Ratos AB (publ)

Good morning and thank you for joining us today.

I will start by taking you through the main events in the quarter before Anna walks through the financials in more detail. I would say that overall Q2 was a strong quarter for Ratos. We deliver profitable growth in what is typically the largest and most important quarter of the year, supported by solid development in our industrial products companies and signs of stabilization in our industrial services companies. Net sales increased by 3.4%. Adjusted EBITDA came in at 988 ms, corresponding to a margin of 17.3% and an EBITDA growth of 14%. Adjusted earnings per share was 1 krona and 97 öre, an increase of 20% compared to last year. We had a strong cash flow and cash conversion in the quarter with underlying cash flow growing by 20% and a cash conversion reaching more than 100%. During the quarter, we continued to execute on Ratos 2030. The strategy we launched at our capital markets day in March, and I will now highlight the key actions we took in Q2 and how they linked to our strategic objectives. Under a strategic objective of building a more focused Ratos, we took several important steps during the quarter. We reduced our ownership in Sentia from 40% to 31%, bringing our stake to a level consistent with our long-term ownership ambition. Sentia has been one of Ratos' stronger investments. With an IRR of around 30% over 13 years, we have owned and developed the company. We're also pleased to be able to report that we received 200 million SEC from our M&A insurance linked to the Xfin Group transaction with a positive cash flow effect in the quarter. During the quarter, we have also been focusing on our divestment processes related to our non-core companies. TURNING TO OUR STRATEGIC OBJECTIVE OF DRIVING PROFITABLE AND CAPITAL EFFICIENT GROWTH, WE MADE PROGRESS IN SEVERAL AREAS DURING THE QUARTER. PRECIS INFA RECEIVED A MAJOR ORDER OF NINE HUNDRED SIXTY-FOUR MILLION RUB FOR OSLO GARDENMUR, COVERING A FIVE-YEAR PERIOD. HOLD DISPLAY ACQUIRED UFO DISPLAY SOLUTIONS, AN AUSTRALIAN DISPLAY COMPANY, STRENGTHENING THE POSITION IN THE AUSTRALIAN MARKET. Finally, under the objective of developing ways of working, we continued to strengthen our model as an active and long-term investment company. One example is a recruitment of external senior leaders and experts as chairs of the boards in selected companies. I would like to welcome Dr. Holger Rubel as chair of the board in Ledil, Lisa Åberg as chair of the board in Aleido, and Magnus Håkansson as chair of Covide Group. And I would now like to move to performance of our companies, which we have categorized, as you know, as core and non-core. Our core portfolio is where we concentrate ownership, attention, and capital to drive profitable, capital-efficient growth over time. Turning to our industrial products companies, DIAV's strong performance continued in the quarter, delivering 16% organic growth, supported by increased demand from defense customers and profitability improved on the back of the higher volumes, but combined with lower depreciation. We also saw a strong development in return on capital employed. HL Display reported 5% organic growth, supported by electronic self-labeling or ESL rollouts. Margins were impacted by product mix and the Dynastar acquisition. HL also did their second add-on acquisition in the year by acquired UFO Display solution, strengthening HL's display on the Australian market. Lidl delivered 2% organic growth driven by the indoor business, while the outdoor business continues to face a more subdued market environment. We also saw improved gross and EBITDA margins. Returning to our industrial services company, market conditions continued to be more challenging. Aledo reported a negative minus 4% organic growth. The overall market remains cautious and the main bright spot is increased orders and activity in the defense segment. Aledo has been driving successful efficiency measures that resulted in a strong EBITDA development compared to last year. For Nitech Group, demand stabilized in the quarter with continued favorable development within the defense customer segment. And Nitech Group also worked with reallocation of resources to growth areas and organization and delaying to drive stronger performance going forward. Speed grew 23% organically from larger new contracts and pricing renegotiations. A big focus for the company is the rollout of the automation project that impacted profitability in the quarter. But we saw a sequential EBITDA improvement from last quarter and the automation project will continue Q3 and Q4, but we will have a positive impact from next fiscal year. TFS delivered 12% organic growth, primarily driven by an increased share of pass-through revenues while service revenues were down. It's positive to see that TFS received orders in the quarter in the dermatology area that will support service revenue growth going forward. Moving now to our infrastructure segment. Precise Infa delivered a 4% organic growth in the quarter, and profitability was somewhat lower, mainly driven by product mix and timing from effects in starting up new projects. Precise Infa won a major order for Oslo Gardermoen of $964 million in winning tuna over these five years. And now moving on to our minority holders. ABLE now have a record high order backlog and we're seeing improving sentiment for European energy industry following the conflict in the Middle East. In the quarter we benefited from successful product execution as well as a more favorable financial net. For Sentia, the share price has increased by more than 50% since the listing in June 2025, and we also received a dividend from Sentia in Q2 of approximately 220 million kronor, corresponding to Ratos' share. And in the beginning of June, we did a sale of the existing shares from 40% to 31% in Sentia to institutional investors, and further improving our long-term free float and liquidity in the Sentia share, and also reducing Rato's ownership to a level consistent with its long-term ownership ambition. The gross proceeds from the transaction amounted to approximately 650 million Norwegian kronor. And lastly, a brief update on our non-core consumer companies. KVD delivered a minus 9% organic growth impacted by lower used car volumes. Forsberg's Fritidscenter continued to perform well with a strong order backlog. Oase Outdoors reported plus 17% organic growth in its largest and most important quarter, and gross margins also improved as a result of initiatives to optimize product cost. Plantagen delivered 3% organic growth, primarily driven by positive development in the Norwegian market, and the gross margin was robust, but EBITDA margins were impacted by marketing investments. And with that, I would like to hand it over to Anna, who will take us through the financials in more detail.

