Systemair AB (publ)

Thank you very much. Hello everyone and very welcome to the presentation of our first quarter report for the year 2025-2026. Roland and myself are today in Skinskatteberg for our annual general meeting and we expect a fairly well visited event. We will now kick off with a rather short presentation of the Q1 report and then open up for questions. Presentation is available on our investor relations website, as usual. And by that, I hand over to Roland to start off the presentation.

Thank you, Anders. And yes, hello, everyone. Roland Kasper, the CEO. So nice to be able to present this report to you. I'll start directly with our second slide with the agenda. So we will first have a short systematic brief. Then we look at the first quarter summary and then we look into the quarter one financials and some highlights on sustainability, projects and products. And after that, of course, we will conclude this presentation and open up for Q&A's and go on directly into slide number three system area in brief. We are operating based on our core values of simplicity and reliability. Our business concept is to develop, manufacture and market energy efficient, high quality ventilation products. With our customers in focus, we are determined to meet their expectations on delivery reliability, availability, sustainability and of course, quality. As you all know, the company was established in Skinskatteberg in 1974 by our chairman and founder, Mr. Gerald Engström. In our last fiscal year, we achieved a total annual turnover of around about 1.1 billion euros. Systemair was listed on the Nasdaq Nordic Stock Exchange Market in October 2007, and today we proudly operate our own sales companies in 51 countries, together with 26 factories in 19 countries. and without about 6 900 employees in system air we are present and sell to more than 135 countries around the world and by that going directly into slide number four a short strategic update of our first quarter We recorded a further positive growth trend in all markets except Eastern Europe. And this despite the challenging market environments we see around us today. In the quarter, we also made a nice acquisition of the company Nadi in India, a leading producer of industrial fans. I will come back to that later in this presentation. We also acquired a new manufacturing facility in the Kingdom of Saudi Arabia to meet the capacity demands that we see in that region. Some other recent highlights in the quarter. At the recently concluded Eurovent Middle East meeting, Systemair public affairs representatives were invited to join and share its expertise in the roundtable discussions. As you know, Systemair as a group is proud to be a driving force in shaping the future of ventilation. actively contributing to more than 50 industry associations worldwide. Every quarter, we also proudly present some of the product launches that we bring to the markets. Here in our first quarter, we successfully launched a major product, which is our new fire dampers and backdrop dampers from our system at Slovakia factory to the European markets. For us, the serviceability, ease of installation and certified performances are top level in these fire safety products. And then going into the next slide, slide number five and looking into the markets. So let's have a look at the markets in the quarter. As you know, we have a global and diversified customer base, which provides us with a solid foundation for this profitable growth. Looking at the different regions, starting with the Nordic region, which represents 14% of our total turnover in the quarter, same as the same quarter last year. Western Europe has 45% share and is thereby compared to the same quarter last year, an increase from 45% to 46% share of our total turnover. Eastern Europe is stable at 13% share and North America shows a smaller decline from 13% to 12%. Other markets, which, as you know, incorporates North Africa, Turkey, Middle East and Asia, is continuing its growth path and shows a stable 15% share of our total share in the quarter. By that, we continue with a closer look at the financial outcome in the quarter and I hand over to Anders.

