Systemair AB (publ)

Good morning everyone Anders Ulf here and we're welcome to the presentation of Systemware's second quarter report for the financial year 2025-26. This will be the last report presented by our CEO Roland Kasper and I would like to take the opportunity to thank Roland for a very good cooperation over the years. We will now start off with a short presentation of our second quarter and then we will open up for questions. presentation you will find as usual on our investor relations website and by that I hand over to Roland.

Thank you Anders and good morning everyone welcome to our second quarter report. Let's dive into the report right away by that switching to our second slide which is a little bit of the agenda. We'll start off with a short summary of system area in brief then a summary of the first quarter Then we go into the Q2 financials, follow highlights out of the ongoing quarter and some product launches. And by that, we will then conclude into some Q&A at the end. And let us go directly into the next slide. Slide number three. System Air in brief. System Air, we are operating based on our core values of simplicity and reliability. The business concept is to develop manufacturer 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 quality. As you know, the company was established in Skinskatteberg in 1974 by our ex-chairman and our 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 out of 26 factories in 19 countries. With our about 7,200 employees in Systemair, we are present and sell to more than 135 countries around the world. Switching to next slide. And here's some updates of our statistics. So a short strategic update for our second quarter. And a nice moment to start with. In the reported quarter, we have an all-time high in sales and operating profit. We see a positive growth trend in all markets in the quarter, which is an encouraging development in Central Europe. And we expect also recovery from current lower levels moving forward. In our second quarter, we moved into our new manufacturing facility in Saudi. This is a continuation of expanding our capabilities in the important market with Made in Saudi products. Moving over to some recent highlights here, Ashok Das, our mentioned director of System Air in India, was elected new AMCA president. Ashok Das' presidency will focus on aligning AMCA's initiatives with major industry megatrends. Also Bertrand Poirier, Our PA officer in North America, out of Canada, has been elected chairman of the board at the Home Ventilating Institute, HVI. Now with Ashok Das MD as president and Amca International, and Raul Corradera sharing Eurovent, and Bertrand now leading HVI, Systemair's ambassadors will help shape better certification standards worldwide. We are proud to contribute to more than 50 industry associations worldwide. Also to highlight in the quarter, we finalized the acquisition of Nadi in India, a market leading manufacturer of industrial fans. Finally, I also want to mention some product highlights. In the quarter, Managa was rewarded for its CO2 Compass air hand units with integrated heat pump at the Atmosphere Europe Summit. I will come back on that later. But also in Asia, systemized air hand units were a major highlight. at the recent Marbex exhibition in Malaysia, where they received the prestigious Product Excellence Awards. We are proud of these achievements. Next slide, slide number five. So let's have a look at our markets in the quarter. As you know, we have a global and diversified customer base, which provides us with a solid foundation for profitable growth. Looking at the different regions, starting with the Nordic here, which represents 16% of our total turnover, the quarter unchanged western europe has 45 percent share and is thereby compared to the same quarter last year and increased from 45 to 44 to 45 percent share eastern europe stable at 13 share and north america shows a smaller decline from 12 to 11 percent share in the quarter other markets which as you know incorporates north africa turkey middle east and southeast asia is continuing its growth path and shows a stable 15 share for total sales in the quarter By that we continue with a closer look at the financial outcome and the quarter and I hand over to Anders.

