ADDT-B.ST FY2026 Q2 Earnings Call Transcript
Date: 2026-10-22
Source: Financial Modeling Prep

Operator: Welcome to the Addtech Q2 2026 Report Presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Niklas Stenberg and CFO Malin Enarson. Please go ahead.

Niklas Stenberg: Thank you, operator, and most welcome everyone to the Addtech second quarter report presentation. The setup is as usual. Malin and I will use approximately 20 minutes to summarize the results and give our comments, and then open up for questions. A very quick run-through of the key fundamentals of Addtech. We are today a group of +150 independent, strictly decentralized companies operating in 20 countries with a clear business-to-business offering. We operate today in six business areas. All of them with clear strategies and a value proposition centered around technical niche products and solutions, primarily to various manufacturing and infrastructure sectors. We have, as you know, a dual growth engine approach, focused to develop and grow business organically, and then complement and strengthen our strategic niches by acquiring leading niche companies with a strong offering, and we fund our acquisitions primarily by own cash flow. Size-wise, we have a turnover of around SEK 23 billion, run operations with an EBITA margin of around 16%, and employ today a bit above 5,000 employees throughout the organization, with a small and efficient central team. With that said, to the quarterly highlights. We summarize a solid second quarter with high activity and a strong order intake. Total net sales, as you can see in the picture, increased 8%, of which 2% was organic. EBITA increased in the report by 17% and a margin of 16.7%. However, quarterly result and margin were affected by a positive one-off of SEK 55 million within business area Safety. We will come back on that within short. We closed one acquisition during the quarter and have started our third quarter in a good way with two more acquisitions in U.K. One of them, Connectors & Switchgear, that was completed actually this morning, so therefore it is not in the report. More details on sales development. The overall business situation was good, and we had solid contributions, especially from the business areas Automation and Electrification. Segment-wise, the main organic drivers in the quarter were electronics with a broad spectrum of products and solutions for especially electrifying equipment. Special Vehicles had another good quarter, especially towards mining back on high mineral prices. Very solid contributions from the niche segment data centers, where we continuously see more and more companies breaching in and capturing potential. And of course, not least, Defense with a continued positive trend. So, as I said, all in all, high customer activity, broad-based order intake, and a positive book-to-bill. I will come back with more details about market development in each business area shortly. But before that, some short comments on EBITA development. As I said, we increased by 17%. A solid contribution from Automation, Electrification, and Safety. We continue to improve gross margin across the board and also an improved EBITA margin. As I said in the beginning, the result is boosted by a positive one-off item in Safety. What we have done here is a company reconstruction, which led to revaluation of the contingent purchase consideration. We will give some more details on that. Malin will elaborate on all non-recurring items a bit later. Again, the underlying margin trend remains positive, and we continue to see positive effects both from improvement in product mix, but also active price management and also of course, from acquisitions. Then a couple of comments in our six business areas, starting with Automation, and as you can see in the deltas, the business situation continues to develop here very strongly. A broad-based increase in sales and good leverage on both earnings and margins. The market situation strengthened further during the quarter. Some indications that some customers are building up inventory to mitigate longer lead times and cost inflation. That could have some impact on demand situation. But underlying demand for product solutions for defense remains strong. Also in mechanical industry, medical process had a positive development. Within medical, it is primarily OEM supplying diagnostics and analytical equipment. In process it is the food processing OEMs, and also automation products that are main drivers. In summary, tailwinds and Automation remains strong with the backlog now being converted into sales, and with strong active pricing. We can see that in combination with last year's cost-cutting initiatives, we have very positive effects on earnings and margins as well. Also Electrification delivered another very strong quarter. Net sales increased 31%, driven by solid business momentum in basically all segments. Solid underlying demand for company supplying Electrification, Energy, and defense customers also strong in the quarter. Furthermore, market situation good in mechanical data telecom. Here we have some presence in data centers, as one example. In medical, flattish all in all, but it varies between the companies. As I mentioned in the Q1 call this summer, we have strong and partly front-heavy contributions from acquisitions and Electrification, and this is primarily related to RAMME, the German company supplying solutions for maritime