Thank you, Roland. First of all, the net sales amounted to 3.094 billion compared to 3.111 billion last year. This corresponds to a decline in sales of minus 0.6%. The decline, however, relates mainly or only to currency conversion effects. Organic growth was positive with 5.7%. We can conclude that the fourth quarter in a row, we are reporting organic growth in a relatively slow but recovering market. Slide number seven. To give a bit more details behind the net sales development, we saw organic growth in all regions except for Eastern Europe. In this quarter, there are no acquisitions affecting the growth figures, and the acquisition of Nadi in India will be consolidated starting from the next quarter, our Q2 report. And then finally, currency effects. The strengthened Swedish krona resulted in negative effects on sales by minus 6.3%. Our main currency exposure is towards Euro and Canadian and US dollars. Going into slide number eight, we come then to the geographic breakdown, and I will focus on the organic growth rates for each region then. Starting off with the Nordics, where we saw a growth and a positive development also in this quarter in Sweden, Finland, and Norway. The Danish sales declined slightly in the quarter. All in all, a continued positive organic growth in this region of 6.4%. In Western Europe, we saw organic growth of 5.8% for the quarter. Within the region, we experienced a positive development in Netherlands, Italy and Spain, while the German market is still not on track, along with countries such as UK and France. We are although happy to see yet another quarter with positive organic growth in Western Europe. In Eastern Europe we experienced a weaker quarter with organic growth of minus 0.7%. Sales increased in Czech Republic, Slovenia and Estonia while Azerbaijan, Lithuania and Poland declined. Last year we did some project deliveries in Azerbaijan and sales in that region tend to be quite volatile from quarter to quarter due to the high share of project driven sales. Going then into North America, the organic growth rate was 1.4%. We saw good growth in U.S. while Canadian sales contracted. There's a stable demand in North America on our commercial and residential products, while school ventilation is currently on a lower level than one year ago. The ongoing tariff discussion is creating a more volatile market. As described earlier, we have a regional production strategy with factories both in US and in Canada. And if needed for economic reasons, there are possibilities to transfer production volumes from Canada into US to mitigate these effects. At the moment, we are only affected by minor effects from the tariffs. In Middle East, Asia, Australia and Africa, we had an organic growth of 14.3%. This increase was mainly driven by increased sales in India, Saudi Arabia and Turkey. In India, we had in last quarter some delivery constraints while moving the production in Hyderabad. But that is now all sold and we are back to normal delivery capacity. All in all then, the total organic growth amounted to 5.7%. Then slide number nine. Our gross margin for the quarter was again strong and amounted to 36.4% compared to 36.0% in previous year. We are really happy to see this continued positive development. This is due to the contribution from implemented restructurings, cost reductions, but also favorable product mix, despite also the negative effects from currency, especially in our Swedish operations. Our adjusted operating profit amounted to 288 million or an operating profit margin of 9.3% compared to 9.8 in last year Q1. The adjustment for the quarter relates to capital loss in an associated company of 5.7 million and costs related to the replacement and hiring of a new CEO of 14.6 million. Selling and admin expenses in comparable units increased by 28.5 million. Going on to slide number 10, profit after tax amounted to 193 million compared to 210 last year. Net financial items for the quarter were negative by 2.7 million compared to minus 16.8 last year. Currency effects on bank balances and loans were positive and amounted to 12.4 million. Interest expenses amounted to minus 12.4 compared to 15.6 one year ago. Tax rate for the period amounted to 27.3%, which is more or less in line with last year. with a cost for the tax of 72.4 million. And then slide number 11. This would be my last slide and a positive cash flow development for the quarter. Despite an increase in the working capital of 91.6 million, we see the free cash flow of 108.4 million compared to 91 million same quarter last year. Within the working capital, the increase in inventory and trade receivables was less than last year. Net investments in the quarter amounted to 109.7 million, mainly relating to investments in our factories in Saudi Arabia, Sweden and Norway. Looking at the debt situation, we continue to decrease our loans and it amounts to 830 million currently compared to 1 billion 56 million one year ago. Our adjusted net debt to EBITDA amounts to the very low 0.52. And we have plenty of headroom for strategic M&A and further investments going forward. And by that, I hand back to you, Roland.

