Good day, and thank you for standing by. Welcome to the Solar A/S Q2 Report 2026 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may submit your question via the webcast.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, CEO Jens Andersen. Please go ahead.
Thank you. Welcome to our second quarter conference call. Please go to the first slide. Let me provide a brief update on our key strategic priorities and the progress we have made during the period. Starting with Norway. We successfully completed the integration of Sonepar Norge in the second quarter of 2026. The integration has proceeded according to plan and represents an important milestone for the whole Solar Group. Our focus is now on realizing the operational benefits from the combination, strengthening our market position, and ensuring that customers and employees continue to experience a seamless transition.
Turning to Kumla, the logistics center has now been commissioned and is fully operational. More broadly, Kumla marks the completion of a significant investment cycle over our logistics network in the core business. That had taken some years, and we have heavily invested and expanded and modernized our automation of our warehouses' facilities across our Nordic markets. With these projects now largely completed, we have established a modern and scalable logistics platform that supports both future growth and hopefully also improved customer service.
As we move forward, the focus shifts from construction and implementation to capturing the benefits through higher productivity, greater efficiency, and stronger return on the huge investments we have made. On the digital side, we have initiated the rollout of a new customer-facing platform. The platform has successfully been launched in our smallest entity, and that is on the Faroe Islands, just to experience all things equal. We have so far seen a valuable experience, and the feedback we got from the customers has been very promising.
We are also progressing the next phase of integration, including the implementation of a new search engine on the existing platform. These initiatives are aimed at improving the customer experience, increasing our digital engagement, which are already high, and making it easier for customers to do business with Solar. Finally, a few comments on what we see in the market at the moment. We are seeing early signs of improvement in installation activities, which is encouraging.
However, market conditions remain soft across much of the industry, and visibility on timing of a broader recovery remains a little bit unclear and limited. The main expectation continues to be MAG45, where activity levels remain relatively robust. At the same time, trade continues to show positive momentum, supported by several large-scale projects opportunities across the region. Overall, while we remain cautious about the near-term market outlook, we continue to execute on strategic initiatives within our control.
Last but not least, I will tell we have now strengthened our operational platform, advanced our digital capabilities, and completed several important investments. That positions us very well in the market in the coming years. I will now give the word to Michael for some financial highlights and our guidance. Please, Michael.
Thank you, Jens. Please turn to page five. If we take one step back and look at the period we've been through, in 2024, we were in an upward trend that gradually moved us into positive territory, and this continued into Q1 2025, which you can see in the figure, where we hit +6.5% in organic growth. The remaining part of 2025 was headwind with -6.1% in Q4. This gradually turned in Q1 with -4.2%, partly due to the harsh winter condition, which mainly was an issue in Norway and Denmark.
The turning point was the start of March, and this has continued throughout Q2 as expected, which now delivered strong organic growth of 6.1% when adjusted for a number of working days. This resulted in a revenue of DKK 3.4 billion versus DKK 3 billion the previous year. Now, please notice that the acquisition of Sonepar in Norway added almost DKK 200 million in revenue in the quarter. If you look at the growth, we saw positive growth in all main segments and in all main markets. Installation, particularly Sweden and Poland, delivered strong growth, with the latter delivering strong double-digit growth.
Within the industry, Denmark was the only one who was below last year. If we take a closer look at this, infrastructure remains challenged, whereas as expected, MRO were more stagnant. We still believe that over time, infrastructure will improve, but currently the main part of the investments are within high voltage, which to a very large extent is direct business between the grid owner and the manufacturer of cables. As we gradually move on, we will also benefit from the huge investments that are coming through.
In Norway, we also saw a stagnant development with infrastructure and marine offshore. MAG45, as Jens said, it returned to growth, actually slightly earlier than we initially expected, and we can see that the order pipeline continues to increase, which gives us confidence that the growth will continue throughout H2. Now, please turn to page six. Now, the EBITDA of DKK 85 million. DKK 84 million, sorry. Q2 was in line with our expectation. Integration and restructuring cost amounted to DKK 38 million, which was also as expected.