electrification. So strong delivery both in Q1 and Q2, as we indicated in the beginning of the year. All in all, strong quarter from Electrification. Broad-based growth, and resulting in a very strong EBITA growth and high margin. Within Energy, the positive trend from the first quarter continued also in Q2. The order intake within electrical transmission distribution developed strongly, and also sequential increase here from Q1. Power generation railway remains stable at good levels, and segment Industry was a bit on the weak side. But sales were slightly up all in all, despite very tough comps. Also we have some increase in earnings, and also on the margins, primarily due to better product mix in the quarter. Looking ahead, we are entering the second half with a strong business momentum for Energy and well-filled order books, which creates very good conditions for an increased pace the coming quarters. The overall market situation within Industry was stable in the quarter. Order intake in Special Vehicles, mechanical and waste management was flattish, but demand for component solutions toward data centers and defense to some extent mitigated continued weak market situation for the sawmill business. We do not see a trend reversal yet here, but there are some glimmers of hope, and a couple of orders were won during the quarter. Underlying, the challenge still remains that the sawmill customers have a weak profitability, and that is holding up investments. To sum up, a challenging quarter with a decrease in total net sales of 7%. Very tough comps here, from last year's strong sawmill product deliveries in that quarter that we were very specific on when we released that quarterly report. Also this quarter, some timing effects within subsea. This affects, of course, both result and margins. We have a strong value proposition in a lot of niches here and less challenging comps ahead, which bodes for a more positive development in the second half. Moving on to Process. The overarching market situation was good in the quarter. Order intake sequentially improved, where marine remained strong, primarily relating to increased regulatory demands. Also, Energy and Special Vehicles had a positive development, while it was stable in mechanical industry and a bit weaker in medical. The segment trends in Process vary between companies in Process. What we can see is that food processing continues to be well, where we see a hesitant approach in oil and gas and chemical customers due to lower profitability in energy-intensive sectors. Here we can see that the focus still is on increasing efficiency maintenance and need to have investments rather than initiating larger CapEx investments. This is something we have said a number of quarters now. But again, there is sequential improvement in Process. All in all, the second quarter with 7% increase in sales, a good mix between organic and acquired growth. EBITA was slightly up compared to last year, but a somewhat weaker product mix and increased costs in a few companies put pressure on the margins. These cost increases primarily relate to investments for entering new markets where we can see future potential. Finally, Safety, which had a positive development in the quarter, a solid order intake, strong demand for product solutions toward data centers continued, and subsequent traffic safety weakened in the quarter towards tough comps. Long term, the underlying potential remains strong here, but again, very tough comps for Safety in traffic safety. No clear signs of an increase in the construction sector yet. As you know, we have a quite big exposure here in Safety. We continue to all in all meet weaker demand for construction sector. Overall, for Safety, sales increased 4%, approximately half from acquisition, with a positive effect on earnings and margins also adjusted for the positive one-off. Some more words on this one-off. It was a decision we made to close one of the units in the company that we have quite recently acquired. This unit has strongly underperformed. It is a quite small part of the overall company, but here when we bought the company, we thought we would have quite strong growth in that unit, and that has strongly underperformed. We had a forward-leaning purchase price model here, and that explains the big revaluation of earn-out. But the main part of the company we acquired is running in accordance with what we expected. This was really relating to a specific unit. To sum up, all in all, a solid quarter, a more positive market situation in this quarter and high customer activity, which makes me optimistic about the coming quarters. Of course, still variations between segments, customers, geographies, and also that the geopolitical uncertainty still adds to the hesitant approach in investing, especially in larger investments. Very brief comments on the first six months. Two solid quarters in terms of customer activity. Order intake has been good. I think as I just indicated in the second quarter, it is really variations between the companies, but this is really the strength of running this very diversified portfolio. All in all, a solid sales growth in the period. We have been good at getting the volumes into the result. EBITA is up 14% with strong margins. But when adjusting for the specific one-offs, the underlying growth is still at solid 11% and an improved margin towards last year. With that said, I give the word to you, Malin, for some more details.