Thank you, Anders. And changing to the next slide, which is Tid. And here, coming back to that I already mentioned in the beginning of this presentation, that Systemware acquired Nadi Air Technologies in India. In August, we completed the acquisition of Nadi Air Technics Ltd. This company with more than 70 years of experience in designing and manufacturing industrial fans with the company headquartered in Chennai in India, where they are producing high performance centrifugal blowers and actual fans for multiple advanced applications and today have an annual revenue of around about 13.5 million euros and 220 employees. Their actual achieved profitability is slightly above system as target margin. And now they will not only strengthen our position in the growing Indian market, but will also bring valuable expertise with very strong potential for international expansion to the group. But then I go to next slide, slide number 13. Next slide, slide number 13, ladies and gentlemen. As Systemac carries the brand Menerga and its units probably in our product portfolio, we of course also want to highlight what we can achieve with this. The Menerga units are designed for highest possible energy efficiency and humidification. That's why we're proud to be able to present this new project where we are part of a new way to build community swimming pool holes. The structure of this new building is designed with 30 to 40% less concrete, resulting in a significantly reduced CO2 footprint. It also incorporates substantially more wood in the main construction. We're in the Nordics. Highlighting sustainable middle building materials, of course. With our units as base, it features a unique energy-saving solution with MANERGA's key partner in achieving this outstanding efficiency. The project itself is located in Nacka in Stockholm and consists of a new swimming pool facility and surrounding installations. This building will cover a total area of 5300 square meters and the project schedule is running from 2025 to 2027. Very exciting and we look forward to its inauguration. Switching to next slide, ladies and gentlemen, slide number 14. Systemair is proudly supplying actual fans for demanding environments here in Stockholm. Systemair has been entrusted to deliver ventilation solutions for the Stockholm Metro Blue Line extension. a major infrastructure project expanding the line from south to north and serve the route and the extension that will increase the capacity between the north and southern Stockholm and enable new housing developments in the region. The order includes jet fans and actual fans for emergency and tunnel ventilation across seven new stations. This long-term project underscores Systemair's strong position in providing tailored energy efficient and sustainable ventilation solutions for complex infrastructure investments such as metro tunnels, railways and airports worldwide. This blue line extension is scheduled to open in 2030. Going to next slide, slide number 15. This is the last project I would like to highlight in this presentation. It's the new swimming pool project Kursko in Slovenia. Systemair Slovenia secured this project for a new public investment for the Kursko swimming pool facility. The delivery includes not only air hanging units along with water-to-water heat pumps, which are integrated into the hydraulic system for sanitary water, but in addition to the project features a Menage Aquacon heat pump solution that recovers energy from wastewater generated by the pool filtration system. This order, that's for the presentation, this order is a showcase of advanced technical solutions and clearly shows that our sales engineers have the competence to combine our products to high efficient and sustainable solutions. Next slide, slide number 16. As you know, ladies and gentlemen, we have already established our first made in Saudi production in Riyadh in Saudi Arabia. Though for us to continue to grow according to the market demands, system will have to expand capacity, the offering and shorten the delivery times. The solution to this problem is our new acquired facility, which allows us to do so. Our new production facility in Saudi is our second in order. We take a next big step forward in the local expansion with the establishment of this new factory facility located in Maldon Industrial City, one of Saudi Arabia's most prominent industrial hubs. With this new plant, which is covering 13,500 square meters, we are considerably enlarging our production footprint. The new facility will increase our capacity to meet growing demands in Saudi for a wider range of system air manufactured products made in Saudi Arabia. The launch of this new factory is scheduled for October this year and will begin its full scale production by January 2026. And by that, ladies and gentlemen, I switch over to slide 17 and open up for Q&A. Thank you so much.

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 Joan Sunmark from SEB please go ahead yes so good afternoon and thank you Roland and Anders so if we start with the

organic growth development it seems like q4 was sort of a bump in the road negatively is it fair to sort of say that the momentum that you see now could continue similarly positive and maybe accelerate even or do you rather see more uncertainty in the horizon now that you have sort of entered h2 in the market

I would say then, if I start to respond a bit on that, for the Nordics and Western Europe, I mean, the trend has been positive now for several quarters in a row. So I think we can expect that to continue like that. Maybe not, you know, on 100%, but still positive note, so to say. eastern europe more volatile but we don't see any any fundamental problem in the demand there and then the us that was maybe a bit more negative last quarter now more back to the normal situation but of course and due to tariff discussions and everything else ongoing there that we can expect some turbulence but and in in the other regions we we see it positive what we had last quarter there with the closure of the factory and or or the move of the factory that was a one-time effect yes okay okay that's clear and then

In terms of the German market, it seems to continue to decrease. Are you seeing any signs there of improvement or what's sort of your base case for the rest of the year in Germany?

