Ratos AB (publ)

Good morning, everyone, and thank you for joining us today. I'll begin with the quarter's main events and developments across our portfolio companies, and then Anna will take you through the financials. But overall,

Q3 was a strong quarter for Ratos. We delivered continued robust sales development at 6%. And if you break it down, we saw strong sales performance for our portfolio companies in industrial products and infrastructure. Order situations was improving for the industrial services companies. And we also saw continued growth in defense related orders and projects. We also saw improved results for majority of our companies and adjusted EBITDA growth of 29%. This was a broad-based performance improvement across companies, but especially in industrial products and infrastructure companies. Adjusted EPS nearly doubled compared with last year. The improvements in EBITDA, together with improvements in net financial items and taxes, resulted in a nearly double adjusted EPS. And return on capital employed improved with 160 basis points to 7.9. If we now go to our strategy, during the quarter, we continued to execute on the Ratos 2030 strategy. And let me take you through progress against our three strategic objectives. To the left, under a strategic objective of building a more focused Ratos, we continue to work diligently on the divestment processes related to our non-core companies. We will update you as soon as we have more information to share. Our second objective is to drive profitable and capital efficient growth. We saw good progress with almost all our companies improving profitability compared with last year. Add-on acquisitions remain a priority for our platform companies, and HL Display signed an acquisition of Top Global in October at Attractive Multiples. We're also building the acquisition pipelines in our other platform companies, and that is going well. Finally, under our objective to develop our ways of working, we continue to strengthen our model as an active and long-term investment company. One important part of this objective is to strengthen our portfolio companies boards with experienced external chairman. This is an important component of our efforts to support the company's continued development and long-term value creation. In the quarter, we added external senior leaders as chairs of the boards in two of our platform companies. And I would like to welcome Henrik Aager as chairman of the board in DIAB and Jon Sinton as chair in HL Display. Welcome, Henrik and Jon. And then early in the year, we launched our financial targets focusing on organic revenue growth, EBITDA margin improvement, and return on capital employed. And on this slide, you can see the development by portfolio company. But overall, our infrastructure industrial products companies developed relatively stronger, and our industrial services companies face more challenging market conditions. So let us now turn to the performance company by company. And if we now turn to our industrial products companies, starting with Diop, organic growth was modest, but defense made a strong contribution, while the company deliberately reduced its exposure to Chinese wind power markets. A stronger product mix drove improvements in EBITDA and EBITDA margin, and return on capital employed increased significantly from 7.4 last year to 16.6 this year. At HL Display, organic growth was 3%, supported by electronic shelf label products and price increases. Product mix and the Dynastar acquisitions weighed on margins, while we also saw offsetting support from pricing and foreign exchange. Return on capital employed increased to 21%. As mentioned earlier in the presentation, the acquisition of Top Global was signed in October. The acquisition strengthens HL's presence in Spain and its position as a leading supplier for in-store merchandising and communication solutions in Europe. It is the latest step in the HL's accelerated growth journey and a sign of its dual engine of organic growth and growth from add-on acquisitions. Ledeel delivered organic growth of 4% with growth in the indoor business. Outdoor demand remains subdued. But we also saw there were signs of stabilization and improved operational efficiency supported the higher profitability. Return on Captain Employed was 5%. turning to our industrial services companies, market conditions continue to be more challenging. Our latest organic sales declined by 7% in a cautious market, with defense remaining a bright spot. Despite this declining sale, the EBITDA margin improved primarily reflecting the efficiency measures that was implemented, and the return on capital employed was at 8.4%. At Nitec Group, organic growth was flat, with a slight improvement in market sentiment during the quarter, mainly in the heavy vehicles area. Defense continued to develop favorably, and we also saw higher utilization that supported improved profitability. Return on capital employed was at 5.9%. Speed's organic growth was 32%, supported by larger new contracts, including the contract with Plantagen. However, the automation projects continued to weigh