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.