Today, and thank you for standing by. Welcome to the Alligo interim report third quarter 2025 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press one and one again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the live event. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Clein Johansson Ullenvik. Please go ahead, sir.
Thank you, Nadia. Welcome to Alligo Q3 report 2025. Presenters today, yes, since quite a while back, are our CFO, Irene Wisenborn Bellander, and myself, Clein Ullenvik, CEO. It always feels a very report-busy day when we report, so we will keep it swift, as always. We focus on highlights and will not go through too many details that everybody can read on their own. This is Alligo, a quick, quick flyover. SEK 9.5 billion turnover, approximately. Sweden is the biggest country by far, and even bigger if you consider the earnings. It is actually two or three shops less compared to last time. We have co-located a couple of more stores, but the biggest uptick with some 26 stores from the beginning of the year was the acquisition of Battery Logic. As of today, 239 shops.
This is a busy slide, but it is to illustrate something we are quite happy with, that we can run an integrated, fully Nordic business and at the same time see investment opportunities in adjacent or in actually the product assortments that we actually have in integrated businesses. For different reasons, it does not really make sense to integrate them. We have our 13 very nice product media companies, we have our six welding companies, and we have Battery Logic, as you know, a nice acquisition we made, and then we have some other businesses. Those together amount to 20% of our sales, but 80% of our turnover is, of course, in the integrated businesses with the two main brands, Swedol and TOOLS. We are a true Nordic organization, as we will see on the next slide.
This is our organization with three sales organizations, one per country, Sweden, Norway, and Finland, and then we have the Nordic functions supporting those sales organizations. This is, according to us, the most efficient way to run our business. What is new since we have shown this picture earlier to you is on the top left corner, Nordic operations, where we have said that in our type of structure, in our type of businesses, many times the Nordic operations are included in the Swedish operation. To make this a true equal support to all countries, we have put the Nordic operations in a specific box, and I mean Nordic sales supporting operations. Like the segments, industrial and construction, those two segments are placed under Nordic operations, retail shop development, marketing, real estate, and some other functions.
Now all countries equally can have the same support, and we can run much better through Nordic sales organizations. Having done that, we have also recruited a new Country Manager for Sweden, Daniel, who will join at the year-end round. Acquisitions: three completed acquisitions, one big and two small ones this year. Twenty-nine stores were added. Battery Logic is obvious, but also two acquisitions within the product media area. They amount to around SEK 300 million in annual sales, and we got some 98 new employees into the group. Some highlights for Q3: the market situation, as we have written in the report, is very much the same. We've said that quite a while, and I see all reporting companies saying more or less the same thing. It's the same market conditions. There is some hesitance, some cautiousness from the market, but it's very much the same.
Every day, every week, every month, every quarter we put behind us takes us one step closer to hopefully a better market climate. We have done, we think, whatever is possible. We have been pushing for sales for quite some time, that we have communicated many, many times, and it has not slowed down in any way. We have done the cost reductions very early on through this downturn. I think you can all agree that we were quite early on identifying the downturn and taking actions. The highlight, if you can say that, about cost savings—it's a terrible activity—but it was the first quarter of this year with a plan , as you know, which we have delivered on to the decimal. We have been able to focus on acquisitions while downscaling costs.
We are working very hard with reducing inventory levels, and that is a tricky thing that we are struggling with. We see good performance, or better performance, I should say, but there's much more to be done. We need to reduce the number of owned brands, and we need to look over the partnership we have with our suppliers. Even if we reduce, you know, by many, many thousands of suppliers, we need to do much more, and we think we are able to do that going forward. Price adjustments, after this high inflation period, there are some product areas where we could be perceived as expensive or more expensive, and that we are addressing, and we are around halfway through that. Delivery capacity is good, Vestby being the last central warehouse we built. It's back on track mainly, some minor adjustments left, but it has a good delivery capacity.