on profitability, and these projects are expected to be fully ramped up towards year end. And the return on capital employed was at minus 2.2%. At TFS, organic growth was 8%, but this was primarily driven by an increased share of pass-through revenues. So the service revenue that you can see here in the graph was declining by 8%. So the focus is really remaining on strengthening order intake, and we got a large ophthalmology order booked after the end of the quarter. Return on capital employed was at 16.7%. And now moving to infrastructure and precise info that maintained the robust order backlog and also delivered organic growth at 20%. But it was primarily driven by price indexation on large contracts compared to last year. But this organic sales growth supported improvements in both EBITDA and EBITDA margin, despite an unfavorable product mix. Return on capital employed excluding cash was at 13.5%. And then lastly, moving to our minority holdings, we saw that ABLE experienced an improvement sentiment in the European and the Norwegian energy sector in light of the Middle East conflict. We had positive impacts from successful project execution as well as project extensions. And I'm very also happy to say that yesterday, ABLE announced that Equinog and its licensed partners have awarded ABLE a significant contract related to the visiting field. So big congratulations to ABLE. And then turning to Sentia, the share price has increased by almost 40% year-to-date and by approximately 50% since its listing in June 2025. And in the previous quarter, Ratos reduced its ownership from around 40% to around 31%, and Sentia will report its Q3 results on November 10th. And then lastly, our non-core companies that's in the consumer segment. We start with Covide Group that saw organic growth of 4% with volume growth in the private segment and with motorhomes. Profitability and margins improved, driven by improvements at false price. And also return on capital employed excluding cash was 10.3%. And then turning to OASE, organic growth was 19% in a seasonally low quarter, but it was supported by the solid order book when we entered 2026. The gross margin improved as initiatives to optimize production costs took effect and return on capital employed was at 11.4%. Finally, Plantoken delivered organic growth of 3%, and it was primarily driven by positive developments in the Swedish market. Gross margins improved, although this was partly offset by higher logistic costs. Return on capital employed excluding cash was at 4.7%. 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 if I were to summarize the quarter with one word, it would be progress. We are building step by step. We are not fully content where we are yet, but we are definitely moving in the right direction. And if we turn to the headline number, the organic growth came in at 6%. It's great to have one good data point, but here now we are in the fourth consecutive quarter of growth, posting plus four for the last 12 months. So it is a bit of a trend, even though we must say that the recovery is uneven among our portfolio companies. Looking at profitability growth, we see healthy almost 30% improvement versus previous quarter. And if I were to exclude our associated companies, we are plus 40. So let us jump into some more details how these different building blocks have developed since the last quarter. And if we look at the organic components, we saw a nice drop through of 20% from the top line down to bottom line, and also healthy 70 basis points accretion on the margin. On the M&A side, we have two different components in that box. One is, and speaking about Focus Ratos, we also exited XPIN business, which is actually quite margin accretive in this bridge. On top of that, HL Display did two acquisitions so far this year, and there are also the Australian one contributing positively, whilst we still see some way to go for the German one, partially impacted by the seasonality in this quarter as well. So, these are the things that we have under our control. Moving into the next piece, that is FX, so currency effect. And here, of course, we are predominantly impacted by Norwegian krona strengthening towards Swedish krona and Chessie's infra's profitability, bringing that component to 20 basis points in the bridge. As we announced previous quarter, we sold partially our ownership share going from 40% down to 30% for Sentia. And now for the first time, we do have a negative impact in the bridge of 20 basis points. This is, again, now we are at the long-term ownership share here. And please bear in mind that this is based on consensus numbers, as to Gustav's point, Sentia will report their quarterly quarter three numbers after us. And then a quite good contribution from ABLE, 60 basis points coming in from really good project execution, but also project extensions. And then if we also turn to how different companies and different industry segments have contributed to this development. So we see a clear trend of industrial product companies being margin accretive, so growing both the top line and the bottom line, whilst we still