Yeah, there's of course a really good question, which is hard to answer. For us in Germany, we at least for our business today, we would rather see a flattening out. It's not further decreasing, but it's flat and stable. The question, of course, is when will it turn to be a clear, a positive increasing business? I cannot say that today. It's a little bit too vague. If you look at the available normal outlooks by 2026, it is at least forecasted to be on a positive again. But it's too early to say something actually here.

Okay, that's clear. And then final question on the growth margin. So do you expect this level to be sort of where you're at now, or do you think that there's more to be done to even get it up a bit further going forward?

Yeah, I mean this is a long-term project for us to improve the gross margin and I think what we are seeing right now is also partly then effects of the relocation of the production from Menarga in Milan to Slovenia but there are various reasons behind also them and of course with an organic underlying growth in the nordics and western europe i think we we could be fairly optimistic here going forward but and then you had also we were a little bit we had the currency against us also so there could be more i agree okay fair enough thank you for that gentlemen thank you thank you

The next question comes from Carl Ragnarstam from Nordia. Please go ahead.

Hi, it's Carl here from Nordia. A couple of questions from my side as well. Coming back to the gross margin, 36.4%. Could you help us split up the different parameters here? You mentioned effects. You also touched upon mix in the report. Because given the organic growth you are presenting, it feels like you don't really get the sort of drop through it deserves. So how should we think around the operating leverage here on the gross margin in the quarter?

We haven't specified that in the report, as you see then. And of course, I mean, if you talk about, for example, the restructuring down in Manerga, that is a project that is going step by step. And sometimes you follow the plan, and sometimes you fall a little bit behind. And I think there's also a learning curve on the receiving entity here also. And that is also happening as we go along. Now, I don't want to give any specific figures here. They all count in here, really. If we look at the currency effect there, maybe I can help you a little bit with a figure. Then we have specified in the annual report, I think, that it's around 5% change in the currency of EURSEC. It gives an effect of roughly 60 million, I believe. And I would say that half of that relates to the Swedish business, really, which is having a headwind, which is not really, you know, changing the sales, but it's only changing the profit margin since they have a loss of turnover in euros. If that's clear. Yeah. I just and also I always know you have this. Okay thank you and please. Now if I just to define the word here regarding you know we have the project-driven business also and that affects the margin as well then and that's the the mix problem here really to specify you know how much that is. So it was a negative mix in the quarter? In this case, it depends on where you have the projects as well. If you look only on Eastern Europe, it was more positive than since we had these deliveries to Azerbaijan last year. But in that specific case, maybe the margin was not that bad. So it varies. Sorry not to be able to give a more clear answer here, but it's a lot of... Okay, fair enough.

And also touching upon the gross margin here. In India, it is of course great to see in the numbers that you're recovering nicely with the production ramp up. When you're doing a production ramp up in, let's say, this case India, what are the margin impacts on the gross margin level when you're ramping the production that heavily? Does it lead to inefficiencies? Or is it a usual drop through, you'd say?

Yeah, in India, as it looks today, and those projects that we're serving with our strategy that we're following in India, as you know, we're only going for, let's call them the high quality projects around the top of the positioning levels, where normally the prices are not very, how to say, not very low, very moderate for what we're doing. Which means also that for us, the ramp up as such is to train, to learn and to get in more people to help us on the production lines. We will at the second and third step, we will also need to invest more on the machinery and manufacturing side, but that's not where we are today. So I would say that a big part of the volume increase is also actually a drop through in India, where our profitability is much higher than our peers in the local market, absolutely.