Malin Enarson: Thank you. Yes, as you just said, our EBITA grew and the profit margin improved compared to last year. The adjusted EBITA growth amounts then to 11% and the margin increased with 0.3 percentage points. I will elaborate. Niklas mentioned that we have made a restructuring measure in one of our relatively newly acquired companies in business area Safety. This gave a positive net effect of SEK 55 million, with a revaluation of earn-outs of SEK 64 million and restructuring costs of approximately SEK 9 million. The EBITA margin in Safety amounts to 15.3% in the quarter adjusted. Furthermore, we had unusually high transaction costs in relation to an acquisition in Industry. This amounted to approximately SEK 10 million and was due to the fact that there were multiple shareholders which required handling that differed from our usual process. Overall, margins are strong thanks to acquisitions and improved product mix, good pricing power, and the fact that restructuring measures that have been taken in businesses with persistently lower market conditions are now having a clear impact. We can also see that the trend line of total costs in relation to sales has a continued good development. As always, we invest as well as hit the brake where needed. Yes. Our cash flow from operating activities weakened somewhat compared to the same quarter last year, but we are still on good levels overall. The decrease was caused by an increase of working capital due to both strong invoicing at the end of the quarter, but also some increase in inventory levels due to supply chain disruptions and high order intake. Return on working capital increased to 82%, and all in all, inventory levels are still at healthy levels in relation to order backlog, even if inventory versus sales increased somewhat. Our financial position remained very strong during the quarter, and our gearing and leverage remained at low levels, even if we saw a sequential increase since first quarter, as expected after the dividend payout in beginning of September. Our strong balance sheet provides significant capacity to fund future acquisitions and organic growth investments. With those short comments, I hand over back to you, Niklas, for some further comments.

Niklas Stenberg: Yes. Some comments on acquisitions. As you can see in this slide, you see all acquisitions we made this calendar year. We continue to attract well-run companies in our strategic markets. So far during the fiscal year, we have welcomed four highly profitable companies adding SEK 500 million, and five if we include the Connectors & Switchgear that we made this morning, adding another SEK 130 million approximately. During this quarter, we completed the acquisition RTL Materials, which operates under the brand Rolatube, which supply patented rollable composite structures and deployable mast systems towards primarily defense industry. In addition, we have closed the Mechanical Power Transmission, complementing our industrial driveline business within business area Industry, and Connectors & Switchgear strengthening our transmission value position within Energy in U.K. Connectors & Switchgear will build a strong cluster together with our existing U.K. company, Allied Insulators. As always, you will find details about all companies, of course, on our website. In general, the market is favorable for acquisitions. With our increased footprint internationally and the growing awareness that follows from that, our pipeline is well-filled, and we continue to fill it up with really interesting cases. This in combination with our strong balance sheet that Malin just presented, creates very good conditions for high execution rate during the remaining part of the year and also, of course, forward. To wrap up, we conclude a good second quarter, high order intake, gradually improving business momentum. Topline grew a solid 8%, and our strong earnings growth continued, adjusted for the one-offs up 11% within, again, improved margin. The international expansion continues. It's really great to see that we are showing more and more that our value proposition and culture works very well in a number of markets. Finally, uncertainty due to the geopolitical situation remains, but given our positions in attractive niches and our well-filled backlog and also pipeline of acquisitions, we have a positive view of the coming quarters, not least on back on also easier comps within Industry and strong momentum in Energy. With that said, let's open up for questions.

Operator: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Ope Otaniyi from GS. Please go ahead.

Ope Otaniyi: Hi. Good morning, Niklas, Malin, and Christopher. Maybe questions from my end, maybe just at a high level, could you break down sort of growth you saw in the quarter into sort of price and volume? Secondly, on maybe on the segment level, on Industry, sort of what are you seeing there, especially in forestry? I know you kind of touched on this, but sort of do things look like they're bottoming there, but also in Process change in the quarter in terms of willingness for customers to invest in our products? Then thirdly, on margin, sort of how much headroom should we expect from areas where you're investing in growth, like you said, in Process? Thank you.

