Studsvik AB (publ)

in areas like sales and business development, strategy, M&A, and obviously other functions like HR. We have also appointed a new person heading up our strategy M&A department called Jason Babich, who comes with a strong background both for European and American nuclear sector. He will be based in the U.S. and he also has a long history with the company Westinghouse. We see a continued high interest for the Stuttwik products and solution based on the more positive investment cycle. This means there is more incoming needs, incoming requests for both our existing services, but also additional new services. We have a very positive development in the quarter with the U.S. Nuclear Regulatory Commission, NRC, approved the Stuttwik's fuel optimization software to be used for applications for new modular reactors SMRs and this is just a proof of our strong technology there and also that we are relevant for the new developments and the new technologies developed in the SMR sector and we have a continuous strong operating margin development as I just highlighted so we are definitely reaching some key milestones here in quarter two. Let me then go through the different three business areas we have, and I'll start with decommissioning and radiation protection services, DRPS. It's a business area that serves mainly the German-Swiss market, but also some Nordic and some in the Benelux countries, for decommissioning and planned maintenance outages work. Here we have not lived up to the expectations of profitability, not in this quarter and not in the first half year. We have, however, seen a bit of improved business performance from the acquired company, Extreme Borrowed Sold, EBS, which is very positive. But here we are taking actions to improve profitability, review what our offering should be in the future, and work on increased efficiency, because this is not where we should be. It's important to state that the market is definitely here. There is a big request for these services, but the competition, mainly in the German market, is very stiff, driving down profitability in the quarter. If I continue then with fuel, materials and waste technology, you can see that's the heart of what we do here at Studsvik. This is mainly driven out of our site, just south of Stockholm in Studsvik. We here have a very strong operating profit in a very dynamic and growing market. The SMR technology, small modular reactors, we're starting to see more interest from those vendors to get support on material testing, fuel analysis, different things around licensing, as we have a lot of capabilities there for them. We have also continued interest in our Indram waste technology and a lot of customer visits coming to our demonstration facility at site. If you recall the last quarter we announced the customer ESS, European Spedation Source, that we are working to help them with to take over their waste and we are taking all the permits for our Indram to build an Indram for them at site. The numbers are truly strong here. We have more than doubled the profit in the quarter and we have strong growth as well. So very happy with fuel, materials and waste technology. Studvik Scantpower, which is now, you can say, two different businesses. One is our fuel optimization software business, driven out of our strong knowledge about how fuel is behaving in the reactors. That is a solid business, but in the quarter, we have lower license sales. This happens, it's very seasonal business, which indicates that we actually had a lower sales and lower margin in the quarter compared to last year. But this is a normal seasonal effect and we will continue to see those in the coming years as well. We have done another business that we acquired called Black Star Tech where we provide a software solution to monitor safety solutions and the main safety we bring out now is related to our battery technology both for emergency lighting and power backup, but also things like fire alarm systems. Here we see low sales in the quarter. This is very early days. We are building an organization. We are building the funnel, which is with a strong interest in our technology. But the ongoing sales in the quarter were low, but we have very high hopes and high belief that this will be a very important business for us going forward. And with that, I'll leave over to CFO Peter Teske to take us through some of the details in the finances. Please, Peter.

