Troax Group AB (publ)

Hi everyone and welcome to the second quarter interim report for the Trowax group. My name is Martin Nyström and I'm president and CEO of the group and together with me I'll have Anders Jeklöf and together we will present the second quarter results and after the presentation we'll open up for a Q&A. So without further ado let's dive into some news and of course the quarter.

Here we go.

So the second quarter offered a very interesting macro environment, and in total we reported a minus 6% order intake growth. Europe continued pretty slowly as well as Americas, while APAC was more stable in the first quarter. If we look to North Europe, we continue to develop weekly driven by the automotive as well as the warehousing segments. Southern Europe grew in the quarter and we saw this being driven by general industry as well as the process segment. We had a good run in Americas in the first quarter, but we saw from the beginning of April that our customers have become a bit more hesitant during the quarter when figuring out and analyzing what the potential tariffs and so forth would mean. And I'll come back to this in the next slide. APAC had a very strong quarter in the first quarter, as you know, so very strong start of the year. In the second quarter, we were more flattish when we report in euros. If we look into local currencies, we also have a small single digit growth also in the APAC region. Moving over to the profitability, we came in at 14.4 EBITDA margin in the quarter, mainly driven by lower volumes in Europe, but also due to FX effects. We had a solid gross margin in line with our informal target of around 40%. We initiated a cost reduction program to get to a sustainably better place. And I'll have a slide in a few slides from here going into what that entails. And last but not least, we also had FX headwind and FX losses, which impacted the result by roughly 70 bps. Our working capital continued to work disciplinely with this, and we kept, I think, our cash flow on a reasonable level, as well as with a stable net debt. And I do think that discipline on inventory management in terms of accounts receivable, as well as accounts payable were all in good shape in the quarter and continue to be so. Which means that our balance sheet with the net debt to EBITDA of 1.1 means that we have room for further both acquisitions as well as organic investments where we think that's appropriate. During the quarter we've also made progress on some of our strategic priorities and I've decided to highlight what we have now decided to do in Europe and that comes very much back to simplifying our supply chain as well as simplifying our racking portfolio. If I then move over to I think the big news in the quarter we towards the end of June we we're released that we are taking action on our cost side and optimizing our organization a bit. And this pretty much entails three things or contains three things. During the second quarter, we have had to say goodbye to roughly 100 employees. And this is, you could say, an adjustment based on the fact that we have lower volumes, mainly in Europe as well as in the US. We have areas where we've seen SDNA efficiency potential, and of course, we've also taken our strategic priorities into account. So, based on the first part of this cost reduction program, we will see a run rate saving of roughly 5 million euros a year, which will then come into effect in the third quarter this year. The second part of the program is to streamline the manufacturing footprint in Europe. And here we think that and see that we will have plenty of benefits by moving the warehousing products and the racking products. So we will move those from Poland and move those to existing facilities in Sweden. This also means that we can manage the racking portfolio, so shelves, dividers, anti-collapse systems, in a better and more effective way. This also means that our factory in Poland will be closed, and as an impact of this, we will have additional 125 employees being affected in Poland. This will also mean that we will have a few new recruitments in Sweden. The run rate savings from the second stream of this is roughly €5 million a year, and we aim to have our Polish facility closed and have the move done by the end of this year, which means that the run rate savings will come into effect in the first quarter of 2026. So, in total, we have €10 million a year of full run rate savings coming from these two. and in the second quarter we have then booked and as reported as one offs in the second quarter we have restructuring costs including severance pay but also moving costs and some asset write downs which amount to 6 million euros the third part of optimizing our supply chain comes back to what we disclosed a few quarters back which is our investment into the north american manufacturing And we've decided to build a new factory in Tennessee. And this will do both because we need higher capacity due to the growth we have had and will have. But also we see that there is a gap in efficiency where our American operations are not as effective and as efficient as we are as we're running in Europe, which means that we have both the ability to produce more, but also to higher efficiency. And I think we're doing really good progress here according to the plan, and we will ramp up during the beginning and mid of 2026. This will also add additional savings on top of the first and the second stream of this program. But we're not yet in a position where we want or could quantify what that means in terms of money. I would also like to welcome you to our, in fact, first capital markets day. So this is more of a heads up or an early welcoming. So on the 5th of November, we will have a capital markets day in Hillestorp, where we will talk about our future vision, our business and future ambitions. You'll get the chance to hear presentations, meet a few of the group Management members will walk you through our factory and of course we'll hopefully have a lot of good discussion and dialogue throughout the day. So there will be more information and invitations coming out after the summer period during Q3. And there will of course as always be more information available at our homepage. So then let's dive a little bit more into the market and what we are seeing. And I'd say if we start with the lens through how we view the world, we are looking at this through the lens of geography as well as end market segments. So if we start with Northern Europe, we were down in total by 13% ordering take change year on year. This decline is driven by automotive, but mainly from warehousing. I'd say this, though, that we have had a general demand in Northern Europe that has been somewhat muted. And I would say, and we could already in Q2 see that there is some more light at the end of the tunnel. And I'd say that goes for general industry where we've seen growth in the quarter as well as in process. And from process, I'm very happy to see that we have a green arrow because it's also one of our strategic growth priorities where we can gain share also in this very tough market. Moving over to southern Europe which was down or which was up five percent also here automotive declined a bit as well as warehousing but also here we saw good growth coming from the process as well as the other segment so all in all we are in fact up a bit more than five percent so from that point of view I'm pretty pleased with the development in the quarter. Then moving over to Americas, where we were down 14%, and here we clearly see a shift in how the market and the market temperature has changed between quarter one and quarter two. Quarter one, we saw we were a bit more positive. Now, I think in the US, we see that customers are, generally speaking, a little bit more hesitant. A lot of our products come together with investments, and those investments, so machinery, equipment, robots, etc., are usually manufactured outside of the US, which means that they are also then very much impacted by whatever the tariff policy will be. So, I think from that point of view, it's probably not super strange we saw automotive continuing roughly on the same level warehousing on its way down where process and others were down respect and flat respectively but down all in all in Americas in APAC we reported flat when reporting in Euros if we continue or if we look at local currencies we were up roughly seven eight percent in local currency. So there is underlying growth in APAC, but due to currency, we're reporting flattish. Now, that being said, I do think that APAC, if we consider the full first half of the year, is up 40% year on year. So I still think that we have a good growth momentum in the APAC region. if we then look at this more from a product point of view I think we have a stable slightly growing machine guarding business in the quarter so a lot of this drop really comes from the racking products and the storage products which might be good to know and all in all we then reported a minus six including currency for the quarter so I'd say there are some lights at the end of the tunnel when it comes to general industry. And I'd also say that we now start to see more activity in the pre-sales on the warehousing side. So this is a segment which has been very, very slow and continue to be slowing too. But we do think that there is more activity, which then bodes well for the development towards the end of the year, as well as going into 2026. And with that, I'll hand over to Anders to run us through some numbers. So please, Anders, go ahead.