Thank you, Gustav. And without further ado, let us have a look a bit more into details. I would like to highlight that this is the third consecutive quarter of organic growth. And also now we are seeing a last 12 months organic growth of 2%, which is really good to see. Looking at EBIT improvement, EBITDA improvement, it grew healthy by 14%, but also it was a solid plus five, excluding our associated companies. And then digging a bit further on each and every component, we saw a healthy drop through of 15% from our organic growth, But we did see some bits and pieces moving around in that EBITDA contribution. So for instance, speed, had quite a negative contribution on EBITDA line compared with last year. What is good to see is that speed has moved to black numbers and has also sequentially improved. But of course in this bridge, it's highly negative contribution on EBITDA. This was offset, more than offset by very strong DIAB who contributed both from top line and EBITDA perspective. Moving into M&A piece, we have two major items moving in there. It's Expin, the disposal of Expin. And if you remember, Expin was a loss-making company, hence it comes with a good contribution on EBIT here. And also for HL Display acquired Dynesir. Dynesir is a quite a sizable acquisition, but unfortunately due to they have quite pronounced seasonality, out of which Q2 is their weakest quarter, and they were actually loss-making. But still, these two components together were margin accretive of 40 basis points. Moving further down into the bridge, we have the FX component. We have turned a corner, and now FX is in positive territory. This stems from Norwegian krona strengthening towards SEC. It's a translation FX impact. On the other hand, it had a neutral contribution to our EBITDA margin. Then CENTIA, a meaningful contribution of 100 basis points versus last year. We should remember that CENTIA was not part of the Q2 2025 numbers. And also worth remembering that as of Q3, we will no longer have this large bridge item. If anything and all else equal, as we have gone from 40% ownership share in Sentia to 31% ownership share. And all else equal, this should be a negative bridge item as of Q3. ABLE, good to see, positive contribution, 40 basis points on our margin. It has to do of ABLE actually during 2026 being very good at executing on ongoing projects, but also we saw lower, less negative net financial items compared with last year. And digging a little bit further again, I would like to highlight some items. I think it's great to see that Ledeel has turned the corner, posted organic growth, and also managed to improve their gross margins against EBITDA margins. NYTEC Group, it could be under the headline, flattening out. That's good, even if it was on admittedly easy comparables in last year period. Another comment that I would like to make is in regards to Precise Infra, where we saw a solid organic growth, but as you can see, negative contribution on EBITDA line. This, I would say, has rather to do of having quite difficult comparables in the same period last year. And also, as previously mentioned, we are now facing a project mix where we have a larger share of new projects, and these projects come with slightly lower margins up until we are efficient enough to increase them. So I would say nothing funny going on there. And then last but not least, of course, Plantarsan. This is their most important quarter. We saw plus 3% versus last year, again, on easy comparables. Of course, we would have wanted to see more here, but we are happy that we are in positive numbers the second quarter in a row. And also we managed to increase EBITDA by 8 million. We also, just to mention one another thing, that gross margin was good in Plantation, but we did make some marketing investments to support Plantation going onwards. And just looking at Plantation, we have had a year and a half of focusing only on costs. we would like now to move into phase where we actually focus on the commercial side of things. Hence, we believe it was the right thing to do with these marketing investments during the quarter. And now addressing networking capital, relative networking capital hovers around 7% for several quarters now in a row. So nothing major going on. Looking at it sequentially, we saw a bit of decline. So we released some networking capital supporting our cash. And going to cash, I would say that there were two major drivers. One is strong result. The second one