Thank you Roland. We are happy to summarize our second quarter that from seasonality normally is the best during the year. This quarter we achieved a sales record with 3.271 billion. Start of the quarter was rather slow but it has been picking up month by month and October was really good. Our increase in sales amounted to 4%, but we have had rather high negative effects from currency conversion. So the organic growth was 8.2%. We can conclude that for the fifth quarter in a row, we are reporting an organic growth in a relatively slow but recovering market. We go to slide number seven. We give a bit more details behind the net sales development. We saw organic growth in all our regions during the quarter. As Roland stated, we have completed also the acquisition of Nadi in August, and that contributes with 1.4% to net sales. And then finally, currency effects. The strengthened Swedish krona resulted in a negative effect on sales by minus 5.6%. It comes from the conversion of Canadian and US also euros. Heading to slide number eight. Then we come to the geographic break to focus on the organic growth rates for each region, starting with the Nordics, where we saw growth and continued positive development in the quarter in Sweden, Finland and Denmark. However, the Norwegian market declined in this quarter. All in all, a continued positive organic growth in this region of plus 4.2%. Going to Western Europe where we had an organic growth of 11.1%. Within the region we experienced a positive development in Germany, Italy and Netherlands. We are happy to see positive signals from a low level on the German market. The sales development in UK and Spain was negative for the quarter. All in all, the organic growth in Western Europe was really good, but we need to remember that we are facing rather weak comparables. In Eastern Europe, we had an organic growth of 5%. Sales increased in Czech Republic, Poland and Slovenia, while Azerbaijan and Hungary declined in sales. In North America, the organic growth rate was 5.1%, but the signals in the market is currently mixed. Part of the sales increase relates to price increases as a consequence of the implemented tariffs. In Middle East, Asia, Australia and Africa, we had an organic growth of 10.1%. This increase was mainly driven by increased sales in Saudi Arabia, Australia, Malaysia, while sales in Morocco decreased. All in all, as stated before, the total organic growth amounted to 8.2% for the group. Going to slide number nine. The gross volume for the quarter was again strong and improved to 37.7% compared to 37.3% last year for the same quarter. We are happy to see this continued positive development. This is due to the contribution from implemented restructurings and cost reductions, but also from the good organic growth. Our operating profit amounted to 390 million or an operating profit margin of 11.9% compared to 11.0% last year. Selling and admin expenses in comparable units increased by 9 million. Slide number 10, profit after tax amounted to 265 million compared to 236 last year. Net financial items for the quarter were negative by 37.4. Currency effects on bank balances and loans was negative and contributed with minus 16.3 million. Interest expenses amounted to 18.8 million compared to 19.2 last year. Tax rate amounted to 24.8%, which was 2% lower than last year, which was on the higher side. Slide number 11, the cash flow development for the quarter. We achieved a free cash flow of 188 million. Within working capital, there were a significant increase in trade receivables of 180 million, mainly due to increased sales at the end of the quarter. Net investments of 140 million relates to a larger extent to the production capacity investments Czech Republic, Sweden and Saudi Arabia. Net debt has increased mainly due to investments in our factories and the acquisition of NADI. The adjusted net debt to EBITDA amounts to 0.73 and we have headroom for further strategic M&A and investments for further organic growth. And by that, back to you, Roland.

And changing over to the next slide. Thank you, Anders. So, heat pump innovation of the year award for Menarga COMPASS-HU. Yes, as mentioned shortly in slide number five, Menarga was rewarded for its COMPASS air hanging units with integrated heat pump at the Atmosphere Europe Summit. As the demand for sustainable cooling and heating accelerates, businesses must navigate a landscape of solutions that eliminate ozone depleting substances, PFAS and global warming potential. At the ATMA conference, the industry explores the latest accomplishments and the drivers behind adopting clean cooling technologies, focusing on both natural refrigerants and refrigerant-free innovations, including caloric cooling. That the Compass HQ uses R744, which is CO2, as a refrigerant with minimal global warming potential, PFAS-free, non-toxic and non-flammable, led to this reward. It is designed for public pool humidification, and the unit also heats the pool and provides domestic hot water. With the Menarga Compass unit that was unveiled for the first time at the ICH, the large exhibition in Frankfurt earlier in 2025, this year, we are of course very proud for the further technical development within Menarga. With that, I move to the next slide, slide number 13. The next project is the new Mercedes-Benz car factory in Spain. It's actually Mercedes-Benz second largest car factory, which is located in Vitoria in Spain. This plant is now being further expanded with the brand new production lines for electric vehicles. For the new paint shop system, I will supply multiple high performance Genox air handling units. The order, which is valued at 1.3 million euros, demonstrates our capability to deliver energy efficient solutions that meet the needs of major global players in the automotive industry. The first electric vehicles will roll out from the factory in later 2026. Moving over to the next slide, slide number 15. The last project that we share here is a very special high innovative, improving efficiency and environmental impact. The high energy efficient chemical operation in the port of Antwerp, where Systemair has signed a contract with Alpha Technical Installation, working on INEOS project one. is aiming at becoming one of the most energy-efficient and raw material-efficient olefin complexes in Europe, with minimal environmental impact at its core. System Air's order includes large actual fans and modular air unit systems equipped to meet EU directives for dedicated equipment in explosive environments. The high ventilation capacities combined with safe operation in environments where explosive gases may or do occur making suitable for such industries with strict safety requirements and for us this project is valued around about 700 000 euros with that we move to the last slide which is the q a part and we open up for questions thank you very 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 Sundmark from SEB. Please go ahead.