Yeah, thank you so much, Carl. And I will start with our go through our three segments, business segments. And then after that, we look at the consolidated group numbers. And then we talk a little bit about our financial targets. And here we see on the left we have the decommission and radiation protection services, DRPS. The sales for the quarter amounted to 89.7 million and for the first half year 176 million. This is in local currency a decrease of 8.3% in the quarter and 1.6% for the first half year. Both the quarter and the first half year were characterized by tough competition and strong cost focus among our customers, which combined with the cost saving program reduced our opportunities for additional sales. Therefore, this had a negative impact on our revenue and the operating profit. The decline compared to last year also affects due to the planned maintenance outage in Switzerland, which took place in Q2 2024, but now is rescheduled to Q3 2025. The acquisition of EBS, Extrembård & Sogteknik, contributed during the quarter with a net sales of 6.7 million, and for the first half year 10.8 million and as carl mentioned we are now back on higher utilization rate and then on the right side we have the fuel materials and waste technology fmwt here we see the sales in the quarter amounted to 107.4 million and for the first half year 205.1 million which in local currency is an increase of 9.2% in the quarter and 5.1% for the first half year. The increased sales for the quarter and the half year are a result of a good progress in our project and improved productivity. Also, we had during the quarter a fuel transport that impacted our sales positively. we see a strong improvement compared to last year in the operating margin for the quarter where the margins increased from 7.2 to 18 percent and that's an effect of good progress in our project improved productivity but also an effect by our cost efficiency program that we have implemented but also we have improved our purchase routines and streamline the delivery organization The business was, during the quarter, classified as an electricity-intensive business, which resulted in a tax repayment of 3.3 million, and that had, of course, a positive effect on the operating profit. On the other hand, we had a cost of 1.4 million, attributed to the ongoing streaming effort affecting the quarter. and compared to last year we had also in the first half year 2024 a property sales amounted to 2.3 million and then our third segment business area strategic scam power And the sales decreased in the quarter to 35.5 million. But on the first half year, we have an increase to 81.7 million. And in local currency, we have the decrease in the quarter of 3.7%. But in the first half year, the increase is 12.9%. And as Carl mentioned, the business are subject to seasonal variations in sales. which was appearing now during the quarter. The sales increase for the first half of the year was primarily driven by the deliveries of the Gardell monetary system as we spoke on during Q1. The profit of the quarter is also affected by the seasonal variations in sales of course and during the quarter you also see a little bit lower sales for Blackstar tech products but it has low negative impact on the overall profitability for the business area. For the first half year we see an increased sales that contributed to the earnings that have improved the contributed earnings and we see that underlying business are demonstrating stable profitability. business area was positively impacted by exchange rates movement in both the second quarter and the first half year and the majority of the exchange rate movements relate to revelation of balance sheet items and if you then go to our group numbers when consolidated and so here we see the net sales per quarter So the net sales for the quarter amounted to 227.6 million. And in local currency, that's a decrease with 0.4%. But basically, it's stable. And also, this quarter is the second strongest Q2 in the past 10 years. And we have a decrease in sales then for Stuttgart Scampower and the Commission of Radiation Protection Services. but we have seen compared to last year higher sales with infused materials and waste management technology and if you summarize it for the first half year the sales amounted to 454.6 million sec and in local currency that's an increase of 3.7 percent and there we have scam power infused materials and waste technology that's increased their sales If you then go to the operating profit, so the operating profit for the quarter is 17.6 million and the margin is 7.7%. And here, as we mentioned before, the improvement from last year is driven by FMWT. and also Susie scam power that we have some positive impacts of the exchange rent movements and then if we look on the operating profit for the first half year it was 37.0 million sec that's an increase with 11.3 million and also we see an increase operating margin and the increased operating margin is an effect of our strength and financial discipline our cost saving program and then that you had some positive one-off items like the electricity intense business as i mentioned about the tax return we have some exchange rates movement but also that we have some negative effects for example at the the cost of the ongoing streaming effects and if you look at the cash flow for the Q2 we see that the cash flow from the operating activities for the quarter was positive with 3.5 million and the free cash flow was negative with 1.3 during the quarter but it's still a big improvement compared to last year and then if you look at the cash flow from the full first half year we see that it's positive with 39.7 million and that's an increase with 56.5 million compared to last year and the higher operating profit the positive development in working capital is of course impacting the cash flow really positive and we are working continuously with our working capital For example, we have now improved our accounts receivable procedures and our procurement procedures, increased cost control and we have better follow-up. And our free cash flow for the first half year was 38.3, an improvement with 79.2 million compared to last year. And there also we see the improvements contribute with the higher operating profit, the work capital change, but also that we have lower investment levels this year compared to last year. And finally, if we just go to our financial targets and compare it to the first half year and the full year 2024, We see on the growth that we have a financial target of 6% or above and we did achieve that during 2024. And for the first half year now we are reaching 3.7% but as we mentioned we are affected a lot by the challenging market situation in Germany. We see that we have a positive improvement of the operating margin, that we go from 3% to 8.1%. And that's because of good development in our business, but also improved internal efficiency improvement, as well as our work with our financial discipline. And also we see a positive trend on the equity to asset ratio. So with that said, I will handle my word to call our CEO.

