Good day, and thank you for standing by. Welcome to the Solar A/S Q3 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, and 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 speaker today, Jens Andersen, CEO. Please go ahead.
Thank you. Good morning, and thank you for joining us today. I will start focusing on a few fact-based highlights from our third quarter, followed by an update on our digital journey towards the full implementation of a brand-new digital customer experience when doing business with Solar. Then, as always, I will hand over the word to CFO Michael Jeppesen, who will give you some insights into our financials. Our third quarter performance demonstrates that the actions we have taken across the business are delivering results. We achieved a positive organic growth across all our main markets for the second consecutive quarter, with adjusted organic growth reaching 10.3% in Q3. The growth was broad-based and supported by continued activity across customers' segments. At the same time, EBITDA development was in line with our own expectation, despite continued competition in the market and also a very high price pressure on margins.
Reflecting the stronger-than-expected development during the year, we have refined our 2026 guidance. We now expect revenue of DKK 13.6 billion and an EBITDA of DKK 450 million after a lot of one-off costs, which Michael will give you some insights into later. Our previous guidance ranges from DKK 12.9 billion to DKK 13.4 billion in revenue and DKK 400 million to DKK 480 million, respectively, in EBITDA. This update is supported by the broad-based growth we are seeing across markets and the solid execution of our strategy. Just as importantly, we continue to position Solar for the future following the completion of our warehouse upgrade program and the integration of Sonepar in the first half of 2026. Now, we are very deeply involved in our rollout of our new digital commerce platform, which remains on track for completion in the first half year of 2027.
Digitization is a key enabler of our strategy.
It supports growth, improves efficiency, and strengthens the customer experience while increasing the scalability of our business after our huge capital investment. Let me therefore turn to some of the important progress we are making in this area. Next slide, please. Our investments in digital capabilities are focused on a clear objective, making it easy and more productive and more friction-free for customers to do business with Solar. During the quarter, we have successfully completed the pilot implementation of our new digital commerce platform on the Faroe Islands, which is involving more than 650 installers locally on the Faroe Islands. We have also strengthened our product discovery through a new search engine, which is already available in all countries, making it easier for customers to find the right product quickly and efficiently.
In parallel, we are leveraging data, analytics, and AI-supported capabilities to generate deeper customer insights and enable more personalized interaction. By combining digital commerce, search capabilities, and customer insights, we are building a stronger digital foundation that improves customers' productivity, supports growth, and increases scalability across Solar. Therefore, I am also happy to share that we have strengthened the executive management team, and Anders S. Odgaard will join the team, reporting to me as CTO. This reflects the increasing importance of technology, digitalization, and transformation across our business and reinforces our commitment to accelerating Solar digital development and long-term competitiveness going forward. I will now give the word to Michael. Please, Michael.
Thank you, Jens. Now, please turn to page number six. If we start looking a little bit back, during 2024, we had a positive trajectory and gradually returned to growth, and this continued into Q1 2025, where we reached 6.5%, as shown in the diagram in the middle of the slide. Market condition changed during the remainder of 2025, and we hit rock bottom with a revenue decline of - 6.1% organic growth in Q4. Q1 of this year, we had very harsh winter conditions, which mainly impacted Denmark and Norway and, to a lesser extent, the Netherlands. But we gradually been moving ahead ever since. In Q3, we delivered a total revenue growth of 18%, of which the 10% was organic growth. This resulted in that we actually reached DKK 3.3 billion in revenue in Q3 compared to the DKK 2.8 billion we had the previous year.
If we take a closer look at the different segments. Installation saw very strong double-digit growth in all markets, with Norway being the only exception where it was a stagnant development. Industry, it is a bit more of a mixed bag that we are looking into here. So if you take it on a segment basis, infrastructure, and this is mainly a Norwegian and a Danish issue, continued to face strong headwinds, and we actually saw more than 10% negative growth in total within this area. Marine offshore growing in general, and this is mainly in Norway and to some extent Denmark. Then there is MRO, which was stagnant. OEM continued to grow. MAG45 saw very strong two-digit growth, driven mainly by two of their key customers. In addition, we can see that they are building up their build-to-order stock.
It is close to all-time high now as we speak, so we are very comfortable with that the growth that we are seeing in MAG45 will continue in the coming quarters as well. So all in all, industry came out with a positive growth. Trade also had a very strong growth, but it was driven by the main sub-segment DIY customers. So, to sum up, revenue came out slightly above our expectations within the quarter. Now, please turn to page number seven. With an EBITDA of DKK 147 million, Q3 was, as expected, substantially above what we saw last year. Looking at the underlying EBITDA, meaning if we adjust for the one-off, it is DKK 158 million.