Microeconomic factors are very much the same, but luckily, at least we can benefit from better exchange rates between SEK and the dollar. There are some positive things with all these disasters. There is a slide with six boxes where we tick at least five of them. Revenue grew thanks to acquisitions. Organically, we are still in minus, a little bit less minus, but we're still in minus. We improved the cash flow. The adjusted EBITDA is up, and the margin went up from 6.4% to 7.2%. We are super happy about that. The gross margin, as you know, and we have communicated many, many times, we have been focusing on cost and contribution gross margin, and we continue to have that in mind. The gross margin that you arrive at in a slow market is many times the gross margin you are stuck with when things turn back.
The whole trick is for us to get volume growth with this high gross margin, then we will have a super nice future. Highlights from Q3 include continued extremely high sales focus. We are running our growth initiatives. We are working very much with sales efficiency, what targets to put on different sales roles we have, and adapting the pricing system and the pricing levels. We do that constantly. We know how to do it. It takes some time, and it's necessary for us going forward. Acquisitions, I've said, we don't need to repeat that, but we have a good pipeline when we feel it's time to hit the throttle again. Operations, we are very much focusing on TOOLS Finland, and we will not stop that focus. We have even more focus on getting the gross margins up in Finland.
Normally, the Finnish organizations, wherever I've been, have a decent cost structure, but we need to improve our gross margins in Finland. We and the management team in Finland are extremely focused on that. Assortment management, we are a reasonably new organism, and of course, when we establish assortment and things happen, you fine-tune that a bit. We need to arrive at a position where we say, "This is now our assortment," and we can do a more structured way of developing the assortment. Capital efficiency, we have said we were at 24, and we are up at 28, and we should come down to 24. That's a target we will come back to. Turnaround Finland, gross margin is a super focus. The team is very dedicated. We are learning from each other within the group. Norway did in Q3 some really good initiatives bringing the gross margins up.
It's hard work. It's not, you don't, it's intellectually no challenge, but it's super difficult to really make it happen in the everyday life. We are all trying to help our Finnish colleagues to do the right things in turning the gross margin up in Finland. The financial targets are super clear. There are no changes there. The organic growth being 5%, as we've said, and we have always said that we have hoped to add another 5% in a normal environment with acquisitions. Our debt ratio is down at 3.1, and we don't foresee any reason why we shouldn't be around last year's level at year end. Q3 is our weakest quarter from a cash flow perspective, and Q4 is our best. The EBITDA margin, we will start from where we are today, and we were close in 2023 before the market started turning sour.
It's still there as a target, clearer than ever. The dividend, of course, we are in line with what we have said. The sustainability targets, they are all developing in the right direction, meeting the supply standards. Customer satisfaction index, we're actually above our target in all countries. Sick absence is at a targeted level. CO2 levels, we have a good plan in order, and we are executing on it. Female in management positions are slowly, very, terrifying, slow development, but at least in the right direction. An update on our portfolio. We say we go for growth, and we have very clear targets, and they are, of course, Nordic. Services are a very important area for us because there are parts of our assortment which our competitors have, and we need to differentiate in other ways than price and how to do that.
You add services, and we think we are pretty good at that. The laundry service is developing nicely. You need first to win the contract, and then you need to exchange the garments. It takes a time before it ramps up, but from a process perspective, everything is in place, and it will continue this nice development. To develop our shops is also a very important thing. I think we have a great part of the organization in the group. We have a good way of running our shop sales, and it needs to be developed a little bit more. We have a very focused initiative for the construction industry. We think we are well- positioned. We have the right brands, and we have a strong position in Sweden, where we also need to develop that in Norway and Finland.
Own brands, and I think we can skip to the next page directly. We have our Björnkläder, probably the oldest workwear brand in the Nordics, and Univern being the real premium from a price position. If you take the mid-range from a quality perspective, it's actually premium, both Gesto and Ampro, but priced a little bit more attractively. For you who have been around for quite some time, you remember when we launched Gesto in 2014, that was our affordable line in those days. It has developed. It has become almost perhaps a little bit too good, but it's priced in a mid-range. The same thing with Ampro, super quality products in TOOLS, but priced at a very attractive price level. The affordable, the 1832, we launched to meet competition with lower-priced products.
