Good morning and welcome to the Q2 update for Arendals Fossekompani! My name is Benjamin Golding, and I'm the CEO of Arendals Fossekompani, and together with me here today is CFO Lars Peder Fensli. Arendals Fossekompani is a long-term industrial investment company. We invest in B2B growth companies operating within the energy and/or technology space. We drive sustainable value creation in our portfolio companies through active ownership. Today, Arendals Fossekompani holds six main investments in addition to a number of smaller assets. Our companies have presence across the globe. Over time, AFK has built a diversified portfolio of B2B companies focused on industrial technology and energy. Volue and our other smaller investments are pure software companies. NSSL delivers both software, hardware, and data services. ENRX and Tekna are world-leading in cutting-edge industrial technologies related to advanced materials, additive manufacturing, and induction heating and power transfer.
In addition to this, AFK also has a real estate portfolio consisting of properties related to our businesses, as well as some local real estate projects. Finally, hydropower is our oldest business, which we have owned for over 100 years. We have controlling interests in all companies except Volue, where we hold 40% and co-own the company together with Advent International and Generation Investment Management. Our current portfolio spans the entire lifecycle, from startup through growth equity to mature companies. Over the last year, we've continued to execute our clear strategy to optimize, de-risk, and focus the portfolio toward growth equity and more mature companies. In line with this strategy, we will not actively pursue new early-phase investments. Moving forward, the companies within the previous Alytic portfolio will be followed up directly by Arendals Fossekompani's investment team, thereby optimizing cost and simplifying governance of the current portfolio.
As of Q2, the Alytic investment team has been dissolved, and the early-phase companies will be reported under other investments. Moving to the right in this picture, we find our growth companies. These are larger and have more mature business models and have access to a wider range of financing options. Our focus here is to develop asset value using a typical private equity toolbox, while at the same time maintaining the unique benefits that come with our long-term ownership horizon, our deep industrial roots, and our flexibility in terms of partnership models. The mature businesses on the right generate cash that is used for dividend and to drive organic and inorganic growth in the less mature parts of the portfolio. We create value through investment, capital allocation, and active ownership, and we realize values when we assess that we no longer are the best owner.
We continuously work to optimize this picture so we have a good balance between cash generation and attractive capital allocation options. Now, let's take a look at the highlights from the quarter. Group revenue ended at NOK 0.9 billion, down from NOK 1.25 billion last year. The declining group revenue year-on-year was primarily driven by lower revenue in AFK property, resulting from revenue recognition of NOK 245 million related to a large residential project in Q2 2024. Group operating profit for the quarter was NOK 32 million. The decline since Q2 2024 was due to property, but also low hydropower production levels in the quarter. Despite lower numbers on group level, we note several solid achievements in the underlying portfolio companies in the quarter. For example, Volue delivered 22% ARR growth year-on-year and a cash EBITDA margin of 19%. ENRX's heat business grew 5% with an operating margin of 7%.
Tekna's order intake was up 42% year-on-year, with positive cash flow from operations. NSSLGlobal delivered continued high activity with an operating margin of 20%. We'll now take a closer look at our main portfolio companies. Volue is one of Norway's largest software companies. The company delivers software solutions for energy and grid. The company aims to become the number one software provider for the European energy system by 2030. Performance in the quarter has been strong, both in terms of growth and margin expansion. As mentioned, with an ARR growth of 22% and a cash EBITDA margin of 19% in the quarter, the company is now well on its way to becoming a true Rule of 40 company. Volue announced the divestment of its infrastructure business in Q2. The company also closed the sale of its hardware business, Scanmatic.