Thank you, Peter. And let me continue to talk a little bit about the market developments. And let me start with small modular reactors, which we see several announcements and several build outs of this new technology. In many cases, this is traditional light water reactors built in a smaller, more where you can do a lot of production in different factories and then ship it to the sites. We have seen ongoing plans. The first that will go live is most likely the one in Ontario, in Canada, which is planned to go live somewhere around 2030. But many of these others are coming alive in the early part of 2030. It's still SMRs used to build for SMR campuses that will produce a high amount of electricity in traditional sites. In addition to that, you will also see more and more smaller SMRs to support AI data centers and other industry processes in different countries. So here you can see an example of a SMR campus. And why is SMR of interest for utilities and others that want to build more power? Well, they are more flexible. You can put in this case, you have, I think, up to six or seven, but you can have actually one or two as well. So they're very flexible. You don't need to be one big site. You can build many smaller. and they have reduced lead time for the construction this has been one of the problems in the industry that some of these bigger sites have taken a long time and have also suffered from a lot of delays and the promise of this technology is that they can be more easier to manufacture and also to then construct and keeping lead times and cost down We have also seen positive nuclear market events based on government decisions and the nuclear power industry is obviously an industry driven by market demand but also controlled and to some sense driven by different decisions made by the governments and politicians in different countries. In the quarter we have seen three significant and very important decisions by governments. If we start with Sweden, the Swedish parliament passed a legislation to finance new generation of nuclear reactors, which are key to the energy security in the country and achieving net zero emissions. This will drive applications for building new large sites, but also most likely SMR campuses. In the UK there's been a similar but actually probably larger big government funding released supporting both the development of SMR technology in the country and one of the vendors that was mentioned in that support was Rolls-Royce which is a very important European vendor of SMR technology. That will also lead to that UK will start building more of that kind of technology into the UK grid. And last but not least is the executive orders signed and passed in the US to support a large increase of nuclear capacity through power updates to existing reactors and new reactor constructions and basically making sure that legislation and regulatory things would go faster for new build. So all these three countries are really pushed for and supporting the new build and life extensions of existing plants. If you continue a little bit by the market development we can see that there is projections of 25% of the Added capacity that is required would be from SMR technology. 30 countries have announced that they're considering to move forward with introducing nuclear power into their energy mix or building new. We see a demand for electricity consumed from data centers expected to triple, and we have seen that very much in the US, but we also have dialogues and discussions where we see that also happening in the European marketplace. And by 2050, the global nuclear capacity could increase 2.5x the current capacity. And to do that, it's required both to make sure that you extend the life of existing plants and add new capacity. And that's just exactly the two things that we at Stuttgart are very engaged with. Talking a little bit what we do in addition to what we have done in the past is obviously we are driving a lot of innovations into the marketplace. We have discussed before our in-drum technology and this is a picture of our demo site where we can reduce waste in drums with radioactive material. with some 90%. This is generating a lot of interest from different companies around the world. We're also very active to drive new software and initiatives versus the SMR developer, both for the ones doing traditional light water, but also for the advanced modular reactor sector. And last but not least the acquisitions of Black Star Tech which is a new technology that will be very essential for new build but also for modernization of the existing power plants. So let me go then to my final comments. If you remember from last we have focus areas to drive and improvement of our financials. That starts with enhanced commercial management. That is to focus more on the markets and the customers as a group, not as a separate business areas that we have done in the past. That we're going to increase our efforts in marketing and also make sure that we are more controlled and disciplined when we come how we offer and what kind of terms we have in our offers. That is already happening. We're starting to see the result of that. We have a lot of mid- and long-term organic growth opportunities. Some of them I just highlighted with our innovations, and we continue to drive those opportunities. We have executed our M&A strategy with the acquisition of EBS and Blackstar Tech during the last 12 months. We have appointed a new head of strategy and M&A to drive the agenda on M&A continuously to see more opportunities for strong and good M&A to add to our portfolio. And of course, very important is to drive the growth from the quiet companies of EBS and Blackstar Tech to prove that we can actually be a good host for new companies. And it's an intense war for talent. The nuclear industry is waking up and we need to work hard to be the preferred global employer wherever we are for companies into this sector. And that's also an area where we have a lot of focus as we are set on a growth trajectory. So in summary, Q2 of 2025, strong profits in the quarter driven very much by the strong demand for our FMWT services in this quarter. We have a dynamic market that continues and which is in the court underpinned by government decisions creating opportunities for Stutsvik. We have positive developments in US Nuclear Regulatory Commission, NRC, with respect to our software for use by SMRs. We have a new executive management group appointed. And we have two new board members added to our board. And we saw Armada Investment AG to become our largest shareholder in this quarter. So with that, we end our presentation and happy to take questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Next question comes from Caleb Solomon from Seb. Please go ahead.