Okay, very helpful. And the final one, if I may, is on U.S. You mentioned the uncertainty is still in North America, which is fair given the, I guess, current turmoil. Could you help us a bit understand what you see, especially on the RECI side that could be vulnerable from the price increases as well as consumer confidence fluctuation? So what you see there and secondly on that is a bit on the Canadian market, if you have seeing that you saw that you've seen it, I think you said decreasing. Is it worsening or is it flattening out at the low level, you say?

All in all, I would say that the impact for us to start there with the turmoil and discussions on tariffs is so far very minor. In the beginning of this week, there were some new developments that we still need to look into. But given overall, I would say if you compare it to the last quarter and the same quarter the year before, we had actually in the last quarter, our last fiscal year, we had record high volumes of residential units to the market. It's of course very hard with these comparables. So that's one of the positions. But I would say that we have normal volumes just now. The Canadian market as such, we don't see any considerable heavy downtrends or something like that. It's a stable and good and healthy market for us. The Canadian market at the time being more stable and maybe more interesting than per se the American market. American market though has gone from a little bit more volatile as Anders was into, a little bit more stabilization but of course very, how to say, they're cautious in their behavior and in their orders. Just due to the discussions around everywhere.

On the school ventilation side, we have been delivering here for some time.

Okay, very clear. Thank you.

On record levels and, you know, so it's coming down more to a normalized level, I would say, not to a low level. So that is what's happening. Sorry for the delay here in the responses. It seems to be some lag in the technology.

Yeah.

That's fine. Thank you so much. It's all for me. Thank you, Carl.

The next question comes from Anna Woodstrom from DNB Carnegie. Please go ahead.

Hi, Roland. Hi, Anders. Thank you for taking my questions as well. So firstly, I would like to go back to the German markets. that seems to remain in decline with maybe some signs of stabilization. Are there any subsectors that perform a bit better or a bit worse or is it very general in that market?

Yeah, that's a very good point, Anna. For us, as you know, in Germany we are manufacturing actual fans for industrial MRT applications and that is to us still a rather stable market with a consistent demand. um we see on the commercial uh ventilation side it's a little bit more volatile and still not really recovered but as said before in this call uh all in all we think that the german market and the customer behavior at least is stable and also when we follow our peers we we get the same signals back it is stable not declining but we don't we don't really see the upturn yet which according to common understanding and discussions, it has to come with incentives, political achievement, this kind of thing. So we think that the market is healthy, but it needs to pick up.

Okay, great. Thanks very much. similar trends, like looking on Europe as a whole, because both the Nordics and Western Europe seems to be quite good momentum for several quarters now. Is that driven by like any specific subsectors or

Overall, if you look at Europe, including West Europe, Northern and South, I would say overall, we see a trend, of course, as we all know, residential is not that strong anymore. The commercial is stabilized, but not on the highest level, on the lower level than before. And still industrial investments and infrastructure are today promising areas for engagement in our business. That's the same picture all over Europe, I would say today.

Okay, great. Thank you. And my last question is on M&A. I think the acquisition sounds very interesting and like a good fit for us tonight. Is there many of those kind of companies in that region specifically to find or is it sort of a unique find that you found?

I think all M&A cases need to be unique finds, Anna, that first. But let me say like this, what we were looking for and what we're following, of course, is to strengthen our approach in an application, the industrial part of the ventilation business. So we have now, with the acquisition of Nadi, we're very happy about the surplus in knowledge and manufacturing capability. for that part of the world. Of course, we're still interested and also find that in the other regions where we're active, we're partly we're doing it ourselves. But to add on similar businesses in other parts of the world is, of course, still of interest. So it's not the end. We're looking.

This is super short follow up on that one. When trying to expand into the industrial part of applications, is there a clear difference in the business dynamics, like having more service or different kind of pricing, etc.? Or is it very similar to your current structure?