Thank you very much, Martin. I will go through this pretty quickly, as usual. I will start with the order development. In the second quarter of this year, we reached 65.3 million euros in orders, compared to 69.6 million in Q2 of last year. That is minus six. percent decline, and that goes both organically as well as in total, meaning including structure and FX. Next, please. When it comes to sales, we reached 68.7 million in sales compared to 71.9 million in Q2 of last year. That is a 4% decline, both organically as well as in total. Next. On the EBITDA side, we reached 9.9 million euros, which is 14.4% EBITDA margin, to be compared with 12.1 million euros or 16.8% EBITDA margin in Q2 of last year. The decline mainly comes from the drop in volumes, whereas Martin said before, we kept the gross margin on a stable level. We also had some headwind on the FX loss side in this quarter coming from the revaluation of receivables and payables, mainly in the balance sheets. So excluding this FX loss impact, we reached 15.1% in Q2 of this year compared to 16.5% in Q2 of last year. Next, please. When it comes to working capital, it's stable, I would say, in terms of days. We see a decline in absolute numbers, mainly related to the decline in sales volume. But overall, a very stable, I would say, working capital level. Next. Cash generation. We had a free operating cash flow of 8.9 million euros in the quarter, and that is and 90% cash conversion in relation to EBITDA, which we believe is a pretty good level. So we are pretty happy about that one. Next. And also on the net debt side, we are at 1.1 net debt in relation to EBITDA, the 12-month rolling EBITDA, which is also a good and low level, we believe. which gives us an opportunity for further acquisitions looking into the future. And the next one. Here you have the summary basically of what I mentioned in the previous slides. The only thing to be added there perhaps is the EPS where we hit 11 cents for the quarter compared to 14 cents in Q2 of last year. And with that, I hand over again to you, Martin.