If we compare the underlying EBITDA, it's DKK 122 million, which is slightly above what we saw last year. If you look at the figure, you can see that COGS had a decrease of 1.2% on the margin compared to last year, and this is despite the cyclic inventory gains of approximately DKK 20 million. Of the 1.2%, approximately 25% can be explained by increasing cost to freight due to the increasing fuel cost, and we have not been able, as expected, to pass this fully on to the market. The drop we see is spread across market segments and sub-segments.
It is our assessment, therefore, that there is a fierce competition in the market, but we also see a minor negative effect from the mix, with more low-margin customers, particularly also within projects coming through. Cost initiatives the last couple of years, of course, combined with the growth, has ensured that staff costs actually had a positive impact on the margin. As in previous quarters, we can see that loss on trade receivables remains well under control. Now, please turn to page seven.
If we take a short look at H1, then underlying EBITDA of DKK 212 million, we came out slightly below last year at DKK 243 million. A substantial part of this can be explained by the harsh winter conditions we saw in Q1, where particularly Norway and Denmark were very hard hit. The loss of gross margin was also on the half-year substantial as we announced when we gave our guidance, despite these additional cyclic inventory gains that we've seen here in Q2. Despite the headwind we saw in Q1, we managed to catch up in Q2, enabling us to deliver a total organic growth of 0.8%.
However, we've not been able quite to catch up with the earnings that we lost in Q1, meaning that if you look at H2, we remain slightly below the mid-range of our guidance as regards earnings. Now, please turn to page eight . Operating activities came out with minus DKK 267 million. If we take a closer look at it, we can see that there is an increase in inventory, meaning that we've not normalized the inventory. This is, as announced, due to the fact that we did additional purchases in Q2 in order to counter the price increases that we saw.
We decided to accelerate this further compared to our initial expectations. We see the benefit from this that we have been able to now raise our expectations from DKK 20 million to DKK 40 million in cyclic inventory gains. We of course expect the inventory to normalize during H2. If we look at the receivables, we also see an increase, and it's simply due to they had a very strong June compared to March. Short on the investing activities, we spent DKK 79 million, of which the DKK 39 million is PPE.
Of this, the main part, DKK 26 million, relates to Kumla , meaning that there remains between DKK 20 million to DKK 25 million, and then we are done with the investments in Kumla . Now, please turn to page nine . If you look at the net working capital, we are also seeing a trend shift, and it started to increase here in Q4. We think this is temporary. We ended on 17.7 versus 15.1 last year. The inventory being a main part of the explanation, which is approximately DKK 250 million higher. Again, bear in mind, this is not a coincidence.
It is based on a decision that we have made in order to counter the price increases. If you look at the gearing consequence of this, combined with the investment, is that we now see an increase to 5.1. This is still within our covenants, but of course, it is outside our range. This was expected, and the drivers being net working capital, which will normalize over the year, that with the H2, and similar with investments. We expect investments to come down substantially here in H2 now to a normal level, and thereby the gain will start to reduce from now on.
Please turn to page 10. Normally we deal with macroeconomic uncertainty, but the environment we operate in now also contains geopolitical uncertainty, and we have not really seen any relief of this during 2026. In our most likely scenario, meaning the mid-range, we still expect all our markets to post stagnant growth, with installation being slightly more positive and industry slightly more negative, MAG being excluded from this. Our outlook reflects a continued decline in gross margin, mainly driven by the pressure of sales prices.
Despite the cyclic inventory gains, which we have increased now to DKK 40 million, we do not expect this to wear off. We expect the development we saw in Q2 to continue, meaning that the gains are offset by the competition within the market. We reconfirm our revenue gains between DKK 12.9 billion and DKK 13.4 billion, which is equal to an organic growth in the range of approximately -1.5% to +3.5%. Also our EBITDA, we reconfirm to the gain a range of DKK 400 million -DKK 480 million and still approximately DKK 75 million in restructuring and integration costs.
As said before, this is a transition year mainly in Norway, and since we know in all material aspects are done with the integration, we will gradually here during H2 start to see the benefits of the acquisition that we did in Norway, where we expect that it will strengthen the margin for the group going forward. Thank you.