It's a good question, Anna. It's a little bit different set of customers. It is that typically the products are not so standardized. And it's typically also that it is longer lead times, but it's a stable and it's a good margin business. And to your question, it's also recurring service. Absolutely.

Okay, thank you so much.

Thank you, Anna.

Perfect, thank you. That's all for me.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

All right. If we don't have it.

The next question comes from Adela Dashian from Jefferies. Please go ahead.

Hello, gentlemen. Good afternoon.

Good afternoon.

Afternoon. A couple of questions for me. Firstly, on the lost sales, I guess you could say, from the Indian factory relocation, or maybe not lost sales, but the timing effects of that. Do you feel like you've fully caught up on that now or will we continue to see some catch up in the coming quarters?

Yes, we have caught up a little bit, but we are continuously increasing the capacity in that new established factory. As I said, we were moving into a new factory for around 20,000 square meters manufacturing surface, moving out of a 5,000 square meter big one. And the move was the biggest impact of the loss in this volume that we reported. Now we've started and we are now, of course, increasing capacity to look for best possible outcome when it comes to delivery times for our customers, but at catching new orders and, of course, increasing our total volume in the near future.

Got it. Appreciate that, Kalle. Could you, alongside that, maybe also specify where you see your CapEx levels from here on out then?

Yeah, I think for the coming year, it's somewhere around 350 million, something like that. They come in 12 months.

Okay. That makes sense. And then maybe lastly on the, you know, you mentioned here that you had some negative mix effect that impacted the profitability. It seems like you were focusing in more on the project mix rather than regional mix differences or is there a combination of both?

I would say there's a combination of both. If we do in specific regions where we have more project driven business like Eastern Europe or other markets, then we deliver to bigger projects that normally tends to be with a lower margin. So it goes hand in hand, I would say.

And do you have quite good visibility then for the near term?

Soren, come again.

So you have quite good visibility then on what you're supposed to deliver in the coming quarters. That could suggest maybe a continuation of the dampened margin trajectory. Or you feel like it could be a quicker turnaround

Yeah, as I tried to say a little bit on the response to Carl here earlier, I mean, also some projects, some regions could also be with better margins. So it would be incorrect to say that it's constantly, you know, the bigger projects that push down the margin. So it could be different depending on the product and on the geography also. So sorry, but it's not really... that easy to give a straight answer on that.

I guess what I'm trying to get to is what the average lead time is on the project to have a better flavor of what your visibility looks like.

That's a little bit, to Anders point, that's a little bit our problem in this, our problem. You know, project business is per definition can be air handling units, can also be actual fans. The actual fans would in that case be in infrastructure projects where the project execution is somewhere between six months to two years and the air handling business between six weeks and six months. So it depends on the projects and it's very, very hard to give a common answer to that.

And the competition in that region, I suppose, as well. Yeah.

So it's a little bit, when you're into the project business, it really depends on the project demands, project by project. So it's very hard to have one solution to all.

Got it. Got it. All right. Thank you so much.

Thank you, Adela.

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.

Yeah, I think we have two written questions. One from Henrik here at RedEye regarding Nadi and new business areas here. I think you have more or less already responded to that, Roland. um yes correct and the second one which cost items in the p l includes the non-recurring cost and then i i can respond to that it is the the bigger part here is the admin expenses then for changing ceo and for the other parties other operating expenses regarding this capital loss on this divestiture that we did. Hope that responds to that question and that's all the only two questions we got here in the chat. So I think maybe Roland do you want to conclude the meeting?

Yes thank you Anders. So ladies and gentlemen thank you very much for calling in. We presented our first quarter where we think that we really present a strong organic growth and given the market situations out there we're fairly happy with that. Today we will after this one now hold our annual general meeting with more than 130 people being here in Skinskatteberg at our headquarters and of course we're looking forward to presenting our second quarter in beginning of December. Yeah thank you very much all for calling in and looking forward and take care thank you very much.