As you can see, it is almost identical to the reported EBITDA, meaning that the transition we have been in with integrating Sonepar Norway with Solar in Norway, but also the move to our new central warehouse in Sweden, is coming to an end as expected. There might still be a few costs in Q4, but they will be negligible. If we take a look at cost of goods sold, we saw a drop in the margin of 0.5% compared to last year. In all material aspects, this can be explained by the increase in fuel prices, which cost us DKK 0.3. We have not really been able to pass on the price increases that we have seen in this market. There is still our understanding, a strong price pressure out in the market.
Despite the cyclical inventory gains of DKK 35 million, we came out slightly less than we hoped for and compared to what we saw last year. Let us just dwell a second on these cyclical inventory gains, because a bit simplified, what is happening is actually that it takes us more time to implement the price increases that we see. So basically, to a large extent, what we are doing is that the products we had on the shelf when the price increases come into effect, we basically sell out to a large extent to old prices, and hence we cannot keep this gain. This is contrary to what we saw in 2021 and 2022 in particular, where we were able to increase the prices immediately. Bear in mind that it is two very different situations.
Back in 2022, there was a scarcity of a lot of products, and that was what was driving the price. Whereas you can say the main driver behind the price increases this time are energy prices. If you look at the external operating costs and staff, we can see that we are actually now starting to see the scale effects. This is mainly Norway, where we have additional revenue due to our acquisition, but also Sweden, where we start to see the effect of the investments that we are doing. So in total, we actually gained more than 1% point compared to last year. To us, this is a sign of that there is quite some leverage built into the operation now compared to what we have seen previously.
Regardless, we will of course continue to have a strong focus on our costs in order to ensure that we harvest the full benefits of the investments that we have done. Trade receivables seems to be unchanged, so as we see it, they are under control. Please turn to page number eight. If we take a very quick look at the year-to-date figures, the EBITDA of DKK 290 million, we are on par with last year's DKK 296 million, but we have slightly higher one-off costs. So if you adjust for that, we are actually above it, and we are now on an upward trend. Looking at the full year, we see pretty much the same picture as we saw in the quarter.
We still drop in our gross margin of 0.9%, of which the 0.4% can be explained by increased fuel costs, but also the price pressure that we saw particularly kicking off in Q1 has continued both in Q2 and Q3, meaning that the cyclical inventory gains we've seen basically have been sold out for the old prices that were there when we bought the articles. Please turn to page number nine. If we take a look at the cash flow. Operating activities came out with DKK - 155 million, and if we take a closer look at it, we'll see there is a minor increase in inventory, meaning we have not yet normalized the additional purchases we initiated in Q2 and Q3 in order to counter price increases. We have, you can see, seen the benefits with the cyclical inventory gains.
You could, of course, argue that we are still selling to the old prices, but we're getting the orders now. We have the revenue coming our way. Liabilities is down with DKK 187 million, and that is the first sign-off that we are now hitting the brakes, meaning the next you'll see is that inventory will start gradually to move to a more normal level. We expect a more normal level to be around DKK 200 million lower than what we see right now, and that'll happen towards the end of the year. There's only a small difference on the receivables, and that is basically in, say, June versus September. We had a strong June, but also a very strong September. It's worth also to take a look at the investing activities.
It's down to DKK 45 million, and as you can see, the main investment now is being done in our digital platform, meaning that our investments in PPE is also coming to an end, and we expect this gradually to start to normalize, but we need to get well into H1 next year before you'll see the digital investments also start to normalize, because we need to, as Jens also was saying—
Yeah
—to roll out our new customer platform. Please turn to page number 10. If we look at net working capital as an average for the last four quarters, we see that it increased from 15% last quarter to 15.5% this quarter. Inventory is, as I said before, part of the explanation, but also the fact that we have a very strong growth in Q3 adds to the net working capital. If you look at the gearing level, we see an increase from 5.1x to 5.2x, which is within our covenants, but it is regardless slightly outside what we expected, and that is simply due to the very strong growth that have required additional investments in net working capital.
We, of course, expect, as I said before, the investments to start to come down, and we also expect net working capital to start to reduce now, mainly the inventory, and we will also over time see the accounts payable start to normalize again as our purchase starts to pick up, when we have to start to refill our inventories. Now, please turn to page number 11. We are dealing with not only macroeconomic uncertainty, but also geopolitical uncertainty. There has not really been any relief here in 2026 on that. You could argue on the contrary. Despite that, we have, as Jens also mentioned, refined our guidance for 2026, where we initially expected a recovery in H2, and we can see this is materializing.