is networking capital release. But there are some bits and pieces moving around in our cash flow. Hence, I want to dig a little bit deeper. So we saw a staggering 40% increase in reported cash flow. However, if we were to look at it a bit more operational and a bit more like for like, we adjust for discontinuing operation in the first step. And then if we look at our industry segments, I would like to give a lot of credit to industrial products. We saw a very good cash generation versus the same quarter last year. I would say it's driven by good results, but also good collections going on in some of our companies. For industrial services, also a contribution versus last year. Not so much about results, but a bit more on collection and inventory side. For consumers, this is unfortunate, as Plantagen had fantastic cash flow improved with last year, much due to the inventory reductions. But here for KVD, due to very solid markets within motorhomes for Forsbergs, they had a bit more inventory on that side, hence a negative cash flow contribution versus last year. and some slippage of orders between Q2 and Q3. And looking in infrastructure, which is essentially precise infra, nothing major going on, a bit of an unlucky timing between Q2 and Q3. So 20% underlying growth, good cash conversion above 100. And then on top of this, M&A insurance, this is real cash, 200 million SEC, and also Sentia dividend, which we received during the quarter, taking us up to that high number of 1.5 billion. A couple of comments on return on capital employed. If we look at on the reported numbers, the main effect and the driver behind the decrease is Sentia disposal or that we IPO Sentia. As you might know, Sentia is asset light. hence has always come with high return on capital employed, hence the reported RUSE is down. But if we focus on the underlying or adjusted RUSE, where we are adjusting for its continuing operation, but it's also excluding our associates, we see a good trend line taking us up by 100 basis points in the past two years. The major driver, I would say, industrial products again, DIAB in particular. When it comes to industrial services, this is a long-term metric. We still are suffering from lower results from majority of our industrial service companies, not to say all. And one last comment, due to this excess cash that we received in quarter two, we decided to repay some debts amounting to 800 million in the quarter. which is, of course, part of the capital employed piece. And now, looking at our net debt EBITDA, we see significant deleveraging and taking our leverage down to one time. This is, of course, below our targeted range of 1.5 to 2.5 times. BUT AGAIN THESE ONE-OFF ITEMS HAVE BEEN SIGNIFICANT IN THE QUARTER SO CENTIA SELL DOWN 650 MILLION SEC M&A INSURANCE 200 MILLION SEC CENTIA DIVIDEND ADDITIONAL 221 MILLION SEC AND OF COURSE THE SOLID OPERATIONAL CASH FLOW IN A VERY IMPORTANT Q2 THIS MEANS THEN THAT LEVERAGE IS POSTED AT A VERY LOW NUMBER. BUT I JUST WANTED TO REMIND YOU A DIFFERENT PERSPECTIVE TO TAKE HERE IS RATOS HAS SUCCESSFULLY DURING THE PAST 12 MONTHS RECEIVED NON-RECURRING CASH ITEMS AMOUNTING TO 1.6 BILLION. THIS INCLUDES ALSO THE SETTLEMENT of 700 million in cash, which we received in Q3 last year. If I were to adjust for this, of course, this is a theoretical example, but then our leverage would rather be 1.7 times. But again, what this picture illustrates is of course that we do have high financial flexibility. And what it all boils down to is of course, EPS growth. And we are happy to see year over year, 20% increase taking us just below two krona. But also on the LTM basis, I would say the growth is even higher. It's almost 40%. What makes me additionally happy is that we see accretion throughout the P&L. So it's not just of us growing the underlying result, It is us having lower net financial items supporting EPS, but it's also, if we just look at the tax line, it is in line with last year and that this has to do with us having still some tax losses carried forward. So tax is also supporting. we have a lower share of non-controlling interest that is also supporting and taking us down to this very very nice EPS and just one comment we shouldn't get used to a low tax rate reported tax rate was at 12 percent our normalized tax rate is rather in the range 18 to 17 to 19 percent So very happy to see this EPS working with us as well. And now I would like to hand over to Gustav for some conclusions and summary.