Niklas Stenberg: Yeah. Hi, Ope. I'm just writing down your three questions here. Starting up on price volume, this is, of course, quite challenging to give a very clear answer to that in the portfolio that we have, but our estimations are saying that all in all it's more or less in line with what we are used to. We usually say that in a normal environment, it's 80% volume, 20% price. Now, let's say it's maybe 75/25, but it's really all in all, not so much price driven. Of course, we can see a number of components and products, especially in electrical components, where we see a strong increase in price. But on the other hand, we can see actually lower prices on some raw materials. So, all in all, it's actually quite normalized if we look at the price inflation impact. The second question, I think, related both to the Industry and Process, right? If we start with Industry, this was very tough comps on the sawmill for Industry. We had especially strong deliveries from one company on products last year. We started this year with a very low order book towards the sawmill market. That has gradually improved. In this quarter, we have received a number of orders and projects. We are slowly building up a little bit of a pipeline. We still have not seen a big release. We have a really strong pipeline of ongoing discussions on projects, and at some time, a number of sawmills will have to invest. Again, we still don't see a catch-up effect here. Looking forward, especially on top line, we have easier comps after this second quarter. When it comes to Process, the kind of day-to-day rolling business that is around 75% of Process is going quite well all in all. It is still on the more product-related business where we can see hesitations. Of course, the economic turbulence and interest rate discussions and all these things are, of course, putting a hampering effect on that. As I said, we have seen a slight improvement during this quarter. Hopefully we will see an improvement. We have a strong order book in the Process business area, so at some point we should see a release there. I think that was your second question. Third question, can you please remind me on that?

Ope Otaniyi: Yeah, sure. Third was on margins. I think, Malin, you mentioned you're investing for growth in person, so just on a group level overall, what margin headroom should we expect from investments there? Maybe if I could add, what's the sustainability of margin in Automation, and what should we expect in the second half of the year?

Niklas Stenberg: Yeah. Okay. When it comes to Process, I wouldn't say we don't expect a headwind on the margin. The investments we have done is, of course, relating to expectation of top-line growth. When we invest in entering new markets, it takes some time before that converts into business, of course. But looking ahead, when we should see an improvement also on top line, we should not see a headwind on the margins. It's not huge investments. It's a couple of companies where we have done some investments. So really no headwinds. It's not what we expect. When it comes to Automation, with the cost initiatives we did last year and with the strong momentum we have, it's always difficult to say because it's a matter of product mix and also projects and a little bit of that. But I believe that there's probably still room for some improvements on the margin.

Ope Otaniyi: Great. Thanks very much for answering my questions.

Niklas Stenberg: Thank you.

Operator: The next question comes from Zino Engdalen Ricciuti from Handelsbanken. Please go ahead.

Zino Engdalen Ricciuti: Yes, good day. Thanks for the presentation and for taking our questions. One on demand, which is, I guess, similar for both Automation and Electrification, which seem to have taken another step up. How do you feel about the organic sales performance in these segments in terms of are they reason to extrapolate or were they unusually good quarter in this quarter?

Niklas Stenberg: Yes. If I look on the book-to-bill situation, also the comps going forward, we should expect continuous strong organic growth in both of these business areas. I do not think I want to go into specific details on the numbers. It was really strong organic growth, but we expect to continue to see strong growth in both areas.

Zino Engdalen Ricciuti: Very clear. Going into Energy, we have of course talked a bit about the strong order intake you have had for a long time, and you have highlighted earlier that you expect it to be converted a bit more into H2. Is it possible to get a better understanding of the deliveries ahead? Is it possible to give the size of the order book at the end of the quarter related to the same period last year or anything similar on that?