Since it's us putting our names under it, it is affordable in price, but in quality, very, very good. We have Profeel in TOOLS just to meet shop assortments from low-priced competitors, so our customers don't feel that they need to go somewhere else to buy that. I think we have a very good set of own brands, potentially too wide assortments. We are focusing on scaling it down in a number of articles, but we'd like to increase the sales of own brands a lot. Market position, it's an analysis we do every year around these times when annual reports have come out. As it looks, it's a very mathematically advanced model behind it. From a Nordic perspective, we are keeping our market shares, potentially a little bit up in Sweden, flat in Norway, a little bit up in Finland.
If you look at profitability and market share development, we come out okay, to say the least. Especially from a profitability level, we are on a very good level. Financials, Irene Wisenborn Bellander.
Thank you. As Clein mentioned, after six quarters of weaker results, we now have a quarter with improved profitability across all countries despite the continued weak market. Revenue increased by 2.1% in the quarter, driven by a 6.3% growth from acquisitions, but contracted by a negative organic growth of 2.7% and adverse FX effects. The organic sales growth was weakest in Sweden, but it was significantly impacted by large project orders to the defense industry last year, and also the loss of Norfolk volumes this year. Adjusted for this, the group's organic growth was flat. Sales within the manufacturing sector in Finland recovered, although from low levels. Norway continued to benefit from a strong oil and gas sector in the quarter. EBITDA reached SEK 158 million, representing an improvement of SEK 21 million or 15%.
This increase was driven by improved results across all countries, following stronger gross margins in Sweden and in Norway, cost reductions, and contributions from acquired businesses. The enhanced gross margins are due to positive customer mix effects, better sales and assortment management, as Clein mentioned, and to some extent reduced purchase costs in U.S. dollars. The impact from stronger margins, cost reductions, and contributions from acquired businesses is illustrated in the EBITDA bridge. The SEK 100 million cost-saving program implemented in Q1 has further reduced the cost base in Q3. As you can see in the chart, the cost reductions have offset the annual salary increases and inflation effects on other expenses. Sweden has the highest share of SMEs and own brands, followed by Norway, while Finland has the lowest. This directly correlates with profitability in each market. The higher the shares, the greater the profitability.
The market downturn has primarily affected small and mid-sized customers. However, the decline related to SMEs is now less significant, and their share has increased from 68% to 73% in the integrated Swedish business. Additionally, the share of own brands in Sweden has increased from 26% to 30%, as sales of our own brands primarily derive from the store channel. As you can see in the graphs, there is also a slight positive development in the share of SMEs and own brands in Norway and Finland. Moving on to some highlights of each market's development. Starting with Sweden, the Swedish market remained weak, with organic growth declining by about 6%. However, if adjusted for the large project orders to the defense industry, the growth was slightly positive.
The improvement in EBITDA is due to better gross margin resulting from more favorable customer mix, as well as cost savings and contributions from acquisitions. Moving on to Norway, the oil and gas market in Norway has remained strong, but the growth in this segment was lower compared to the first half of 2025. EBITDA was slightly better than last year, driven by cost reductions and a higher gross margin resulting from positive customer mix effects, but also improved sales and assortment management. Moving to Finland, there was a sales recovery in Finland, but from low levels last year. While our recent acquisitions have had a positive impact on the results, the old TOOLS business remains challenging. As Clein mentioned, the main focus is on improving trading gross margin in the direct sales channel.
Moving on to cash flow, you can see that we had an improvement when it comes to operating cash flow, driven by improved EBITDA and repayment of preliminary tax. We have an ongoing capital efficiency project, and we have reduced the inventory levels of external brands, but the investments in our own brands counteract this progress. Networking capital, as percentage of sales, is about 29%, and we aim for 24%, which was the level in 2022. Investing activities in the quarter mainly relate to the add-on acquisitions within product media, and the organic investments are lower than last year, and the CapEx to Depreciation ratio was 0.5. The net debt at the end of the period was SEK 2.1 billion, an increase from previous year, primarily due to higher acquisition pace and lower operating cash flow.