Thank you Anna for an excellent overview and now I would like to talk a little bit about the summer of the quarter and it has really been about delivering profitable growth and execute on the 2030 strategy together with implementing the Ratos investment company model. And in the quarter, we saw improved performance in almost all portfolio companies, and we added external competencies in three of our boards. We did a successful sell-down of incentive from 40 to 31%, and we are now at our long-term ownership level. We continue to focus on add-on acquisitions in our platforms companies, and we end the quote with, as Anna presented, a very strong financial position, and that enables us to do more add-ons on our platform companies, but also organic investments in other portfolio companies. So looking ahead, our focus is really to keep driving improvements, implementing our investment company model so that we can sustain profitable and capital efficient growth through Q3 and onwards. And with that, thank you. And we are happy to take 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 Bjorn Olsson from Seb please go ahead hi guys first on two of your holding companies if we start with Nitech I mean you're saying that

you're seeing the decline in demand flattening out, but you're still printing 11% sales decline year over year. In the same time, the margin decline seems to have sort of troughed. So I guess the first question is twofold. First, where do you get the conviction that this seems to be the trough in sales declines? And second, have you have you adjusted your cost base making the margin decline to stop or is it a mix effect?

Thank you, Björn. I will start and then I can add. But I think if you look at the technical or industrial consultants market or segment, it has been quite a challenging market over the last quarter, maybe years as well. So I think we're still there. We don't see a huge improvement going forward. But what we say is it has kind of stabilized on these levels. There are activities out in terms of orders. We are winning orders. But at the same time, we're also focusing and doing a bit of more focus on higher growth segments. And I mentioned defense and energy and so on, where we have a strong position, but we want to grow that even more. And that is correct for both Nitech and for Aledo. So I think the team at Nitech with Dimitris, they're doing a good job in this different industry focus. At the same time, they work a lot with their model and with their organization and de-layering to make sure that we have the cost level that we need to support the margins, exactly as you mentioned. And that's the ongoing work and they will continue to focus on that, of course. But as always, the key priority, for Nitech is really to come back and drive order growth and then revenue and then, of course, margins going forward as well. But that would take some time, I think, and looking into the coming quarter, we don't see any Just a couple of additional comments. I would say what we've seen in NYTEC is that we've had difficulty compensating

for a drop in gross margin with these integration or OPEX-related saving. As you can understand, gross profit is much larger than the other cost or admin cost or OPEX cost. Hence, even though we have been active in trying to address that, the gross margin decline has been difficult to compensate for. And then we would also like to be a little bit more ready when and if the growth comes back. So what we are trying to do is keep some of the competencies in-house and also at the same time as we have reduced admin personnel we have added personnel in COGS and these resources they are not up and running from day one hence they are weighing on the on the gross profit so this is a balancing act so just to summarize beyond I mean

It's a challenging market. I think the company is doing a good job here and now to cope with that. But we are well positioned when the growth comes back and the market comes back to have a strong growth position.