Niklas Stenberg: As I said, or you indicated that we have had a strong order intake for a long time. We had a bit weaker situation, as you know, in Q4, and that affected Q1 and also Q2. We have seen a quite strong order intake now. If I look on the order book, without going into too much details, it is a clearly stronger situation now compared to a year ago. It has been a good inflow of products, and this is quite broad-based. It is primarily, I would say, in Sweden and also in the U.S. We are taking some market shares in the U.S. from our Spanish company, Arruti. But it is quite broad based, and, as I think I was quite clear of, we foresee a quite significant improvement the second half.

Zino Engdalen Ricciuti: Thank you for that added color. Just lastly from me, in Safety, the restructuring charges you have taken there, how large would you expect the effect on the margin from this restructuring to be going ahead?

Niklas Stenberg: Quite marginal, actually. We talk about one company, a small portion of that company that really underperformed. It will have an improvement on that company's margin. But all in all, for Safety, not a big impact.

Zino Engdalen Ricciuti: Okay. Very good. Thank you. I will get back in line.

Niklas Stenberg: Thank you.

Operator: The next question comes from Gustav Berneblad from Nordea. Please go ahead.

Gustav Berneblad: Yes, it is Gustav from Nordea.

Niklas Stenberg: Morning.

Gustav Berneblad: Good morning. Maybe just to build on Zino's question there on the Energy side. Heading into H2 and probably seeing a bit more order conversion towards transmission and distribution grid area. Does this have a positive mix on the margin for you, would you say?

Niklas Stenberg: On the margins? What's that[crosstalk].

Gustav Berneblad: Yeah, the sort of exposure. Yeah.

Niklas Stenberg: Not really. It's a question of course, the product mix in the growth in the products we are taking. All in all, I would say not a direct positive effect. Basic kind of normalized, if I put it that way. When it comes to Energy, looking forward, I was speaking of top line. You should just remember that in Q3 last year, Energy had an exceptionally strong margin, so that should be taken into account. But apart from that, I would say not a positive, but not a negative effect either.

Gustav Berneblad: That's very clear. Thanks. When it comes to this general exposure you have towards the grids, are you seeing any signs of sort of ensured in the industry at all, or any signs of delays, or what's your view there?

Niklas Stenberg: Actually, no. Rather the opposite. When we talk with our biggest grid customers, we can really not see any signs of a delay. Then of course, as we have said in many quarters and years now, there can always be some delays because of permit processes and so on. But if you look on the investment plans and the discussions, we can really not see a trend of delays in projects, rather the opposite.

Gustav Berneblad: Perfect. Then moving on to, I think Automation it was when you talked, Niklas, there on some customers building up inventory due to longer lead times, so some demand is pulled forward. That's specifically for Automation, is it possible to say anything how much it is, or?

Niklas Stenberg: Yeah. Automation and maybe partly Electrification. This is relating to that these two business areas have quite a lot of especially electronic components where we can see much longer delivery times on some parts. It's primarily affecting these two business areas. When we look at the order intake and split it up in short-term, long-term, we can see an improvement also short term. So I would say all in all, not a huge impact. It's a few of our companies that are indicating this, but I think all in all not a huge impact.

Gustav Berneblad: That's very clear. Thank you for taking my question.

Niklas Stenberg: Yeah, sure.

Operator: The next question comes from Johan Lönnqvist Sundén from DNB Carnegie. Please go ahead.

Johan Lönnqvist Sundén: Hi, Niklas and Malin. Thank you for taking my questions.

Niklas Stenberg: Morning.

Johan Lönnqvist Sundén: Just to follow up on Gustav here on inventory build up among clients. Just recap what you said in the beginning, is that something that already has happened or is that something that you expect to come in the coming quarters?

Niklas Stenberg: I would say impossible to answer that. Because of the global situation, how will things develop going forward in terms of lead times, et cetera, and also prices? It is impossible to foresee how that will be. What I said is that, again, some companies are indicating that they think it is a little bit of a boost effect on the order intake. But our evaluation and conclusion is that, bottom line, this is more linked to actually underlying growth. We do not think this has a major impact.