Hello, and good morning, Anders and Roland. And congrats on a very nice development in this quarter. So if we start a bit on the margins, you mentioned it briefly, but could you perhaps share a bit more on the sort of gross margin drivers here in the quarter and perhaps also give us some color on the improvement? You would say that it's driven by Menegia as well.

Yeah, I mean, it's not one answer that could answer this question. It's many factors that has had an effect here. Menerga restructuring and the move to Slovenia, one of them, but general savings we have done in many factories overall. And of course, very good help from the good organic growth in this water, I would say. Even though we have, as we stated last quarter, that we have the currency against us in the Swedish operations also. So we see this really strong.

Sorry, yeah, go ahead. No, sorry, sorry. But do you expect, do you have sort of more restructurings coming up or do you expect that this is sort of where you anticipate the gross margin to be going forward as well?

I think we have said before also and stated that with Menerga and the move there, there's of course a learning curve in that as well. As we are ramping up and we are getting more and more efficient in the production in Slovenia, that helps and that improves really. There's always things to work with also to improve further and there is potential if all the stars are aligned and so forth. absolutely potential to get higher but yeah of course we need to have continued good organic growth also.

Sounds fair and then if we move to the markets and start with the German market you seem way more positive which is very nice to hear. But would you say that the increased demand that you see now in Western Europe already is reflected in the organic growth driven by Germany? Or is it rather something that you see in the order intake or quotations out there?

Johan, it's a very good question. But in general, we would rather see that the European construction market is a kind of a stabilization phase. So we had two years of contraction but now construction is more in stabilization phase and we see for example in Germany that the building permits are picking up. So what we see ahead of us is more positive but it's hard to determine if that is really hard to say how much it will lift because we're coming from very very low levels. I think the total construction growth in 2025 is somewhere at 0.2% growth, which is of course very low. So it starts getting improved, but it's very hard to predict when exactly we'll see the bigger, how to say, positive impact. For us, it's more that we have been able to gather more of the projects that we are aligned with in the German market. But it's not Germany as such only that is driving this good organic growth, of course. It's common overall in Europe that we see a good development in the quarter.

Okay, fair enough. Thanks for that. And then the final question on North America. You also managed to grow there some 5% organically, which is quite impressive. Yet it seems like the outlook is quite uncertain in that market. So if you just could give us some flavor on what you hear out there in terms of activity levels from your clients, et cetera.

As we said during the presentation, part of that organic growth then comes from price increases related to the implemented tariffs. So that is why we have increased prices there. The signals are mixed in the market when we meet our colleagues there. And in some areas good, other areas a bit slower for the moment. So it's not a clear picture really.

We see some applications like the residential is stronger than the light commercial, though is the outlook in the light commercial mid and long term much better. So it's really very mixed singles between just Canada and US, for example. Very hard to predict at the moment.

I see. And just to remind us, light commercial, that's some one third of North America and the rest is about the same, if I'm not mistaking.

You're totally right.

Okay, perfect. That's all for me. Thank you, gentlemen.

Thank you, Johan.

Thank you.

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

Good morning, Roland and Anders, and a big congratulations from me as well. I'm going to stick to the topic of North America. And maybe if you can go a bit deeper into the pricing crisis that you just mentioned. What's the magnitude that we're talking about here? And what is your output for the coming quarters in terms of offsetting the tariffs?

So the price increases that we have applied are mainly on the US side. And they have over the last two, three quarters. They are amounting to around about 9% on the normal. And this is to offset what we see the impact of the tariffs are on the goods into US from mainly Canada. To predict on the next coming quarters is very hard for us because we don't know how the changes will apply or even will continue. So that is the unsecure part of it.

So right now you don't have any more price increases in the plan? No. That's what you're implying? Okay, got it. Then if we move to the Nordic, I'm assuming that the weakness in Norway is pretty similar to what you've expanded on in previous quarters, or is there any news and market there that's driving this?

We see Norway for us being rather stable. It is continuing as it has been, where I would say that for us the commercial ventilation side is strong. And as you know, the residential is compared to where it has been one or two years ago is weaker, but stable. So we see Norway being positive out of the state where they are today. That's what I would say to that. It's continued.

Got it. And then lastly, on the investments that you're making, what's the timeline in terms of the more intensified investments that you're making and CapEx Outlook going into next year?

I think one of the major investments we are doing right now is the new factory in Saudi Arabia, and that is finished now. We are also extending factory in Sweden, southern parts of Sweden. That is ongoing currently. We are doing both building and machinery investments there. We need more capacity in Slovakia production wise so it's in machinery also.