It is actually materializing slightly above the top end of our guidance, meaning we now expect a revenue of approximately DKK 13.6 billion versus previously a range between DKK 12.9 billion to DKK 13.4 billion. The DKK 13.6 billion is equal to an organic growth of approximately 4.5%. Similarly, we changed our expectations to the EBITDA to now DKK 450 million versus previously DKK 400 million to DKK 480 million. So, slightly above the mid-range of our guidance. Thank you.
Thank you, Michael. Now it is time for questions, please.
Thank you. As a reminder, to ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. If you wish to ask a question via the webcast, please type it into the box and click submit. Our first question comes from the line of Kristian Tornøe from SEB. Please go ahead. Your line is open.
Thank you. I have a couple of questions. I will start with the cyclical inventory gains. I need to clarify exactly what you're saying here, because if I understand it correctly, Michael, you are saying that suppliers raise prices, but you don't raise prices immediately on your, you can say, inventory bought on the older lower prices. If you're not raising prices immediately, then there's really no gain. Is this just a sort of a technical number, or how should we think around that?
I think you're pretty accurate in your assessment of the situation. You can say, if I bought a product yesterday at DKK 100, and today the price is DKK 110, but I sell it at the same price today, even though the price has gone up, as I would have done yesterday, then you get exactly into this scenario that the DKK 10 I would have as a gain, which we will call the cyclical inventory gain, I don't get that. But I'm not worse off compared to if I've sold the product yesterday. What we're trying to say is it takes a bit more time for us to push the price increases into the markets within some categories. It varies from market to market, so it's a bit oversimplified, Kristian. But in all material aspect, this is what is happening.
Again, it goes against what we saw in 2022, where we immediately could raise prices into the market. The situation is slightly different, but that's basically what is happening. That we sell the products as we would have done before the price increase. When we get the new products, we increase the prices.
Okay. I would argue this is probably slightly misleading, because you could interpret it in a way that when you say there's DKK 35 million in cyclical inventory gains in Q3, then you should really adjust your gross margin for that, which would take it down to 18.2%. But as I hear you, that's a wrong way to do it, because you're not really getting those DKK 35 million.
I am not sure I understood the question. I would have had the DKK 35 million if I had increased the prices immediately, meaning that the products I bought at the old price, if I could sell them at new increased price, then I would have got the DKK 35 million myself.
Yes.
I am not really able to do that, but I can see that if I had done it, I would have had them.
Yeah. Okay. But obviously, it matters because when we then look at slide 11 and your guidance table, which is, by the way, very useful, then you give us a base in your new guidance of DKK 530 million of EBITDA adjusting for the non-recurring items.
Yeah.
But obviously, you do not take into account the cyclical inventory gains here.
Nope.
But as you say, you-
Not the. Sorry, Kris.
You do not realize a lot of those DKK 75 million, as I understand you correctly. So the DKK 530 million is really the correct base to benchmark into next year.
I would say it is a fair base. You should not adjust for these cyclical inventory gains.
Okay.
But you can say then why do we disclose it? I mean, we've always been extremely transparent, and we disclosed this when we had these very high price increases in 2021, 2022. It's the same we've seen here on, although a smaller range of products, but still we've seen substantial price increases way above what would be a normal level. It's that part we are looking into. That's why we just chose to disclose. It's a bit technical, I understand.
Yeah. It is, but I think I got it clarified now, so that's great. If I may jump to your Norwegian business, your commentary around growth in Norway in the installation segment is that there is not really a whole lot of growth opposed to other markets. I'm just curious-
They're not having two digits. They're not having two digits.
Is there an element of cannibalization here from your Sonepar integration?
No.
Or is it more the market?
I don't think so. No.
No, we are measuring the greater part of all customers to go from Sonepar, and there we see a very good index.
We do. But it's not two-digit, but it's growing.
Yeah.
But if you look at the organic growth in Norway, when you look at it, you can say, okay, I think it's 1.7% or something like that. Bear in mind that they are actually losing 10% on infrastructure, and they need to catch that up on other segments. And infrastructure is important in Norway. So, I'm not saying they're doing a bad job. Definitely not.
And then the construction market in Norway is still underwater.
It is.
So, despite all the positive thing about the Norwegian economy, the mainland, and not the offshore activities, but the mainland, the GDP is only growing 1.4%, and mainly construction is still underwater. But expectations is that it will start to pick up, hopefully next year. So I think all in all, a great job in our Norwegian company, and especially that we are soon or more or less finished the integration. And our business case will last also into 2027. We are 100% sure about that as we speak.