Hi guys, just a few questions from my end. The margin in fuel materials and waste technology was up to 18%, and I mean even without the one-off related to the electricity tax. It's up to 15% from just about 7% last year. So can you maybe just give us some color of how much of that is strictly due to the cost savings program versus kind of higher utilization rates? Was there any sort of one-off effects related to revaluations on the balance sheet in this segment? And how much can we sort of extrapolate of this profitability boost moving forward?

Thank you for the question. Very good question. I think in general what I saw when I joined as CEO in October, this area is an area where we have not that high competition. A lot of the other parties in the world that can do this are state-owned laboratories in the US specifically. So I think we have a very good and strong competitive position and we are set out to use that quote-unquote in a better way which means that we have started to increase our prices for different services. We have started to change our payment terms But also, it's all about the efficiency in the labs, making sure that we can do it to the times that we set aside for when we do the business cases for the different offers. And I think we have been better in all these areas. So basically, and also the higher demand gives us more opportunity to be more bold in terms of how we set our prices and so on. So a very strong competitive position leads to increased margins. It's very strong in the quarter. And the electricity side, I think, ends up in this business area. Other than that, we have very few one-offs. We also have some one-offs that goes negative in the business area. Pleased with this, I wouldn't say 18% is the new sort of target, but definitely this should be a very high margin business.

And just sort of a follow-up on the sales growth, how much of that was due to the fuel transport carried out during the quarter?

So we have highlighted fuel transport. We do fuel transport every quarter. So sometimes we have more than other quarters, but that's part of our business. So it's nothing totally unusual. It's a normal part of the business. We just highlight that. What happens when we do that, it comes in as a peak, and it's not material to the growth, but it's one part of the things that we have done in the quarter.

Okay, that's clear. Thank you. And just a question on Blackstar. You mentioned you're seeing a large number of interesting opportunities. How much of that should we sort of expect to maybe show during the second half this year?

I think we should be reasonably conservative of the big things for revenue in this year. This is a business that is both software licenses and hardware rollout. which means that we can take larger orders, but the revenue will come then as we roll out the projects. So when we say that we see big industry, we see a lot of big players also outside the nuclear sector interesting in this technology, but the actual revenue recognition of this can take some time before we build into substantial or material numbers.

Okay and just one sort of housekeeping question. SG&A and development costs seems to be flattish year over year but the other operating income is up almost five times in Q2 and it was up quite a lot in Q1 as well. Can you just sort of break down what that is and how we should think about it moving ahead?

yeah and the majority of the other operating income is correspond to the movement of fx exchange rates and then i think it's like 3.3 million is the tax return okay that's clear thank you and just one last question in in q2 the u.s nuclear regulatory commission approved your fuel optimization software for for use by companies developing smrs

Can you maybe just explain what this sort of means and when we could see this starting to impact growth?

So we have had for more than 12 months now an intensive dialogue with all these SMR vendors to use our software for their design activities. then also when you then starting to go into the regular regulator to be so for seek for approvals you will need to prove how you've done these kind of calculations and what this means that that when smr vendors are looking for software that can that can actually do this we are one of them and not that many that can actually be used and that gives us a sort of quality stamp that the smr vendors will benefit from using our software to get sort of less questions on the regulator So a positive thing for our opportunity to sell into this sector.