Thank you, Anders. So, in summary, we had a pretty eventful second quarter. We saw Europe continuing slow. We saw Southern Europe growing, while we saw North Europe continuing to decline. We had some more hesitation in the US, and we continued to be flattish or slightly positive in local currencies in APAC. The margin is was 14.4, driven by the production volumes as well as the FX effects. And we continue to be disciplined when it comes to our capital management side, and we continue to generate a reasonable and good cash flow in the quarter. So with that, I'd say that we prepare to open up for Q&A, so please Raise your hand and I will open up the mic one by one. I think we will do ladies first with Anna-Lidström.

Yes, hi, thank you for taking my questions. so my first one is if you can give us some details on momentum in ordering in the different regions during the quarter so to say if the year-over-year change in the beginning of the quarter was a bit different in comparison to to the end of the quarter um yes i'd say this another i think it varied a little bit between the regions so um i think europe was pretty much um was pretty much

kind of the same through the quarter, nothing material changed. I think in the US, we probably had some hesitation, April, then May, probably below point, and then June, probably some kind of acceptance. And if I'm being half, the glass is half full person, probably June was a little bit on the better side, sequentially. But overall, we're quite a bit down in the US, as said. Asia, I think, is still pretty small and pretty lumpy, so I wouldn't say anything really about the market dynamics, or I wouldn't draw any specific conclusions on that. I think it's, in fact, more customer-driven and customer-specific on that side than some general market development.

Okay, great. So basically, the order intake is sort of reflecting the current business momentum. So we should sort of assume a normal, decent pattern in conversion rates between orders in Q2 into sales in Q3. Okay, great. And then a question on the progress on the cost savings. Should we expect the full pace already in Q3? Or could there be slightly more in Q4 in comparison to Q3 of the 5 million there?

yeah i i'd say when it comes to if we focus on the two first elements so when it comes to head count reduction so the first part of the the program that has been fully executed during q2 so it means that that that portion and that run rate should be expected to full extent already in q3 when it comes to the factory movement and factory move from poland to sweden obviously this is a gradual process where we need to to move equipment and lines and so forth step by step. So it means that we probably will see some of this impact in Q3 and certainly some in Q4. But we've been probably a bit conservative here and said, well, assuming we'll close Poland down in Q4, we'll have the full run rate effect from that initiative starting from Q1. But it's a gradual process where we move pretty much line by line and machine by machine. And with that, people will also leave our Polish facilities. So it will be a gradual process, but we think of it as 100% impact starting from Q1.

Okay, great. And then talking about Northern Europe, it seems you said that the warehousing segment is the one that stands out basically on the big side. Do you think there's any impact from the whole sort of reconstructuring initiative or is this fully market related?

no i i'd say um if we look at the at what we see during the quarter i i don't think it's um i think it's more of a market driven thing than a home cooked thing if i may use that word um so i think it's it's definitely more market related than than something that is company specific at the same time though um now q2 was i would say very weak from our standpoint at the same time I do think we see some of the larger customers in this space announcing activities and starting projects in our pre-sales phase so from that point of view I'm somewhat positive that we'll see the light at the end of the tunnel and whether we'd be fully bottomed out now in Q2 or whether that would go continuing to Q3 I'm I'm not sure, but I certainly know there is some light at the end of the tunnel in this segment.

Okay, great. And then just a final one from my side before I get back in line. The sort of hesitation that's been an effect from like the tariff turmoil and such, has that had any great impact in your sense in any of the different end markets such as automotive or warehousing or?

I think it's a little bit across the board. Frankly, I think when it comes to what we call Alders, or you can say it's a proxy for general industry, I think it's probably, I'd say it's more general hesitation. When it comes to warehousing, I think we'd see both customers powering through with their initiatives and continuing, and I think we see some customers hesitating. uh on the automotive side i'd say uh all the all the big four if we take the american manufacturers are are still um are a bit more hesitant as to what uh what should be done and by when and so forth so i'd say that's also probably a bit more of a general um nature to that but warehousing is more mixed where you'd have uh We have customers pushing forward and customers being a bit more on the hesitant side.

Great, thank you. I'll get back in line.

Thank you, Anna. Then next, see if I can allow Johnny Jin in.