And some machines that still needs to be completed also in India for the Hyderabad factory. I think these are the main parts.

These are the main for this year. And yeah, I think we are quite well invested. So I hope we can see, I mean, a lower level of investments going forward.

Great. That makes sense. That's all for me.

Thank you. Thank you.

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

Good morning, it's Carlos from Odea. A couple of questions from my side as well. Firstly, you touched upon the organic growth, picked up pace by month by month. Can you help us a bit quantifying what magnitude you saw the organic growth at sort of during the latter part of the period and also perhaps also what you've seen if it continued so far in November? You said it was a good October month. On November and I mean, obviously it's early days, but on December as well.

We don't measure organic growth on a monthly basis, first of all. So I don't have that figure. Overall, including currency effects and everything, we saw, as I mentioned during the presentation, a gradually increased month by month. And it ended with the best month in October, which was really strong. Going forward, as we have said, it's an uncertain market situation right now. There are both positive and negative signals out there, but we see more of a normalization and recovery signals, but also uncertainty signals in some of the markets.

Okay, that is clear. Coming back to just Western Europe and organic growth, Any large, particularly large orders that sort of boosted organic growth in the quarter? Is it just sort of or mostly bread and butter business? And also, if you can touch a bit, you talked about the demand by obviously geography, but it would be good to hear if you can split it up by end market replication areas as well, if you see sort of infra continuing at a good pace, including tunnel ventilations or what dynamics you see there.

Yes, Carl, good question. So in general, I would say it's more, as you stated or framed it, the bread and butter business. So it's overall an increase. It's not a certain bigger project that are sticking out, not at all this time. And for us, I would say we still have a stable demand, I would say, in certain applications related to industrials, but also to renovation and upgrade of existing projects. The orders on new build is still less intense than on the renovation than also on the different industrials. So industrial side and the renovation are the stronger drivers and it's more common orders, no big ones sticking out.

I think those are the ones that we In sizes, yes. With the core factory and the chemistry industry.

These are the sizes that we have.

Okay, that is very clear. And as we also touched upon here, you've announced quite big expansions in square footage in production capacity over the past 12-24 months here. well at what capacity utilization rate are you currently running the company at including the i mean both now and including the announced capacity and where is an optimal level you also said that you probably will see a slowdown in square footage added the meaning that should we then interpret a stronger than historical operating leverage on on on the organic growth over the coming quarters or even years?

In general, when I can start to this, of course, as you know, our investments in our machinery, in our capacities, of course, not going stable upwards. It's coming in waves, if I could say like that. We have now recently, we have done a lot of capacity investments, right to your point. If you break it down per regions, for example, I can still say that it's in Middle East and Southeast Asia, it's just to catching up to be able to bring down the delivery times that we have on the customer demand side, because we need to ramp up capacity in those countries. So that is even that we are running behind a little bit. On the European side is that we are, of course, building up capacity for coming development for future. The main parts that we have done here as a capacity increase, I would mention Lithuania, for example, but then also machinery investments to raise efficiency in certain factories, and of course also be able to handle higher capacities. In general, how much capacity is left? I would say Europe will be on the highest side of left capacity. I would say that our utilization is around 70-80%. And of course, that makes us prepared for the growth that we all expect and see to come in ahead of us. We like to be a little bit invested before to be able to cope with the demands from customer in early stage and take market shares by that.

Okay, very clear. And then finally, sorry for that quick one on the US with the price increases. Firstly, is it the full effect we see of the price increases in the quarter or Will you get incrementally more in Q3 here? And the second part of that is what you see in terms of market shares. If you're losing market shares owing to the price increases or if you keep up with the market.

In general, I would say when it comes to What it does on the market share is we are keeping up with the market for the time being, which is nice to see. If there are some more effects to be expected, not what we can see today at least. But as I said, this is exactly the uncertainty that we also see on the market itself. We don't really see what is coming the next couple of months or weeks even as impacts on these tariff discussions. It's quite volatile.

No, the pricing question was more if you raised prices the first month of the quarter and we saw the full effect during the quarter more than, or if you raised during the latter part.