have this mixed picture when it comes to industrial services company. What is good to see is Nitech kind of turning the corner, and now for first quarter in many quarters contributing positively and being margin accretive. Speed and TFS, as Gustav said, are still struggling with the top line growth. TFS on the service side and Aleido with some pockets of growth, but still the overall picture is still down. Precisinfra contributing really well, price driven, but also good top line development, volume driven top line development. We should note also that many of our consumer companies have a low season in quarter three, hence posting negative numbers. But what is good to see that all three of them are actually improving both bottom and top line. So now turning to networking capital and cash. On the relative networking capital, I would say we are hovering around that 7% to sales mark. We saw a slight relative decrease into Q3. That's predominantly driven by higher sales. When it comes to movement sequentially, we did see an uptick in networking capital that's normal seasonal behavior and has to do predominantly with the seasonal unwinding in plantation. Here also we saw a bit of increase in contract assets in Precisa Infra. What that means is really that we have delivered on some projects but haven't invoiced it yet. And then we also, on the offsetting side, we saw really good collections in Oase and TFS. And then this is one of the things that stands out a bit negatively from the headline part. We saw quite a staggering cash flow decline, almost 70% down, but we need to remind ourselves that in the same quarter last year, we got this settlement of 700 million SEK. This is of course very distorting in this picture. If we were to exclude for that, we saw quite good cash development. So all our industrial segments improved year over year, in particular industrial services and in particular TFS. We had some positive timing impacting us positively in speed, but overall it's good to see that the cash flow is improving. And also one more comment worth mentioning is the group, on the group side, we saw quite negative cash flow impact. And this has to do with settlement of currency hedges on our internal loans, as again, Norwegian krona has increased quite significantly versus SEC. This is just a timing issue. It's not an economic loss, but it does impact the cash flow in this month. And of course, consequently, the cash conversion. And then a couple of words on return on capital employed, because this is one of the most important metrics. It regulates how we allocate capital. And of course, not to be naive, it is a consequence of the previous decisions made, which we need to also take responsibility for. But over the two years, we have improved the return capital employed by 300 basis points. We are not happy where we are at, but again, we are happy that we are moving in the right direction. And here I would say again, product companies, Diab especially, both improving the profitability side, but also on the capital employed side. HL Display posting very high figures throughout this period. And then we have more work to do on the industrial services side. Here still, we have negative last well month profit development. But of course, we are happy to see some signs pointing us in the right direction there. Looking at our balance sheet and our balance sheet leverage, we are at 1.1 times for the quarter on adjusted basis. There was a slight uptick sequentially from the previous quarter. Again, normal seasonality has to do with plantation seasonal unwinding here in the networking capital. We also did acquire the Australian company in HL Display. Those are the biggest drivers. And also, I just want to point out that during the past 12 months, we have had some non-operational positive one-off items. one being us selling down our shares in Sentia, and the other ones us receiving an M&A insurance. And this has impacted the leverage positively by 0.3 times. That said, I would still say that we do have quite good financial flexibility to continue on organic initiatives, to continue with add-ons in our portfolio companies, But we should definitely continue to be selective and disciplined when allocating capital. And now concluding on that fantastic adjusted EPS, which grew by almost 100%. Also on the LTM basis, we improved by over 50%, taking us up to 3.8 kroner. And what is extremely positive is that we have several levers within the P&L. So underlying result up significantly. We have support from net financial items. Taxes also came in quite low. And I should say here it is the utilization of net operating losses, specifically in US, where we now have quite healthy defense activity in DIAB. So all in all, this is a great development for EPS. And a couple of words, just effective tax rate, 12 is quite a low percentage. I would say our normalized effective tax rate is somewhere between 17 and 19%. So again, just concluding on this, it has been a strong quarter. It is moving in the right direction, but we do have more things to do here. So by that, I will turn over to Gustav for a summary.