Troax Group AB (publ)

Hi everyone and welcome to the interim report for the second quarter for Trovax Group. My name is Martin Nyström and I'm the President and CEO of the Group. Today I'll walk you through the quarter, the financial outcomes and the key events before we open up for a Q&A towards the end.

I will start by sharing the presentation. So without further ado, let's dive into the quarter.

The second quarter was a record strong quarter from a top line point of view. The Group reports a 51% increase and our sales grew by 23%. And I'm particularly pleased, of course, by the fact that we saw order intake growing both organically as well as through our acquisitions. Our sales increased by 23% driven by our acquisitions and our organic invoicing declined in the quarter, which was due to the order mixed up we had late in the first quarter, where we had several mid-sized orders with longer lead time and also with deliveries going into the second half of the year. It was also pleasing to see the North American deliveries picking up pace after a slow start of the year after the transition of our inventory and our pick and pack operations from Chicago to Portland. Overall, I'd say we had a strong quarter, but I would also say that it's difficult to predict the demand in general, but there were clearly positive signs and areas that I would like to highlight. During the quarter, we saw solid recovery in the warehousing segment, both in Europe as well as in North America. And we also experienced solid activity and orders from the data center segment. On the more challenging side, we continue to be impacted by the challenging situation in the European as well as the Chinese automotive sectors. If I turn to profit, our adjusted EBITDA profitability came in at 13.0%. Our gross profit was in line with the last year's levels, despite the lower organic volume. And I would say we have had a transition quarter in North America, and also we have our acquisitions not being fully ramped up yet. So from that point of view, I consider this to be a good outcome given the delivered volumes that we had in the quarter. Our sales and administration cost rose as a consequence of our acquisitions. So we have added cost from our acquisitions. We have upgraded parts of our IT infrastructure and completed that. And we also had integration activities from our recent acquisitions in the quarter. Organically, I'm pleased to see that our sales and administration costs went down compared to last year. Our net debt level came in at 3.3, which is on the higher side for the Group and the two main drivers is the dividend payout as well as that we have re-evaluated our earn-out commitments from the three acquisitions we made late last year and beginning of this year. And I would say here as our orders turn into deliveries and our operational cash flow will increase and then also this ratio will come down gradually towards the end of the year and through the second half of the year. If I then start with a few of the key things in the Group, I would say a clear highlight for us in Trowax in connection to the quarter's ending is that we have now ramped up our new facility in Portland, so close to Nashville, in the Nashville area. And we have by that also closed production in our Chicago facility. And I think this really marks a new era for Trovax in North America, where we will be able to serve our customers better. We'll be able to have more efficiency through our automated production and our best in class practices, but also from having a leaner organization. And with our new operations, we will have greater capacity. Of course, we will have world-class automation and we will utilize all of the best practices that we have from other parts of the Group. At the same time, we've also adjusted our go-to-market model a little bit in the US, which will allow our customers then to access the full range of relevant solutions across all the different states. And I'm very happy to see now the Group strengthening our position significantly and also improve our competitiveness. And I think that bodes well for both future growth as well as for market leadership in North America. The acquisitions that we made of Deflex as well as Stompi in the fourth quarter now forms our foundation for our flexible barrier line, which gives us access to a larger share of our customers' wallets. and to date we have experienced great interest in these solutions and we're also busy with the integration to make this work as true solutions and true parts of the Group, both on the sales side as well as the operation side. And I would say these solutions have had a strong and good start in the Group and we and I are very excited to see what the future holds in terms of profitable growth coming from this new product line. The third highlight comes from the core of the core, and here we have launched the world's first machine guarding mesh panel, which is entirely made from recycled and reused material. And we're also using low emission steel to produce this. And I would say this is a very tenable and concrete step in our work to reduce the climate impact across the value chain. And with this product, it makes the same safe job as a normal Trovax panel, but it comes with more than 70% lower carbon emission footprint versus the standard without compromising on safety or the performance. And I think this is a great example of where we can bring innovation into our products and also show that we are truly the world leader when it comes to mesh pumps and machine guarding. And I think this is also a great example where we bring sustainability and safety performance go hand in hand. If I then turn to the market development, and this is the slide where we walk through how the different segments and the different geographies are developing. As usual, we look to the market through two lenses. So it's the geographical lens as well as the market lens. If I start with the total, we had an organic growth