Thank you, Michael. Now it is time for questions. Please, if you have any.
We will now begin the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. From the line of Christian Stjerneby from SEB. Please go ahead.
Yes. Thank you. A couple of questions from me. It seems that your key headache here is the gross margin and this price pressure you refer to. However, I cannot help thinking that now that you are showing decent growth and continued gross margin pressure, that you might contribute to this price pressure yourself. Is there an element of that you are accepting lower prices to gain volumes?
I think it is a fair point that we are part of the problem, but hopefully also a part of the solution. In all aspects, we also have a lot of projects going on at the moment, and that of course also put a pressure on the margin, but meanwhile also that the freight costs are really a heavy burden. I think that goes for all in our industry at the moment. But it is a fair point that we are part of the problem, at least for a moment.
You said you are also part of the solution, so how will you get the gross margin up? And maybe firstly, am I correct in interpreting your guidance that you do not expect the gross margin to improve in the second half of the year? And then longer term, how should we expect that you can improve this?
Short term, Christian, we do not expect any substantial improvement on the margin. What we can see is, also that the price increases that we see from the suppliers, it takes some time to put them into the market. I think if we compare to the situation in 2022, where we also had substantial gains on our inventory, the situation was different. There was simply a shortage then and a high demand that drove up the price increases. What we see is the driver of the price increases here is cost, it is energy, basically. At the same time, the demand is much softer.
So there seems to be, and at least that is what we have seen so far, is that people, and including us, tend to sell out what we have on the shelves at the old prices that we bought to basically. First when you kind of run out of it, then you start to increase prices. This is also why these gains kind of end up in the market to a large extent. So, I would say I would still expect gradually improvement of the margin, but do not expect any miracles. Not short term, at least.
All right. Fair enough. Then just some clarification. So the DKK 38 million in non-recurring items in the quarter, they all sit in the non-allocated segment, is that correct?
Yes, fully correctly understood if you look at the segment note. Yeah.
If I take DKK 38 million out of that segment, you are at DKK 215 million. Is that the real underlying number? Is that how, I mean, what we should then work with going forward?
To some extent, it is a bit more tricky than that because you have all the costs from Sonepar coming in, and the integration did not happen overnight. It is a gradual process where we are reducing the number of people in total, not just Sonepar, also Solar people, goes without saying. Here we are talking about people who are in other lines in the segment reporting. People at the central warehouse, for instance. We closed down the central warehouse in Drammen.
These people were reported as handling costs, but they are out now, and they have been that since, yeah, I think the cleanup was finalized in June. It is not completely true as such. You have to wait until you get to H2 actually, basically.
Yeah. You have the full year effect.
Yeah. Then you start to see a more correct picture of the running rate.
But just to clarify, what you are alluding to, that is the synergies, essentially, the savings. Will they also impact, will they impact the non-allocated segment or will they be.
So, to some extent because you also have overhead that has been reduced, that were not on the pub. It is clear when you add two companies together, merge them, you do not need two of everything, which also goes for the overhead cost. So they are also impacted by it.
Fair enough. Then, just the initiative on this customer-facing platform. You have launched it in the Faroe Islands, which is obviously a fairly small market. So, when you go to the next phase and roll this out in larger markets, should we expect that to drive elevated cost again? Or can you maybe just help me, put perspective on the cost of that initiative?
I think it is more a question of bringing us on par or above where our competitors are. It holds some clear advantages compared to where today, but I think it's difficult to put an exact figure on it, what we benefit from it. It gives us some opportunities, but it will be early days, and regardless, you will not see any impact this year. That much is certain.
No, not at all. No.
We might have some more data we can disclose when we come up next year. But right now, it's simply too early days. We cannot use the Faroe Islands as you clearly pointed out, it's a very small area. But there are some good impact from it, but the figures are simply too small for that we dare use them as a basis. So we need more transparency before we can share anything with you.
Fair enough. I was equally thinking implementation costs. Should you roll this out in, say, the Danish market, should we expect a quarter or two with elevated cost as a consequence?
No.
Okay.
No. We already have taken a part of it, so don't expect that.