Okay, that's very clear. That's all from me. Thank you for taking my questions.

Thank you. Next question comes from Lara Motadi from ABG Sundal Collier. Please go ahead.

Hi, Lara here from ABG. I'd like to start off with your fuel, materials, and waste segments. Margins were very strong this quarter, and obviously you flagged a few key drivers in your presentation as the reason for this. But how should we think about a sustainable, normalized margin for this segment going forward, and especially considering you had some positive impact from some one-offs in the quarter?

Thank you. I think I partly answered the question before. I think obviously this was in this quarter we had some one-off effects pushing it up to 18%. But also, as I mentioned, I think we should consider this to be, it should be a high margin business. based on the fact that we have a very strong competitive position and we have increased demand for these kind of services. So I'm not going to give you a target number, but we should be in high margins for an offering in a business area like this. We should also add that into the business area is not only fuel and materials, also waste technology. And waste technology is a very reasonably small offering at this stage and it's under strong business development and that is an investment there. We also have investments that we're doing in this that could also obviously impact the margin negatively, but we are trying to control that, make sure that we have the right amount investment in that kind of investment area like Indra.

Great, thank you. And if we turn to Scampower, given the seasonal patterns and the variability in the product mix, how should we think about the outlook for the second part of this year?

Well, we have a strong offering. We have definite customer demand for this. But since it's very, these license sales can be very, they hit very favorable when we get them so I think we should we see that we should have a good second half but we don't know exactly which quarter they would hit and it would probably be a bit back-ended which means that q4 would be as normal a much stronger quarter for scan power than q3 for example

Okay, very clear. Thank you. And just to follow up on Scanned Power, regarding demand, where would you say you're seeing the greatest incremental demand? For example, is it more from the US or Asia, or is it from more SMR customers compared to larger plant operators?

I think for now, the big dollars comes from the operating plant sector, but we are definitely moving ahead with SMRs and making sure that they are using our software, which means that we have an increasing revenue potential from those vendors as those SMRs start coming alive and they use our software more and more and also can commercially use it, if you like. So that's on the SMR versus operating plants. In terms of regions, the US is the strongest region for this, but we also have, like in the Fana now, we have strong opportunities both in Western and Eastern Europe. We have some in the Middle East. We have Japan is a reasonably strong market, Korea as well.

So this is a worldwide business, but the strongest market is the US.

Very clear, thank you. And if we just move over to your decommissioning segment, margins declined this quarter, and you stated that this is due to increased competition and price pressure maybe. But you briefly touched on your presentation on the measures you're taking, but could you please elaborate a bit on this and what we should expect in the coming quarters when it comes to margins?

I think we should expect more to be under pressure and continue through this year. These measures and actions we take will take time to implement. In fact, this business area is not one single group of people doing the same thing. There are different sort of services offering we have there. And what we review now is what is the optimal mix between the different services and product areas that we have in that area. and obviously making sure that we can optimize that when we offer. So I think we have opportunities to make this significantly better, but it's not the short-term fix.

Great, thank you. And lastly, I just wanted to ask a little on your cost savings programs. You previously guided for 20 million kroners in annual savings from 2025. in FMWT. Could you maybe quantify how much of these savings have started to flow through the year and what remains for the second part of the year?

Yeah we see that we have we see effects on the cost saving program during this quarter and a half year, and on the total group level, we see, for example, that we are more than 20 people less on the FTEs, but still we are growing as a business. So we are more efficient now than we were for a year ago. So we see positive effects from the efficient program.

But the question if it's how much is left, I think it's also going to be difficult to measure. We took them, but now we also need to make sure that we invest for growth, which means that we may see opportunity where we need to increase costs. But in actual fact, I think you can split this savings pretty much over the year. We took all the costs in Q4 and we had the lower cost entry into 2025. um it's evenly split i think between the quarter but that could be cost increases as we hire for growth or take investments for growth okay great very clear that was all from my end thank you very much

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

Okay, thank you very much for listening. Talk to you again after our Q3 report, and thank you very much, and bye-bye.