Roland, you mentioned a little bit before that in North America, we related to price increases here during the last two quarters. So this has been done. Okay, thanks.

you thank you the next question comes from anna woodstrom from dnb carnegie please go ahead hi roland hi anders um thank you for taking my questions as well um i just wanted to come back to to the german market we've been talking about it in several questions but um is there

similarity in your comments on the general Western European market on which specific sub segments in the country that stands out positively if I get your question right to me it's more that what we see in the German market versus the other European markets I would say the other European market are slowly but but they're gradually improving and picking up The German market is now, in this quarter, what we can see are the orders picking up, but subsequently from lower levels. As I said also earlier, the construction market overall in Europe, according to latest reports, has just improved 0.2%, which is, of course, to a large extent driven by the German development, which is, as I said, on low demands. What we don't see, again, coming to different science, we see that the billing permits in Germany are going up. Again, from low level, but I think since start of the year with 25%, which of course gives us some hope for next year. So that is a good figure we think to look at.

Okay, great. And then I just wanted to ask if you could give us some more details on how the status is on this scale up in, for example, India and Saudi and other markets outside of Europe and how this is impacting profitability levels today and your expectations going forward.

As we already covered a little bit North America, I would just now then start with the Middle East. As Anders also said before, we have just moved in, as also said in the report, in our new facilities in Saudi. Here we are starting up the production and scaling it up to what we expect today be at the level where we can utilize it to the full extent by end of February. That's the plan. So in this our year. When it comes to India, as you know, we opened up the factory in Hyderabad to add on capacity. This is still on the upscaling. We have already doubled from where we started when we opened up the factory in March. We still need to do another doubling of where we are today. That's why also the mentioned machine investment will come in and we need to bring it up to be even more there. So it's a good development in those countries and those regions that we have. Also in Malaysia, we have moved our factory for the air hand units from a smaller premises to a double as big to also there be able to scale up to the customer's demands. That also was done and completed in this quarter. So we are really looking for fulfilling customer demands here more, which is a nice position to have, but still troublesome. So these are good areas for us, and they are absolutely contributing to the bigger picture for us.

But then going into all of these factors, when you're scaling up here, is that going to have... different impacts on profitability levels than we're seeing currently, or how do you view this?

It will have a smaller impact, absolutely, yes. But saying that, that already today, those regions that are already mentioned here, they already have a good impact, but they will contribute a little bit more even, yes, absolutely.

Okay, perfect. Thank you for taking my questions.

Thank you, Anna.

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

All right. We have a question also in the chat here. It's about the order backlog and if it's improving in line with sales. What to say about the order backlog and all that?

Yes, you know, we don't have as long visibility as many of our competitors as we have a slightly different business model. We have 40-45% of our turnover is generated by selling commodity ventilation products from stock. There, of course, the visibility is, yeah, we don't see because it's handled day by day. On the project side, Yes, I think the order backlog is going in line with sales. And we are quite happy with that development over the last two, three quarters. That's correct.

All right. I think that was all the questions we had. You're very welcome to contact me or Roland if you have any further questions. Other than that, we have a Q3 then coming up here in March, 5th of March. So that will be the next. Something more from you to conclude the call, Roland?

Yes, of course. As Oliver said, this is my last call, the second quarter of Systemair in the year 25-26. I'd like to thank you all for being a part of this business. This is a wonderful company, Systemair, and I'm really pleased to be able to hand over this to Robert Larsson, who will be our CEO, commencing here by 1st of January, and So good luck to everyone. Thank you all for being part of this. And yes, thanks, first of all, also Anders for a really good cooperation during all these reports. By that, thank you.

By that, thank you, Roland. By that, I guess we end the conference then.

Sorry to interrupt, Roland and Anders. We have one more question. Is it possible to take it before we end? Sure, go ahead. Perfect.

The next question comes from Joan Sundmark from SEB. Please go ahead.

Yes, sorry, guys. Just a short follow-up, if you could give us some flavor on the Indian market and sort of how much of sales that is and how much you're growing there right now.

Yeah, the growth rate has been quite substantial in that region, of course. So I don't have any figures to pull out here right now from the sleeve, but the size of that market, it's around...

The total market size is more than a billion. But for us, as you know, we are only focusing on the upper segment, on the high quality applications in India. And for us today, it represents a turnover around about 45 to 50 million euros. The growth has been quite impressive for us. especially looking at the latest investment we did in Hyderabad, where we started from 100 units a week and the final target would be to hit 400 units a week. So not come to the end, but half the way. So it will continue to that. And we already need to prepare for the next steps in our capacities there. So it's a good market for us to be in.

Okay, thank you so much for that.

Thank you, Johan. Yeah, by that then, no other questions. We will conclude and I can only thank everyone, as I said before. And of course, not to forget, there's Christmas coming up. So also Merry Christmas and a Happy New Year to everyone. Thank you so much.