That's quite clear. Then on the pricing in general, obviously you are showing quite decent growth here, and we've seen that from some of your peers as well. Theoretically, when the market is growing, you would expect pricing pressure to ease. It's quite clear that's not what you've seen in Q3, I guess. But, I mean, is there any signs that it could get better, or are you still seeing very intense competition in Q4 as well?
At least as we see right now, the competition is really tough and very fierce. Even if I look into also in the Danish market, construction next year doesn't seem to be very good, or the forecast is pretty low on new construction. There will be a lot of renovations going on, and hopefully there we have our share. But the competition is really fierce. I think there are some losers and a few winners in the Danish market at least. Sweden, I think all in all, they're growing more or less. The whole market is growing. As I said before, Norway is difficult.
More stagnant, I would say.
Holland is also growing, but low-digit figures. A lot of things is going on. As Michael stated before, the energy costs are hitting the products, and it also means that it's. At the same time, the interest rates have gone up. So construction will be under pressure, at least for a while, until things are normalized again, unfortunately.
All right. Great. My last question. You bring a bit of guidance on your cash flow in terms of expecting to reverse inventory in the fourth quarter. Can you sort of steer us through where your net debt- to- EBITDA should roughly end by the end of Q4 then?
Between 4x and 4.45x-ish, I would say. That's what our models are telling us. The challenge, Kristian, is always that there might be a few customers who, for whatever reason, pay a few days too late, and then the money arrives at the beginning of the year. But it's going to be, I would say, between 4.1x and 4.4x. That's our own expectations.
Fantastic. Thank you so much. That was all my questions.
Thank you.
Thank you. We will now move on to our next question. Our next question comes from the line of Sebastian Grave from Nordea. Please go ahead. Your line is open.
Hi, Jens and Michael. Thanks for taking my questions. I would like to start off where Kristian left around the net debt position. Michael, you allude to you expect that net debt or the leverage position end year should end around 4.1x to 4.4x. Obviously, this begs the question where, how does that put you in terms of capital distribution with a policy target of 1x to 3x EBITDA? That would be my first question.
To that, we can clearly say we do not have any answer because it is the Board of Directors' decision, and that decision is for good reasons not made before typically early January or late December. We really do not have any answer to it. But yeah, you are right. We are above our own targets. That is spot on. But that is the best guidance I can give you right now.
I guess that is very clear. Yeah. Very clear. Yeah. No, that is fair. Can we talk around the growth for the quarter? Exceptional strong organic growth rates, 10.2%. You say you continue to see pricing pressure, so I guess this is a question around volumes and maybe some mix effect. Can we also talk around sort of if you may be able to split out the growth between existing customers and new customers? Has there been any sort of material inflow of new customers explaining the growth rates in the quarter, or how should we think of the number here?
I think it's, yeah, of course, we always get new customers. Unfortunately, we also lose some once in a while. I think it's more the share of wallet we have increased. We have 60,000 different customers, and I think if we only can increase the share of wallet a little bit, and mainly on the small- and mid-sized customers, there is a huge potential in front of us. Of course, because our cost to serve is very low when it's delivered out of our stores. So, we also can be a little bit more competitive and still have decent earnings on that way of working. We want to at least We have built the company to grow, and at least we have shown that it starts to materialize. Yeah. The price pressure is fierce. We have to admit that.
Okay. No exceptional inflow of new customers in the quarter explaining the growth rates. It's share of wallet, basically.
I cannot give you a fair number. Of course, there will always, as I said before, there will always come new customers. Of course, unfortunately, we also sometimes miss, or someone leaves us of different reasons.
It's crucial to understand the very huge pool of customers. So, we're not like we're dependent on two, three-
No, no.
It's definitely not.
It's a broad base of customers.
Okay. Yeah.
Of course, if you have the right assortment, you can attract new customers, and that's also a thing we are working with, especially in Holland.
Yeah, I would say in particular in—
We have extended our assortment, and we can see that works, and we'll do the same in maybe in other countries as well. Then of course—
As I recall, you—
Yeah.
Oh, no, sorry. Go ahead. Sorry. Go ahead, Jens.
And of course, serve the customers in a digital way, so it is also lean for them and lean for us. Yeah.
Yeah. But as I recall, you have previously alluded to you actively targeting small- and mid-sized installers here.
Yeah
And some of the new initiatives. So, I guess what I am asking, this is not a reflection of your new initiative bearing fruit yet. This is other dynamics in play in the quarter.
It is also a part of it, but I think it is much more than that. It is a broad view on competitiveness combined with a stronger cost base in Solar than many other competitors, simply because we do not have the same cost situation as others. That was our goal with our capital investment, and I think we at least can deliver on that.