These transactions were important steps in Volue's journey toward becoming a pure-play energy and grid software player. Our ownership partnership with private equity players Advent International and Generation Investment Management has a clear and united goal to continue to accelerate growth and value creation in the company. We measure success in ARR growth and cash EBITDA margin. These are the central parameters which drive the value of the company. Volue is and will continue to be a cornerstone in the overall net asset value development of Arendals Fossekompani. ENRX is a leading manufacturer of industrial heating and charging systems based on induction technology. The company saw flat revenue development in the quarter, however, non-repeat project revenue in the charging business unit masked a 5% revenue growth in ENRX's main business area, induction heating. The heating business area also saw margin expansion from 6% to 7% in the quarter.
Regardless, cost discipline remains a key priority for ENRX, also going forward. ENRX holds a strong position in the industrial heating segment, but we expect political turmoil and unstable tariff streams to continue to drive challenging market conditions in the short to medium term. The business is actively adapting to the changing market conditions through a number of commercial as well as operational initiatives. NSSLGlobal provides secure satellite communication solutions to defense, government, and the maritime sector. NSSLGlobal saw continued high airtime and high activity levels within governmental projects in the quarter. Revenue ended at GBP 23 million. The 20% difference versus last year is mainly due to a large non-recurring project revenue booked in Q2 last year. The company delivered a healthy 20% operating margin in the quarter, up from 19% last quarter, same quarter last year.
NSSL has also a robust pipeline, winning contracts both worth GBP 8.4 million in the quarter. NSSL's strong market position is underpinned by a solid customer base, proven technology, and a strong customer-centric organization and culture. We see significant growth opportunities within projects in the coming years and continued growth of the defense segment. Tekna is a leading manufacturer of plasma systems and metal nanopowders for use in 3D printing for defense, aerospace, medical, and automotive industries. Tekna saw a 20% year-on-year top-line decline in the quarter. This was driven by short-term fluctuations in order timing, as well as uncertainty around public funding and tariffs. Regardless, the company delivered a positive operating cash flow of NOK 0.4 million, resulting from a strong commitment to profitability, working capital reduction, and disciplined capital management. Additional operating cost reductions will be implemented in Q3 2025.
Order intake has been strong, with 42% year-on-year growth for the quarter and 59% year-on-year growth year to date. As a result, the materials backlog is up 30% year-on-year. This reflects growing demand and early signs of opportunities from increased defense spending. Defense OEMs are progressing in qualification of Tekna's materials for their additive manufacturing development, as well as for plasma sonic systems. Tekna remains well positioned in the defense supply chain, both in North America and Europe, due to prior qualifications. The company is not adversely affected by U.S. tariffs, as the company's products are exempt under the U.S.-Mexico-Canada agreement. Hydropower production in the quarter was 58.6 GWh, down 57% from last year. This was due to limited snow reservoirs in Q1 and low precipitation and inflow during Q2.
The average power price in the NO price area was EUR 58.4/MWh, up from EUR 44.8 last Q2, but not enough to offset the low production. As a result, total revenue from hydropower in the quarter ended at NOK 37 million, with an operating profit of NOK 13 million. As mentioned earlier, our smaller early-phase investments previously managed under the Alytic umbrella will be reported under other investments as of Q2. These investments include Kontali, a provider of data and analysis for the seafood industry; Veyt, providing analysis related to green certification and carbon markets; Factlines, providing solutions for easier supply chain reporting and risk assessment; Utel, solutions for monitoring telecom networks; and Select, providing software for managing large-scale battery parks. In the quarter, Kontali, Veyt, Factlines, and Utel all delivered double-digit ARR growth year-on-year.
We expect to see continued growth in ARR over the coming quarters, driven by product development and increasing sales capacity. I'll now hand over to CFO Lars Peder Fensli, who will provide additional comments on the financials.
Thank you, Benjamin. As summarized already, Volue reports a strong quarter with top-line growth and solid margin expansion. The consolidated operating profit for the group is, however, negatively impacted by low hydropower production and non-recurring effects in AFK Eiendom, partly offset by improved operating profits in ENRX. Also worth highlighting is NSSLGlobal, continuing to deliver strong results with improved operating margin in the quarter. The early-phase companies in the portfolio presented under "other" in this overview recorded an improvement in consolidated results in the quarter, though remaining negative, reflecting the current growth stage. Earnings after tax ended at NOK 32 million, reflecting positive net financial results on the back of reduced interest-bearing debt, as well as dividends received from financial investments. Income tax expense in the quarter was NOK 32 million, down from NOK 55 million last year, largely driven by lower profits from the hydropower production this quarter.