Yes, hello, can you hear me? Wonderful. Hi Johnny. Hi, good afternoon. Just have a couple questions from my side as well. I think I will start with a follow up question on on Anna's question there and I want to understand the order trend in America is a little bit better. So I mean looking at the book to bill it it looks to be quite a lot below one here at 0.75 here in the quarter and looking at your arrows they also look to be clearly negative sequentially here on the market development and I understand it very. uncertain on the market here after liberation day, et cetera, but could you maybe elaborate what, what you're seeing here and what you're, you're here for your dialogues with the customers, the pre buying activity, et cetera, in Americas, and also given the funnel or pipeline you have right now, what is your best guess for outlook here for, for second half of the year? I mean, could we expect a rather flatter sequential or the development from here or, or has the momentum, uh, stabilized or worse than further going into Q3?

Yeah, I'm not... If we start with the first one, Janne, I think... I think the discussions are a little bit different in the different end segments. I do think that if we look to automotive, first of all, I do think it's pretty much the same type of discussion and same type of hesitation that they've had to remake some of their plans. um and you know in this there is i think now more preference for uh for hybrid and combustion over ev at the same time there is also this where should where should things be produced is this is is this still mexico or is this u.s or uh what part of what parts of canada will we will we utilize so in a sense there are two two uncertainties at the same time, so I do think the big car makers would think slightly the same. If we talk about the American makers, when we look at foreign makers, I'd probably say they are pushing a little bit more for investments into US. I think we see that from parts of the European ones, and we definitely also see that from parts of the Asian ones, the Korean and Japanese ones. and so that's one you could say one cluster of discussions then when it comes to warehousing I'd say this is very this is very split so we have a few customers who have plans who have put already the foot on the gas pedal and they are continuing there are also projects which are a bit more have gone into this hesitation phase as well so pretty mixed picture on the large projects. On the smaller, what we used to call bread and butter business, and I think that kind of gives the temperature a little bit. I think to begin with in April, there was a bit of, okay, what's happening now, but people kept going for some time. Then May was probably the bottom or the trough when it came to, okay, let's do nothing. And then now I do think in June, we saw a little bit of of more decisiveness in that sense. So, a bit of a dip on that. When it comes to, I'm not sure if your second and third there, Johnny, were, if they were meant for US, or if they were meant for kind of general there.

I think if we start with the US, but you can also talk broadly, was also very interesting.

Yeah, no, I think in the US, depending a little bit on the on the big beautiful bill and other things. I do think that if one believes that consumption is going to, if there is growth in the US and if that needs to be handled, that needs to come from consumption. So if the main scenario is more consumption, that means that there needs to be more warehousing, definitely. And there is also a bit better supply demand balance in the US when it comes to to warehousing. So from that point of view, I'm a bit more optimistic that people will start to make decisions again when it's been slow in the second quarter. I think the car industry will take a little bit longer because there are platforms and other things that usually takes a little bit more time before it can turn into decisions. Generally, and then if I move over to Europe, I do think that general industry and the overall temperature, and I hear some of that from my colleagues as well, I do think there are some good signs that we're getting to a place in our next quarters which is a little bit more positive than where we're currently at.

Yeah, I understand that. It's a lot of moving parts here, I mean, with the Liberation Day and tariffs, etc. But looking at it in America for a while here, it looks like the momentum slowed down quite a lot here if you compare Q2 to Q1. I also don't try to understand how much was due to the Liberation Day and also given how late cyclical nature of your business should be interpreted as a lot of started project already is now closed and that you're now more dependent on newer projects coming along or.

Is there that type of department? I think the pipeline in the US is pretty all right when it comes to projects and what has been quoted and what is being discussed. I think it's so I don't think the underlying activity and the initiatives, I don't think that's that's weak I think it's more moving from you could say idea to ink on the paper and get going in many cases I'd rather read that into the situation more than anything else I think in terms of activities and in terms of what's needed I do think that looks on paper pretty healthy in the US okay And perhaps to that, if I may add, Johnny, I think we also have a bit of this comparable is also related to FX in the quarter, which impacts the compare a bit.

Yeah, yeah, I understand that. We'll see. But then I also want to follow up a little bit on your statement that you mentioned somewhat higher pre-sale activity here, which I think you said in the report bodes well for 2026 and onwards. I was wondering, could you maybe elaborate also a little bit more here? How would you think about the timing there? I mean, given what you see now, can we expect to see... To interpret that at the bulk of that, those orders should convert into sales second half of 26. Is that the most likely base case or how should we think about the timing there?