Yeah, we are starting to see the effects of it, I would say.
[Short term]. So, at least what we said so far has been the truth, and hopefully, we can stick to that situation also into 2027. Because for us, the importance of our strong third quarter is, of course, also the run rate into 2027.
Hmm. That is clear. I see no comments or financial metrics on the financial performance in Sonepar Norge in the statement. Maybe I overlooked them, but do you have any color to add to the performance in Sonepar Norge here in the quarter?
First of all, you need to look at Norway as a total. We integrate them the first half of May. By integrating, we mean that we move them into our systems, SAP. If you look at the 400 customers in Sonepar Norge, which was 83% of the revenue, I think there were 14 of those who are not doing business with Solar Norway also. You can simply not, in any meaningful way, separate the two anymore, because you really mixed the hot and the cold water now. What you can see is, you can look at the Norwegian performance and see if things are picking up. As Jens also was saying before, we measure very closely on these 400 customers.
You have to look at the combined revenue, both the Sonepar and the Solar revenue, and see where we are developing from that. That is developing in a very good way. We have delivered on, as Jens also said, all the synergies. We had a follow-up meeting with the Board of Directors where we went through it, so it checked the box in everything. Also the people who unfortunately had to leave us as a part of this, that has happened. I think the pickup that you are seeing in the result in Norway is too substantial, to some extent at least, can always discuss what is what, but we see the effect of it in Norway, that they are in a very different place compared to where they were last year, I would say. We are very happy with the integration.
Our Norwegian team has done a tremendously good job here.
Just to be clear, the Sonepar Norge, it is not included in the adjusted organic growth number you give for Norway of 1.7% in the quarter, right?
Let me tell you how we do it, how we calculate that. We take the revenue of Solar last year, we know that, then we add it to Solar Norway last year.
Okay.
Then we measure the two against each other, the new combined revenue. That is how we calculate it. That is the best way we could do it.
Yeah, it is the best way we can do it. Whether it is the new truth, maybe not, but at least that is the way we have done it.
Then you can say, okay, I think it was 1.7%. That was not a lot. But bear in mind that they lost 10% in one of their main segments, so they had to compensate for that. But they are not delivering two-digit growth in installation. They are not. Let me just look it up. Yeah, Norway is 1.7% organic growth. So, that is the way it has been calculated.
Okay. No, that's very clear. My last question, if I may. I heard that Kristian now, he understands the cyclical inventory gains. I think I'm still yet to fully get it here. Maybe if you could just repeat. As I understand, what you're saying is that the cyclical inventory gains of DKK 75 million here in 2026, that does not impact your gross margin performance. When looking at an underlying run rate going into next year, I should not adjust for the DKK 75 million. Is that correct or?
Let's start with your conclusion first. No, you should not adjust for it. What we're trying to tell, and it is a bit technical, so let me try again. If I buy a product today for DKK 100, and I sell it today as well, I get a certain profit. If I buy again the same product today at DKK 100, and then the price goes up overnight to DKK 110, but I paid DKK 100 for it, just remember that. I sell it to the old selling price. I do not change my selling price in my example. Then I will not get the DKK 10 in inventory gain. But if I can increase my price similar to the price increase I have received on the products which are sitting on the shelf when the price increases, so I bought them at old price, then I will have the capital gain on it.
I'll get the DKK 10, which we call cyclic. So, it's a matter of, these are products bought at old price basically. What you got to ask yourself is, were we able to sell them at the new and higher price? The answer is, to a large extent, no, we were not.
Okay.
It's extraordinary, and it's a bit like measuring the length of a rubber string, because we know normally we have these gains to a certain level, and it's very complex. Very short, they vary over time and country and what have we. We try to say, but these price increases we've seen here in Q2 and Q3 were above normal, what we consider a normal level. So, it's the part that's above. Again, in 2021 and 2022, this is also why we are mentioning it now, we disclosed them because there we were able to keep them. So we may buy the product at DKK 100, the price went up with DKK 10, we immediately put a price increase into the market, and we could keep the DKK 10.
We earned additional DKK 10 on the product, because the price went up overnight, and we just bought it before the price increase.
Yeah. No, that is clear. I think the confusion arises because you refer to it still as a gain, and what I hear is that basically there is no gain.
Yeah, fair enough. There is no theoretical gain. It is a theoretical gain.
Okay. Yeah. No, I got it. Thank you so much for taking all my questions.
We are here for the same reason.
There are no further questions at this time, so I will hand the call back to Jens for closing remarks.
Thank you. Thank you for hosting us, and thank you to you all for joining in, and have a very nice day. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.