of 14% in the quarter, which I consider to be a very strong number. If I look to Northern Europe, we are back on the growth path with 13% year-on-year growth. The growth primarily comes from the warehousing sector as well as general industry, which we can say here also is partly related to data centers. And we also saw some green sparks in fact coming from the construction sector with our storage solutions. the automotive sector in North Europe continued to be soft in the quarter. In Southern Europe, the situation was a little bit different. So we had a decline of 11% on orders in Southern Europe. And here I would say both automotive, partly processing, as well as general industry were slightly softer. Then I'd say the exclamation point of the quarter is North America within order intake growth of 84%. And here, of course, we should note also that the comparison quarter wasn't the strongest after Liberation Day back in 2025. Nevertheless, we had a strong quarter order intake wise. The automotive sector grew after some two soft years, but we also experienced solid activity both in warehousing as well as in the processing industries, taking us to an 84% increase. Last but not least, we have the organic development in APAC, which continues to be somewhat slower. Here, the compare is rather strong from last year. And the order intake decline of the 14% is predominantly driven by the automotive and process industries in China and Japan, which were soft in the quarter. I said turning them to order intake overall very strong quarter also record level we and our order intake in total amounted to 98.3 million euros which corresponds to 51% increase if I look at that organic we had plus 14 structure very nice contribution with 37% increase and then we had a bit of currency headwind with minus one Moving over to sales. Our sales amounted to 84.2 in the quarter which is a 31% increase. The organic element here was minus 8 and this comes back to the order mix back in the first quarter. We will see that order intake from Q1 partly being then delivered into the second half of the year. The structural part was 31%, so good progress in our acquisition. And also here we had a currency impact of minus one, taking the total to plus 23%. Moving over to profit and profitability. So our adjusted EBITDA profit rose to 10.9 million euros in the quarter, which represents an EBITDA margin adjusted of 13.0. And I would say, given the lower organic volumes, both in EMEA as well as in Europe, as well as in APAC, I think this is a good outcome. We've also had our most intense When it comes to transitioning our Chicago operations to Portland, and we've also done great progress when it comes to integrating our newly acquired businesses into the group. So, I think this is a solid outcome for the quarter. Going forward, I'd also say that I expect some of the raw material prices to continue to develop, not only in North America, but also in Europe. And here it's important that they continue to be agile on the pricing side. Moving over to operating cash flow, which came in at €0.8 million, which is an improvement than in relative terms to the first quarter. And here it's obvious that having strong growth mainly coming from them from our acquisition, it ties up a bit of cash flow in working capital. But as we get the deliveries going during the second half of the year, we will increase our cash flow during the second half of the year. Turning to our net debt development, our net debt increased to 3.3 during the quarter from 2.7 in the quarter before. The main reasons for this is the dividend payout in May, as we have every year, and also re-evaluation of the earn-out continues of 11 million euro, which at this point is non-cash. As such this re-evaluation I think is positive because we do see stronger performance and of course contribution to the Group from these acquisitions than we originally anticipated. And as our order book turns into invoicing and cash the net debt will decrease during the second half of the year and aiming for levels then which are below our target which is 2.5 net debt to EBITDA. So, if I summarize the key figures, our order intake grew by 51% to 98.3, our sales grew by 23% to 84.2, our EBITDA profit rose to 10.9, which represents 13% EBITDA margin adjusted, and our net debt level increased to 3.3 after revaluation of our earn-out continuance. And last but not least, the adjusted EPS per share increased to 0.12 euros per share. So, in summary, we had a strong development in the second quarter and we passed a lot of milestones relating also to our strategy. I think we see some really encouraging signs in multiple important segments. and segments such as warehousing as well as data centers. At the same time, the future continues to remain difficult to predict and predict with certainty. Our broader safety portfolio including the flexible barriers and the data center solutions continue to gain traction in the market. I think we had strong evidence of that in the second quarter and which also bodes well for coming quarters and coming years. We started our North American new manufacturing production after an intense project, and this is truly a milestone that will improve our competitiveness and also profitability in North America going forward. And I'm also very happy that we now operate from a stronger platform overall in North America. And overall, I'd say the recent investments, acquisitions and operational improvements definitely also provide a stronger foundation for continued growth as well as profitability. And we will, goes without saying, continue to execute relentlessly on our strategy to make sure that we are in the pole position when our customers have needs and demands when it comes to industrial safety. And with that, I would like to end the presentation part of this call, and I would like to open up for Q&A. So if you have a question, please raise your hand and I will call your name and we will unmute the microphone.