The ratio of net debt to EBITDA was a multiple of 3.1x, and the ratio is higher than last year due to a combination of lower EBITDA and increased net debt. Typically, the debt ratio increases from the second quarter to the third quarter since Q3 is the weaker cash flow quarter. However, the debt ratio has actually decreased slightly from Q2, and it's expected to continue to decline. Our covenants relate to interest coverage and equity asset ratios, and they are fulfilled at the end of the period, and there is still good headroom before reaching the threshold. In summary, despite the temporary increase in leverage, we maintain a solid financial position and expect leverage to be well below the financial target level by year end. Handing it over to you, Clein.
Thank you, Irene. Q3, in summary, improved profitability in all countries. That is, of course, extremely nice to say. High sales activities, even if we don't really get the benefits of all the hard work, but there will come a period when we can harvest the fruits of our hard work. Everybody is struggling, and our lovely colleagues are fighting every day. We hear more positive signals. There are more quotations. We're even getting answers to quotations, and we're winning quotations. That's it. We feel there is a little bit of a different market feeling. We empower them with better sales concepts and services, and we think we have a market office which is quite strong, a little bit different from several others. Continued cost cautiousness. We are always ready to take actions when we see that needed.
Outlook for 2025 and beginning 2026, and you've all probably seen the latest statistics, and it's an up, in Sweden at least, a revised upwards construction market for 2026. Unfortunately, a little bit revised downwards at the end of 2025, but at least the longer outlook looks good. We are well- positioned to leverage on this. We have built a very efficient and financially sound company. If we add a few percent of organic growth on top of this, this should be a very nice journey going forward. For 2026, very much focused on sales, marketing, and continued focus on acquisitions. One last thing before we open up for questions. You've seen the news. Me leaving during 2026 is the least dramatic thing in history and should be seen as a signal that we are in a very, very good position.
We are getting closer and closer to a market upturn. When and how strong, nobody really knows. It is also a signal that the group, it will never be finished. It will never be 100% ready built, but we are in a very, very good position. We're taking all the largest strategic grips and building this platform. Looking at the time frame down there, I hope you all can agree that it has been a decent amount of time, and it has not been just leaning back. It has been some dramatic grip we have taken over the years. That's that. Handing back to you, Nadia, for Q&A.
Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press one one on your telephone keypad and wait for a name to be announced. To withdraw a question, please press one and one again. Alternatively, you can submit your questions via the webcast. Kristin Hallbäck will compile the Q&A queue. This will take a few moments. Now we're going to take our first question, and it comes to the line of Emanuel Jansson from Danske Bank. Your line is open. Please ask your question.
Good morning, Clein and Irene. Hope you can hear me. Thank you always for a very good and informative presentation. A couple of questions from my side. I mean, looking at the market development and how you're performing, we can see now that the Swedish market is declining around 6% organic. I know that you for quite some time had quite tough comparable figures versus last year. We also have the struggling account with Norfolk, so to say. How much of the decline is related to this, you would say, i.e., how is the underlying development going? Also, can you maybe shed some light on the underlying demand from the SME customers, which we know are very important for your business?
Yeah, very good. You are extremely well informed, as always, Emanuel. You know that we sincerely dislike bringing up excuses. Of course, the defense orders and Norway, if you adjust for them, we would have had a positive organic growth.
In Sweden.
In Sweden with a couple of percent, uneven affecting the group so much. It would have been at least flat from that perspective. When it comes to the SME customers, I heard on this lovely pod, Kvalitetsaktiepodden yesterday, they mentioned that it was the worst SME market in over 40 years. I feel that we have felt that. We think we have a good grip of that customer category, and we know them very well, and we know their behavior very, very well. We see that we have just been, some of you know about our Swedol days if you take Sweden and TOOLS days in Norway and Finland. We still attract the same amount of customers or even more to the shops. We can still see that the average purchase is still lower than it used to be.
At least we see stability, and we also know which accounts we win. Just as you said, the comparables going forward from Q4 and onwards, those two excuses are on a much lower level. The potential is still there if you take the defense, for example. We are well positioned with sales to the defense. Norfolk has gone forever, but the defense, it's an opportunity for us going forward. We are pushing for the small and medium-sized customer, and hence those price adjustments we also are making so they can get the feeling again that they don't need to go to any low-cost, lower-quality competitors of ours.