Okay, so then I sort of interpret this as that the sort of 11% year-on-year drop should probably be LIGHTLY VISIBLE IN Q3 AS WELL AND THEN PERHAPS IT CAN YOU KNOW FINGERS CROSSED ET CETERA PICK UP SPEED ONCE THE MARKET IN GENERAL PICKS UP SPEED IS THIS DOES THAT I DON'T UNDERSTAND WHERE 11 IS COMING FROM YEAR TO DATE NYTIC IS ORGANICALLY KIND OF FLAT ISH IT'S JUST Q2 AGAINST Q2 25 AND THEN IT'S UP

2% on Q2 last year, organically.

Okay, that's good to know. The reported number looks different. But anyway, okay. Let's be more positive then. Turning to Diab. I guess it's the other side of the coin here. So how much should we extrapolate the current margin and sales trends?

Thank you. It's a great question, of course. And DIAB is performing so well. You can see the trend here over the last quarter. It's fantastic development, well positioned for the defense segment and so on. But I think it's important to say as well that it's been a very... SUCCESSFUL AND HIGH GROWTH OVER THE LAST QUARTERS HERE SO GOING FORWARD WE ARE A BIT MORE CAUTIOUS ON THAT OUTLOOK BUT IT WILL BE STILL ON VERY HIGH HIGH LEVELS BECAUSE THEY'RE WELL POSITIONED ESPECIALLY DEFENSE BUT ALSO THE ENERGY SEGMENT AND MAYBE A COUPLE OF COMMENTS BJORN WE MENTIONED THE UPSETTLEMENT WE ALSO HAVE

Apart from operational support and volume growth, which we are definitely seeing, we also are benefiting from lower depreciation. As we wrote off fixed assets in Q3 last year, that effect will tail off, which of course you will not drive the EBITDA as much as we've seen in the past. And one another comment is that we do benefit. We have deliberately, we want to get out from the wind segment, which has meant that we've increased prices towards those customers. We are benefiting from that on both Topline and EBITA. That effect is also going to tail off as we approach the second half of 2026. So solid underlying demand, but there are some items here WHICH WILL WE NOT BENEFIT AS MUCH AS WE HAVE HISTORICALLY.

OKAY. THANKS. AND JUST FINALLY ON A MORE STRATEGIC LEVEL, YOU ARE CLEARLY PUTTING THE CONSUMER BRANDS UP FOR SALE. IN A SCENARIO WHERE YOU DON'T GET AN ATTRACTIVE OFFER ENOUGH, DO YOU HAVE A PLAN B ON WHAT TO DO WITH THESE HOLDINGS IF SUCH AN EVENT WOULD OCCUR?

Yeah, so we're focusing. The priority right now is to follow the divestment plan, and that's what we're working on. Of course, we always have a plan B. We always think through all the different scenarios going forward, but it's important to say that the focus here now and what we aim to deliver on is the divestment path, and that we are working on those processes, but I will not today talk about those processes in more detail. When we have something to talk about, we will come out again and give you an update, of course. But Björn, rest assured, we are thinking through all different scenarios going forward, but the priority is to find a divestment path.

Okay, thanks. Thank you, guys. And thank you, Anna, and good luck in the future if we don't get any more calls with you.

Thanks, Stuart.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Yes, so thank you for listening in to our call and all the questions and I would just like to give some brief final remarks on the quarter. So Q2 is Roto's largest and most important quarter and we delivered organic growth, we improved our margins and we also showed a strong cash flow. Q2 was a strong quarter for Rotos where we delivered on a strategy and continued to implement our investment company model. So we now really look forward to continuing to deliver during our important Q3 quarter and the fiscal year 2026 and beyond. And with that, I would like to thank you for listening in and have a great day. And thank you.