the summer. The remaining companies are expected to merge in the fourth quarter. Our plan for when we enter 27 is to have one single operating company for Natal's business activities in Sweden, rather than 14 companies. This is one of the key measures in our savings program, which will lower our costs around 15 to 25 million with full effect next year. As we said earlier, 2026 is a transition year for Natal. And over the past years, we have taken important steps to restructure and strengthen the company, creating a more focused, efficient and resilient organization. I would like to extend a sincere thank you to all our committed employees who have contributed to this journey with dedication and commitment. Thanks to your efforts, Natel is now fully prepared for the proposed merger within Fria and for the next step in our development, together creating a larger and stronger new company positioned as a leading player within critical infrastructure services. And now we are ready to open up for any questions.

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 Johan Bonnevere from DNB Carnegie. Please go ahead.

Yes, good morning, Jonathan and Frederick. A couple of questions, Jonathan. First, looking at the company that you are now doing the IIC for the completion of the company you talked about acquiring in 2022 that you are now winding up, I understand, rather than closing projects. Could you describe a little what have changed your wording around that operation and the risk for further kind of extra costs to come for closing it?

Well, we look forward to winding up the operations, as Conette said. We intend to close that business down. And in parallel, we have now started up the new operations within the so-called Natel Infraöst. During the first six months of those new operations, we have managed to win and bid for 75 million in volumes. and that work will continue throughout 26 and we expect to be done with most parts of this transition during this year for the full calendar.

So you don't see any more costs related to that process, so to say, that will come as an IRC or insured in normal kind of setup?

Well, we still have a few ongoing projects in that company. As of today, this is where we stand. Then we look forward to finalize that process and continue with the development and increase the scope for the new business within Atal Infra.

And if I remember correctly, didn't you reserve for those projects during last year already? Or is this something new that is happening? Or is it just me, my interpretation that I've been wrong?

Yeah, this is one of the subsidiaries that we took some write downs for during the fall of 25. We did have provisions and buffers for some of these projects. Now we're looking to close the remaining parts of the ongoing projects and the business. And these are then extra costs that have occurred here during the first six months, and particularly here in Q2 for 26. And we still have a few ongoing projects, as I said, that we will finalize during the the remaining part of 26 and a few projects that will take place and run over to 27. But our expectation is that during 26, we will be done with both the effects and the company in all material aspects.

Excellent. Thank you very much for the extra granularity on the order backlog as well. The 1.2 billion that you see now coming to become the invoice during this year. Do you feel that the 500 million gap or 450-500 million gap you have to show growth for the year is really a feasible kind of target to find?

If we look at the first six months, I think that we said during our previous conference hearing that we added approximately 400 million from from the wording that we had during the year-end report from 2025 to the Q1 report in 2026. We have now an additional order intake if you sort of backsold the backlog for us. We don't present the order intake as a figure for us, but that implies that we have more than 200 million here in the second quarter as well. So yes, as we said during the call, I think that the remaining volume that we need in order to achieve growth as the target is balanced and it's viewed as a normal course of business for us during an a very active market and during a bid season that we have been in and that we will enter into once again here starting right after the summer vacations.

Thank you also for all the good comments about the healthy market. When you look at it, it seems to be a lot of projects that are in tender for the moment, out there for the moment. And as you alluded to earlier, quite a competitive environment going for those orders. Do you see with so many of the network owners now trying to add capacity and build things maybe a little more near term that we are now coming into an environment where we have a slightly more healthy also pricing environment for going for those contracts?

Yes, I think it's still a competitive business because when it's increasing markets, a lot of entrepreneurs, construction companies want to be a part of it, of course. But we see... big shift actually from the increasing bid season this year compared to last year and we expect that it will be a more normalized situation at least from next year through the competitiveness in the products. because it's also a resource capacity question for all of us who are in the market. I expect that we will see a better situation coming up next year.

I guess resources must be tight given what is happening out there for the month. Do you feel that you can get the sub-suppliers you need still and secure what you need to deliver on the projects you're involved in?

Yeah, I think we have a good combination with our own employees and a long-term relationship with the other subcontractors that we for many years work with. So that is actually not difficult for us in the situation we are now. We have the capacity to take on increasing volumes further on. But we need to, of course, work with that so we always have good relationships to be able to grow.

Yeah, and I think that the upcoming merger with Infria as well will increase our capacity base. We will increase the number of colleagues. We will increase the networks that we have, ensuring the necessary subcontractor units that we're looking for, at least for the Swedish market. Then obviously our key personnel individuals, they will always be very key for our business. And we are continuously searching for good competence and new colleagues to add to our teams.

And that's also one of the... strategic reasons rational for this merger is that we are building a bigger and stronger company that will also attract the right competence and skills to the new group.

Excellent. Looking forward to the merger prospectus to see the full picture of it. Just on Norway as well, fantastic growth in the quarters. The same thing there, how do you see your own resources that the limitation there or can you cope with the volumes that are coming in and can you take on more?

Yes, we can cope also. They are in a very good momentum, our power business in Norway, for that example. So it's easier for us to attract the right companies and skills, as I said earlier, for that. So we increase our number of employees, but we also work strategically to work with subcontractors to be able to scale up the business in Norway. in the broader geographic areas than we are situated today with our power business.

Excellent. And Fredrik, just a question on the cost savings for 2027, the 15 to 25 million. So in the proposal within Fria, you talk about cost synergies of 50 million Some of the wording sounds like they're the same kind of numbers, but could you just confirm that these are complementary numbers rather than, say, double counting?

Yeah, these are complementary numbers. If you look at the 15 to 25 that we have been communicated since a couple of quarters ago, those are very much focused on the module processes that we have internally and our own cost-saving actions that currently are underway within ATEL. The communicated 50 million synergies for the intended merger with Infria is to be viewed as added on top of that. Those are, as we said during that merger presentation, allocated mainly towards the sort of double costs that you see in this typical merger process with two HQs and obviously procurement and purchasing that we will focus additionally on.

excellent thank you very much for that good luck with the with the merger process and all the best out there thank you as a reminder if you wish to ask a question please dial pound key 5 on your telephone keypad yes we have one question or There are no more phone questions at this time so I hand the conference back to the speakers for any written questions or closing comments.

We have one question. What will Jeanette's role, my role, be in the new company post-merger? When the merger is finalized in what we expect in the fourth quarter, I will hand over to Martin Reynardsson and be part of the transition and succession. But then I will leave the group after that.

Yeah, and then we have an additional question on our cash flow position and whether or not we expect to be cash flow positive for the full year 26, including amortization of lease liabilities. And I think that we have talked about this in the past as well, that we expect to maintain the level of cash conversion that we have seen in the past. We know that we have a good position, that we have an ability to generate cash flows. And with the improved margins that we have been communicating for 26 in relation to 25, we do expect that we will see a cash release during H2 and to be cash flow positive for our operations. Then obviously here with the merger, we will communicate the net costs for it. We will have a share issue and other items that will be added. I think that all those details will be additionally clarified when you have the prospectus at hand. So operational advice, we do expect to be positive on our cash flow generation and to look forward to that cash flow release during the latter part of the year. And with that, we don't have any additional questions at this moment. I'm not sure if we should maybe give it a few seconds, but it doesn't look that something is underway.

So with that, thank you all for listening in. And we look forward to meet you all again for our third quarter presentation, the 21st of October. And with that, we all wish you a very good summer. Thank you for listening in.

Thank you.