Perfect. Thank you. That's very, very clear. On the defense exposure that you have and have built up the last couple of years, how big do you think this could potentially be in the future for this business?
I don't know if we're communicating. I'm looking at it as if we're communicating that. We have in all our countries, Norway, we are in the middle of a huge tendering process. Nobody knows the outcome. We know we're pre-qualified. We came out best of all the bidders from a sustainability perspective and all other vitals around it. Price will be the determining factor. The HTP, Hämeen Teollisuuspalvelu , we acquired in Finland, is a super important partner with Patria. I've been there seeing what they build, and it's not just product they develop. They actually assemble parts for the vehicles they have there. In Sweden, we know both from workwear, tools. We are in so many different product areas, so the potential is big. It's a number of hundreds of millions over time.
You also know that we've communicated that 2024 was the last of the budget cycle, and 2025 is the first. 2026 and 2027, the purchases from the defense will go up. I don't say that we will win all the orders. It's tough competition, and it's also attracting international players from countries you're a bit you're questioning how can they quote to a Swedish defense. We have a strong position. We are very involved in their planning, but it's tough competition.
That is really interesting. Of course, what is the potential there for you to deliver even higher growth within your private labels within the defense sector? Is that possible?
Absolutely.
How is that working?
Absolutely. We can take that at a different time, perhaps, but we are delivering some very interesting products, both high-tech and down to garment for the kitchen. It's a whole spread. We are in pants, backpacks, and shoe soles, but very technically advanced shoe soles. It's across the line, and we are strong, especially since our connections to Paris suppliers. We've been successful in winning these separate tenders. We have a specific team we have set up to deal with this. This is not in the normal sales organization, so to speak. We have a specific team set up since a year or two back to benefit the most from this.
Did you have this opportunity during the old Swedol days within this defense sector, you would say? Did you already have this exposure then?
Not really. I mean, it has been the investments now being pumped into defense from different perspectives, is, of course, much, much higher. The TOOLS part of the Alligo Group had, on the tools side, hand tool side, had an agreement since many years back. We've been able to capitalize on that. With the good relationships from the previous TOOLS business and adding assortments that Swedol came to the table with, it should be a match made in heaven.
Really, really exciting. I'll not stick to this subject for too long, but really interesting. Given now that perhaps the comparison base is now behind us regarding Norfolk and probably defense order, do you think that the following quarters now will show more clearly on how well you are performing versus the markets, as you showed in your presentation?
Yeah, it's a very good question. We anticipated that would come, and we don't dare to say anything. We are a bit too nervous on the market outlook. Nobody dares to say anything. I think all the reporting companies have said the same thing, that it's some hesitance and cautiousness from the customers. At least, as you say, the comparables are, we have nothing to blame anymore or to excuse. That excuse is gone for sure. Now our true performance will be more visible. That is for sure.
Perfect. Thank you. Jumping on to Finland, which shows organic growth, that's, of course, really positive. What is driving the improvement there? It appears that you're also growing on a store basis. Have you started to see results from the transformation of your physical stores there, or what's driving the growth at the moment?
We are always very open and transparent. We have a couple of larger customers that have had a good development, and we need to do much, much more in order to transform the Finnish organization to be more successful with smaller customers. Having said that, for the transformed shops, as you say, we have seen good development over the last.
Sales are picking up.
Sales are picking up. That's typically us. We expect that it should be booming from day one, and it never is. We see that the new shops are developing. Most of them, not all, most of them are developing nicely. The figure you see and you relate to is, if I'm downgrading ourselves, it's mainly because a couple of larger customers have had a good development.
Where are you now at the transformation of the store network in Finland?
We've stopped after the shops. We did, and we said, let's see if this is the right way. We did it. Potentially, we should have done less. I think, was it six we did?
Yeah, I think that we have six or seven concepts.
We said, let's not roll that out further until we see that this is the successful way of doing it. We would be in a very good group of many other businesses thinking that you can copy a concept from other countries into a country and it doesn't work. We said, let's be cautious. Let's really look into how has this developed now in Finland. Is this the way for Finland or not, or do we need to make an adjustment? We're not rolling out any new, we're not converting any new shops as it is.