Johan Lönnqvist Sundén: An order intake rather than revenue in the quarter, so to say.

Niklas Stenberg: Yes.

Johan Lönnqvist Sundén: The second question from me is on the industry side. I noted in your report you show the various kind of end market splits on this specific segment, and the telecom increased quite a lot in the Industry segment. You mentioned it in the beginning as well, but can you please give some color on what has happened here in the quarter? There is a big step up from both what we saw in the previous quarter and what we saw in the same quarter last year.

Niklas Stenberg: Yeah. It is primarily one of our companies that has a really good exposure towards one major customer. It is a project related business, but with a quite long-term exposure. It is primarily one company that has a really strong development within, let us call it data communication. So in the end, it is relating to the AI growth. So it is one. Yeah.

Johan Lönnqvist Sundén: You believe that to be maintained for quite a while, or was it one Is that a longer project rather than just isolated to this quarter?

Niklas Stenberg: No, that we foresee to continue for quite some time.

Johan Lönnqvist Sundén: The last question from my side, it is on the Electrification and the effect from especially the RAMME acquisition. I think you were pretty clear in relates to the previous report that you should have some closures of production during the summer, so your Q2 should be weaker than Q1. I think you indicated Q2 was still pretty okay for RAMME. How should we think about the coming quarters?

Niklas Stenberg: Yeah. RAMME is partly a project related company, and that is always a little bit difficult to foresee what will happen. Q1 was really strong. Q2 was also good. As I said, after Q1, we did foresee that the first half of the year would be stronger than the second half. That is still our view. So a little bit lower pace on project deliveries the second half.

Johan Lönnqvist Sundén: But should we expect a step down from Q2 as well, or was the step down already happening from Q1 to Q2?

Niklas Stenberg: No, also a step down from Q2 to second half. It is not dramatic, but it is still a lower level second half.

Johan Lönnqvist Sundén: Perfect. Those were my three questions. I get back in line.

Niklas Stenberg: Thank you.

Operator: The next question comes from Victor Forss from SB1 Markets. Please go ahead.

Victor Forss: Good morning. Thank you for taking my questions. Starting on the order book, over the past year, you have described the order intake as tilted towards longer dated orders. Would you say that the orders you are taking now in this quarter have a similar profile or any reason to expect something else here?

Niklas Stenberg: Good morning. No, I would say that the order intake we've had the last couple of quarters has a quite good split. We are growing both the short-term order book and kind of medium-term and long-term as well. No dramatic shift this quarter. It's quite broad-based, if you put it that way, in terms of time.

Victor Forss: Okay. Very clear. Thank you. Then just on the margin side of the order book, you mentioned rising cost inflation as a risk in the outlook. Just wondering, if you have higher costs, can you pass them on to customers for orders that you took three or four quarters ago? Can you give any split on how much of the order book is fixed price versus moving?

Niklas Stenberg: No, it's difficult to give details on how that is split. But I would say that we don't see any major difference from what we are used to here. Up to now, we have been able to put forward the pricing. Our view is still that we have strong pricing power, and of course, a lot of back-to-back when you look on the agreements from supplier to customer. I think it's a quite normalized situation, and I don't see that there is a risk exposure in the order book that would mean that we cannot take out it on prices. Of course, it varies from company to company, but all in all, as a group, I feel quite comfortable there.

Victor Forss: Okay, great. Thanks. Just a final question on net financials this quarter. Quite a significant increase. Just wondering what that's about and what to expect for the coming quarters.

Malin Enarson: I would say that if you look at the net financials, the difference between the quarters are more or less. If you look at rolling 12, I would say that it's more or less the same. The interest rates are on the same level, but the differences are rather currency exchange.

Victor Forss: Okay. Perfect. Thank you. That was all for me.

Niklas Stenberg: Thank you.

Operator: There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.

Niklas Stenberg: It seems we don't have any written questions. With that said, I think we close up and wish you a great day. Thank you.

Malin Enarson: Thank you.