Arendals Fossekompani parent company's financial position remains solid. Available cash end of quarter amounted to NOK 757 million. In addition, the parent company has undrawn credit facilities of NOK 2 billion, securing available liquidity of around NOK 2.8 billion. Net debt, which excludes shareholder loans, was at the end of the quarter NOK 100 million. Looking into the year, we expect both revenue and operating profit for the group in 2025 to be lower than last year. The decline is driven mainly by forecasted lower hydropower production and expected reduction in operating profit from NSSLGlobal. Both ENRX and Tekna expect operating profits to be in line with last year, whilst Volue expects operating profits to improve compared to the previous year. With that, back to you, Benjamin.
Thank you, Lars Peder. Finally, let's recap our priorities. Our overarching goal is to deliver an attractive total shareholder return through actively and systematically building net asset value. We do this by working on three key priorities. We develop value in our existing portfolio companies through active ownership. We work to optimize the overall portfolio, both to ensure a composition that provides the best possible risk-adjusted return, but also to ensure a good balance between cash generation and attractive capital allocation options. Finally, we identify and execute value-creating transactions and structural opportunities, both at the portfolio level and at the parent company level. An underlying prerequisite for this is a strong balance sheet that gives us the financial flexibility to support our existing portfolio, but also capture opportunities when they become actionable. Now, we'll move over to the Q&A session.
First, we'll take a couple of minutes to review the questions. Thank you.
Thanks for waiting. Now we move to the Q&A session. First, we start with two questions related to NSSLGlobal. First one, NSSLGlobal reports weaker results compared to last year. I understand that the company is well positioned in the defense sector. Given the current global uncertainties, what should we expect going forward?
It is true that geopolitical tension drives activity levels in NSSL, and fluctuations in revenue have been driven by changes in product mix, so between airtime, hardware, and engineering. In particular, the timing of large projects can impact revenues on a quarterly basis. NSSL is shifting its business model from airtime more toward projects and engineering, and we do expect significant demand within this area going forward.
Okay, good. Second, related to NSSLGlobal, would you consider listing NSSLGlobal?
We continuously assess what is the best financial and ownership structure of our companies, and we will use public markets when we believe that can optimize or maximize value for our shareholders. However, currently, NSSL is not on the agenda for listing, I would say.
Third question is related to Volue. Can you elaborate on the reasoning behind the recent divestments in Volue, and how will this impact the company moving forward?
When we delisted Volue together with Advent International and Generation Investment Management, we had a clear ambition to make the company the number one software provider to energy and grid across Europe in 2030. In order to do that, we need to focus the company, and the divestment of infrastructure and Scanmatic have been important steps in that process, really focusing the company on grid and energy. Those divestments have seen to it that the company now has significant gunpowder in order to drive M&A within energy and grid going forward.
Good. The fourth and last question is related to Tekna. Tekna's results this quarter are significantly weaker than quarter two last year. What's AFK's assessment on Tekna's performance?
The performance for the quarter is obviously below our expectations, but we do need to remember that Tekna's markets are still in an early phase, which makes them volatile. It's difficult to judge the performance purely on a quarter-by-quarter basis. We need to look at longer timelines, and when we do so, we see a steady growth in materials, and we see the system business obviously being a little bit more lumpy. We do, however, see the significant growth in order intake and the backlog as a very clear sign that the markets are indeed moving in the right direction, and that Tekna is well positioned within this market.
Yeah, yeah.
Good. Those were the questions. Thank you for viewing and participating, and see you next time. Thank you.
Thank you.