Thank you. That's very clear. On the gross margin, obviously, good improvement there. You're mentioning the mix effect driving the gross margin. If we now start to potentially see the market in 2026, at least turning in your favor, I assume you have both country mix, customer mix, and also you're mentioning FX tailwind on purchasing on your side.
Yeah.
Where do you think the gross margin could be in the future or in the near-term future? One year?
We got to that question many times in the old Swedol case when the gross margins were very, very healthy. It's not the gross margin maximizing case. When we see stability in gross margin, we could push more for sales. I think that would create the best shareholder value to say that we're not intending to get to 50% gross margin because then we are losing out on a lot of businesses. To find a good, solid base, and as you said, the currency is helping. More and more professional purchasing is helping.
Increased share of own brands.
Share of own brands, increased share of small and medium-sized customers, all that will help. It will also give us, if we refer back to the defense discussion, better ammunition for the sales organization to actually be able to grow a little bit more.
That sounds fair. Absolutely. Last two questions from my side before letting someone else jump into this call. On this then, what do you think we should expect in terms of leverage and profit development if you start to achieve volume growth in the next year, given that you're already now growing profits with not having given any specifically help from volumes at the moment?
Exactly. Mathematically, if you could simulate, I'm not going to say a figure, but with a healthy gross margin, our cost-efficient platform and base, and then if you start adding a few percent on actual organic growth, and if we also conclude that we do not ruin the nice acquisitions we've done, of course, you get a good leverage. We've had this leverage against us a couple of years when the market has turned down. I mean, with our structure, with SEK 0.5 billion in rent cost per year, it's difficult to scale this business downwards. If you add volume on top, we don't need to scale much cost in proportion. I can't give you a figure, but sometimes we meet people who have just been calculated, and it should be okay.
Yeah. We have to wait and see. Last but not least, we are sorry, of course, to hear that you are leaving, Clein. What do you see as the most important task here for your successor, and what will he or she need to focus on to drive Alligo to the next level, do you think?
I think everything is in place. I said to some people who have called, the largest disappointment for me, and that's what nobody should open the champagne bottles yet. I'm not leaving in a couple of months. My first focus is for nobody to be able to come in and say, "Now I've cleaned up after Clein and the existing management team." That should not be possible, hopefully. The financial targets are solid. They are there. The strategies we have in place to take us there, they are there. From my perspective, we are in a very good place to execute on the strategy we have. That should be my, as they do in the White House, when the new president comes in, they leave a note on the desk and don't change too much, potentially.
Thank you. That sounds like a good plan in general.
Yeah.
I think that was all of my questions for now. We might speak again during the Q4 call as well, Clein.
Yes.
Have a great day, and thank you very much.
Same to you, Emmanuel. Thank you.
Thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The question comes to the line of Karl- Johan Bonnevier from DNB Carnegie. Your line is open. Please ask your question.
Yes. Good morning, Clein and Irene. A lot of good color announcements already. I'll be just having a couple of smaller ones for you. Looking at the gross margin development, would you say that we have seen anything of the benefit of the U.S. dollar coming through yet, or is that more of a question for, say, the coming quarters?
It's more of a question of the coming quarters, but we do have some minor effects in Q3.
Looking at the biggest opportunity there, I guess it's on your own brands where you probably have the least of what you would call market pricing of it. You should be able to keep most of it yourself. Is that a good assumption?
Yeah. Also, let's not forget that we have suppliers who themselves buy their products in dollars. This is the quickest way, of course, when we purchase something in dollars, and it suddenly is at $9.40 instead of $10.30. That is, of course, good. We also need to take the negotiations with our suppliers who were arguing for higher prices when the SEK went down. Now the SEK has gone up, and we need to call for new meetings and negotiate that. It's also both our own brands, of course, that is more, it just happens, but also negotiation-wise with our suppliers.