I think it's again timing and big project seems to be very hard to predict. I do think and I think it's worth noticing that if you look at the big players in the warehousing and intralogistics space, some of them have announced pretty big investment programs in different parts of the world, so it could be Europe, could be Middle East, Middle East India, could be also for that matter in the US, so I do think that there is a bit more commitment and a bit more drive from that end, which is now being then worked on and eventually we'll see some We think good orders coming through, whether that's going to be Q1, Q2, or Q3, Q4. I think I'm not in a position to judge exactly which quarter it will be, but I do think that Q26 looks overall definitely more positive than 25 has turned out to be.

Okay, yeah. That's fair. But I mean, the best guess then, I mean, given that it's pre-buying activity now, then maybe they're converted into orders. Let's say, I mean, during first half of next year, then I suppose they are delivered during second half of 26. Is that a fair assumption?

Yeah, no, that's... That's... probably a fair assumption. I think we have pre-sales processes which are, you know, two weeks and we have pre-sales processes that are one and a half years. So, and everything in between. So, it depends a little bit which customers here decides to go forward with what. So, it could be fairly quick, but I'd say probably would have more going into mid second half of next year. I think that's a fair assumption, Johnny.

Yeah, I understand. Thank you. That's clear. And then just one final one from my side. I mean, demand in Europe is a bit mixed, as you mentioned here, but I noticed that you see somewhat higher orders in EMEA South region, which I think is quite interesting here in the quarter. Maybe I missed it here, but what is driving that? Was there anything particular in Q2 here, or was it more broadly driven? And has that momentum continued here in Q3, would you say?

I think it's pretty early in Q3. I think the start of Q3 has been good. Also in Southern Europe. When it comes to Southern Europe, I think the main geographies, so Italy, France, as well as Spain, um i i think they're performing well and i i also think that there are there are plenty of of projects especially you know general industry i think there are also investments going into into process especially retail food pharma etc and i think we've we're chasing our our fair share of that of that growth and in the second quarter it i i consider that to to be go it went well From that point of view. Yeah, OK, so I think it's more broad. I think it's more broad based than anything particular that stands out.

OK, that's clear. Thank you. That was all from the end. Happy summer when you get there.

Likewise, Johnny. Let's see. And we have. Daniel Lindquist. Your mic is open.

Perfect. Thank you, Martin. So just two quick ones from my side. It's been a bit messy here lately. So just it would be interesting to hear your base business with the machine guarding. How is that faring? How much volumes has been lost? And what's the margin profile for that part?

uh or the delta is that basically from warehousing and property protection that's it profitability yeah no sir our machine guarding business is uh is doing in fact very well uh we'd see uh we think we um we have grown that business um flattish to slight growth um and the margin profile of machine guarding is machine guarding is in relative terms more profitable than storage and warehousing. So pretty much all of the drop is explained by warehousing and storage.

Okay, so down the line, this is really healthy. And would that mean that you've taken market shares, if that's measurable as well? I wouldn't conclude that on Q2 because I don't have access to all the competitors numbers but I do think it's fair to conclude that we during 2024 took some market share in the core segments okay perfect and then just on M&A you have the sentence on it in the report with the internal measures taken now there's nothing stopping you from making an acquisition if that would turn up or is it Is it too soon?

No, I would I would say that on the contrary, I think we're by. By taking these measures, I think we make room for for other growth, you know, initiatives and investments. Portfolio wise, I don't think there is any contradiction at all whatsoever in this. I think the what's standing in between us and and acquisitive growth here would be. um you know it needs a both parties to to say yes and agree to evaluation which with more uncertainty around us might be a little bit more difficult uh to agree on what is the value and unfortunately we weren't able to to close uh any acquisitions during the second uh second quarter but to be rest assured that we're pushing pushing and pushing hard for that during the second half of the year okay

Perfect. Great. Thanks. That was all from my side, Martin. Having a really nice summer now.

Thank you, Daniel. And likewise. Okay. Let's see.

Are there any more questions? In fact, I don't see any more hands in the air. Which means that we will conclude the second quarter interim report for Travax Group. And thanks a lot for calling in and asking questions. And if not before, I'll see you in a quarter's time. Enjoy your summers. Bye bye.