Okay. Fair enough. So obviously what I'm, with several questions, trying to get at, is that Q3 should be a fairly clean sheet and going forward as well.
Yeah. Close to Q4 should be, I think. Yeah, Q4 should be. In Q3 we still have a minor pick, clean-up activities in Norway, and also we need to clean up the old Örebro central warehouse. But it's- But within a few months it's done.
Yeah.
Agree.
All right. Sounds good. My last question here goes to your networking capital and financial gearing. Where do you expect that to go at the end of the year?
If we take a 10,000 ft look at this, Christian Stjerneby. We have, I think it's DKK 2.3 billion in debt right now. We expect inventory to normalize, that should bring in at least DKK 250 million. You'll have a seasonal effect between DKK 300 million -DKK 400 million, say for the sake of the rational, DKK 350 million. The P&L will bring in, but there's some money as well. But there's also going to be some investment still. It's not like it's going to be zero. So that's going to bring in, I don't know, DKK 100 million, DKK 150 million.
I would say-ish. That'll bring the debt down to around DKK 1.6 billion, which equals, I think 3.5, something like that.
We're still a little bit above our high.
Still slightly above. But I think, this is a very high-level guesstimate based on what we have disclosed and what you know, if you've been looking at Solar sometimes. You will end up around 3.5, I think. That is a fair guess.
Yeah. That makes sense. Then I guess that also means that in terms of you to start increasing the payout to shareholders, we probably need to wait another year.
I think it is a board decision, and this will be based, of course, not only on the historic development, but also on the expectations for 2027. It is way too early to make any clear assessments. But of course, you will not see payout ratios of what you saw in 2022, 2023, and, I don't know, 2024, but let's see.
Excellent. That was all for me. Thank you very much.
Thank you.
Thank you. I would now like to hand over to Dennis Callesen from any written questions.
Thank you. We have received two written questions so far. The first one goes, you are maintaining the EBITDA guidance of DKK 400 million -DKK 480 million, despite EBITDA of only DKK 143 million in H1. What specifically gives you confidence that the underlying business can deliver the significant step up in EBITDA in H2? How much of that improvement is volume driven versus margin driven?
Yeah. Again, if you do a 10,000 ft calculation, actually from 10,000 ft distance, you can see, yes, it is true, we ended at DKK 143 million. But first half were affected by one-off of DKK 69 million. We had very harsh winter condition that cost us between DKK 20 million -DKK 30 million. Meaning that the underlying performance was like DKK 240 million-ish, not taking into consideration the ramp down in costs of Sonepar. Leave that out. Now, if you take DKK 143 million and you add DKK 240 million to that brings you in the DKK 380 million-ish, right?
That is still a way to go. Then you know there is seasonality in the costs. Staff cost, the main driver being provision for holiday. Basically, maybe a bit too simple, but when people take leave in H2, we release the money from the provision for holiday. Whereas when they are on leave in H1, to a large extent, it is holidays, which means it is paid by Solar. Traditionally, this brings in DKK 40 million -DKK 50 million. That is the delta. If you add these figures together, you actually end up around DKK 425 million to DKK 440-ish million.
It is all other things equal. I know the world never is that. But that gives you an idea about why we feel fairly comfortable that this is within reach, I would say.
Second question.
Yep.
Q2 showed a 6.1% adjusted organic growth, which is a significant improvement from Q1. How much of this reflects a genuine improvement in underlying demand, and how much is simply a recovery from the weak winter conditions?
I would say the weak winter conditions hit us very hard in the first half year, and I don't believe that we will see that we'll catch that up. We have to understand that people at least should do overtime, and they don't, at least not in the Nordics. I think it's postponed more or less forever, or it's in front of us. We need to catch up in other ways. What we see, as Michael also stated, that we saw a pretty okay catch up or pick up in March, and so far we have seen the same pattern.
Don't expect that what we left in first quarter, that we will get that for free because I think simply we are pushing that in front of us, to say, if you understand what I mean.
No further written questions. Okay. I think we will say have a nice day to you all, and thanks for listening in. If there's any other questions, you're always free to call one of us. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.