Clear, clear. And Clein, setting the agenda for your successors coming in, so to say, looking at what you talked about in Finland, getting the Finnish operation up to 68%. You have stated that target earlier in some stages. Obviously, with volumes coming back, that should be easier to get up there. What kind of timeframe would you say suggest would be a logical thing to deliver on that target?
The financial modeling we're doing, it's a couple of years out, two years out. As I said earlier, we need to really show that we can turn up the gross margin. Wherever I've been in my working life, Finnish businesses have always been cost-efficient. The same thing goes for us in general. It is not that we cannot save ourselves to success for the TOOLS business in Finland. We have other businesses which are super profitable. The former Grolls business is profitable. HTP, RTP, and so forth are very nicely profitable. It is the TOOLS business that is struggling. We cannot save ourselves through cost. I think it's also dangerous to at least plan for volume saving us. We need to prove that we can improve gross margins and quickly.
When you look at Finland, is there a lot of pruning still to be done, looking at customer segments, looking at product offerings that I know have been historically challenging to get the margins out of, so to say? Are those still there, getting to 68%?
Yeah, absolutely. All above. Everything needs to be done. You saw Irene 's slide on share of own brands. We need to work closer with our suppliers. Parts of our organization are very, very good at that. Finland perhaps needs to come back to that. I mean, if you win a contract and the profitability is not good enough, you partner up with your suppliers and say, "You need to help us. We need a couple of percent in support to get this on a decent profitable level." It is not intellectually challenging in any way, but the work has to be done. That is what we are together with our Finnish team pushing for.
As you see, there is nothing on the system side when you're looking at your setup in Finland that puts any limitation to it, that there is anything that needs to be, say, invested in to do that opportunity.
We are now following the development of the converted shops. If that turns out to be the right way forward, that should be the right way forward. We don't need to take any strategical grips. From a structure point of view, everything is there, I think. From a behavioral and execution point of view, we need to do more.
Excellent. I heard in your initial statement, Clein, that you talked about a strong M&A pipeline to execute on when you are ready. When are you ready?
I think Irene said that, or perhaps it was me. I'm not quite sure.
I think we're up.
We will be down from a gearing perspective, we will be down to 2024 level in Q4.
Yeah.
We feel confident again. When the interest rates were a bit higher, we said it's uncomfortable to be above 2.5, but we ended up at 3.2. We'll pick that 2.1 or 2.2. It's time now to start looking again.
Looking at the active pipeline you have, you haven't missed any transactions during these times where you have now held back on the acquisition phase.
No. As we talked about before, you and I, I mean, we previously perhaps you could push things to do it earlier. Now for a while, we have not pushed, but we haven't lost any. We haven't said no to anybody. We will continue to do acquisitions in the identified areas that we see potential for growth.
I'm hearing you mention Norway in the comparison numbers for last year. Do you have any exposure to talk about to Steglen, their financial problems of late?
Exactly. 0.0. They are a cash customer. If they want to buy something, they have to pay cash.
Exactly.
It is 0.0.
Sounds like a prudent way of doing it. I'm looking forward to talking to you again before you leave, Clein. Thank you very much for this and all the best out there.
Thank you, Clein. Take care.
Thank you.
You're welcome there.
Yeah. Participants, as a reminder, if you wish to ask a question over the phone, please press one one. If you would like to submit any questions, please use the webcast link. We will just give a moment to our participants to press one one or to submit any questions via the webcast. The speakers don't have further questions for today. I would now like to hand the conference over to your speaker, Clein Johansson Ullenvik, for any closing remarks.
Thank you, Nadia. I think, Annika, we have covered everything that has come in mail-wise. We have covered in all the discussions we've had now. It feels good. Very good, everybody. I think we can conclude that the quarter was decent despite no help from the market yet. I think we built a solid platform. We have a balance sheet in order, and we will come back at the end of the year with a net debt ratio, which is in line with last year, which is good. We focus on sales. That we've said quite some time, but we continue to focus. When that starts to kick in, this should be a little bit better. We continue with what we are doing. We see that we get effect from what we are doing. As I always say at the end of these meetings, the journey continues.
Thank you very much. Enjoy the weekend when that comes.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Thank you.