Good day, and thank you for standing by. Welcome to the Alligo Interim Report Q3 2026 conference call and webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please 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 one again. If you wish to ask a question via the webcast, please type them in the question box and click submit. Please also note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Samuel Alteborg, President and CEO. Please go ahead.
Hello, everyone, and welcome to the presentation of the third quarterly report of Alligo. We are just starting up here, some technical issues, so just give me a second. The presenters for today is me, Samuel Alteborg, CEO of Alligo, and of course, together with Irene Wisenborn Bellander, our CFO and Deputy CEO of the company. The agenda for today, we are going to give a bit of a brief of Alligo, of us as a company. Then we are going to talk some highlights of the third quarter. We will give an update on some specific developments in all our countries, more or less, and also in our logistic expansion of the logistic center in Örebro. Then, of course, deep dive into the financials and a summary and outlook for rest of the year. T hat's what we have in front of us.
Let's start, and let's start with Alligo as a company. Probably this is familiar to most of you, but still to remind ourselves, we are a leading player in workwear, personal protection, tools and supplies, and also industrial components across the Nordics. We operate, of course, then across Norway, Sweden, Finland. We do a revenue which is just now below SEK 10 billion and very close to it. We are roughly 2,500 employees, and currently we operate through 237 stores. This number has changed upwards with three stores since last time we spoke, and it's our acquisitions of welding companies on the east coast in Sweden, Kalmar and Växjö, and even one more store added to that count.
T his is us, and t hen to describe ourselves, we often divide us in one part that we call an integrated Nordic business, and then we also have a non-integrated business that I will come to. T his integrated business, that's of course our big concept brands of Swedol and TOOLS, which I hope you are familiar with. They are built on a platform which has been developed over time, and it spans across several areas. It starts with a common store network, which is fairly the same or more or less the same across these three countries and independent of brand. Then we have added a logistic function to that, which is then homogeneous across the countries and serves all those three countries in the same way.
We have common IT systems, ERP, and even a BI platform, which creates a very strong transparency across the group in all types of data and how we are performing and how we are developing ourselves, which is very strong. We have also built own brands and own capabilities in certain product areas, which we can also then spread across this integrated platform. A very strong base, again, has been developed over time, and I think for us now, when we will talk more about that, it's a lot about utilizing this strong platform as we move along. Sales also split across various channels to customers. Of course, the stores are strong and important. Roughly 45% of our business is channeled through the stores. The absolute majority is in the fixed stores we have, and then we are complementing ourselves with some industry-specific stores.
Those are a pop-up kind of stores that you build in an area or in a certain project temporarily to follow that project over its lifetime, and then you dismantle that store when that project is finalized. 45% relates to store and 33% relates to various only or sorry, digital channels. I t can be direct sales or online or web or whatever. Then, of course, the 22% then that is non-integrated. Let's come then to that. If we are building on this strong core that we discussed, then we have complemented ourselves with a set of companies in different technology niches.
We spoke already last time that this is a mix that I really like to build on because we have this then strong core with a strong product assortment, with a strong customer base, and then we complement ourselves with these niches somewhere in the periphery of the strong core. What I mean then is that from a product perspective, it partly overlaps with the core, but the niches also add uniqueness, expertise, and depth, of course, in those type of products. Also from a customer perspective, we partly overlap with slightly same customer base. A gain, these niche companies comes with a broader customer base and, of course, new customers that we can then work on in the totality, so to say, of all the things we can offer.
R eally happy with our product media niche, with our welding companies, with our battery capabilities. Then we have a few others as well, which are also performing strongly. Again, I think this is a strong base to complement the integrated business with these niches and to find synergies across, especially on the commercial side. We are doing that more and more, and we gradually, of course, develop how we work as a whole company, the integrated and non-integrated together. T hat's a way to describe who we are. Then just to finish off, we have developed ourselves with these acquisitions over time. I think in the past five, six years, we have acquired companies to the value of SEK 1.7 billion in terms of revenue. It, of course, goes a bit up and down. That's the story when you work with M&A.
We have always had a pipeline. We try to develop ourselves, and we want to find good companies of a strong quality that really complement ourselves well. Of course, sometimes several of those come in, and then it can take some time before the next batch comes in. It is a bit of a catch-up kind of effect thing to do. O ver time, I think we have developed ourselves nicely then through acquisitions as a complement to the strong core business. Yes. That is a short reminder of who Alligo is and how we are developing broadly. Let us come in then to the third quarter, and let us talk some highlights of what has been happening here for the last couple of months. Starting with macroeconomics, obviously a factor we all need to consider. There is a geopolitical uncertainty, we are aware of that.
T he kind of effects of that is still the same as we have said before, which is very limited if you talk about direct impact. Then, of course, we live in the same financial climate as everyone else, and that is probably to a certain extent impacted by this geopolitics. T here is nothing in addition to that, so to say, impacting or in any way harming or disturbing for Alligo. I think we are strong in mitigating and managing effects coming out of this uncertainty that is out there. Then, of course, we can also talk about industrial activity. We will come a bit more to the market and what is happening there. W e still see a mixed picture and overall, a quite cautious market in our core countries.
In Sweden, obviously, we have had growth for some time, but we still see the market being a bit cautious or slow. We also, in the third quarter, had a little bit of negatives from a weaker seasonal demand. On the other side, we also see upsides in various industry niches in some areas of the country. I t is a bit scattered, but overall slow. The same more or less goes for Norway. It is a bit more evident there that oil and gas has been a fantastic market for many years, and we have talked about the projects that have been a strong business for us, which is good. O f course, naturally, such projects also phases out over time.
We still see a potential, so to say, in the market and that good things are happening, but equal to Sweden, it is still on the slow side from what we want, of course, and what we aspire for the future. Then come Finland. That has continued strong or maybe even stronger than what we have said before. Recovery manufacturing, defense is strong, but we see it across also towards the smaller construction companies, the electricians, the plumbers, whatever it can be. Of course, happy to see the development in Finland, which is very strong. In this type of market situation with the geopolitics, etc, that are uncertain, of course, we as managers need to be super proactive and super agile when it comes to actions and how we steer and develop Alligo. This is a trading company. Sales focus will always be top priority.
That's how it works. We are applying that across all our channels all the time, and we are focusing on short perspectives, of course, which you always need to do to stay super relevant, but also in mid and longer perspective. How do we further develop our capabilities and structures and steering of sales? We will come back a bit more to that, but this is a core topic for us as a company and should always be. Then in parallel, of course, continued cost cautiousness. We need to continuously monitor our cost base so that it's relevant and that we adjust. This can be locally. Some cities doing really well, maybe need some more headcount, for example.
Other cities, which has a slower period, of course, there we need to be very active to make sure that we have the exact relevant staffing that we need. That's part of our job, and that we do continuously across all the countries and companies. Then growth by acquisitions, as we said, a super interesting way to complement ourselves and build ourselves even stronger and find commercial synergies. That agenda is continuing as it should. For this year, we have also been focusing maybe even more on our inventory levels and making sure that we are very optimal in what we store and when, so that we can tie up some capital. There is a program on the way, and it's delivering according to our plan.
L ast but not least, in this agenda, geopolitical uncertainty with oil prices and other stuff going up and down per today, we need to be very active also in price adjustments, especially towards those segments that are impacted mostly. We are that. If you would see our pricing system, you can see that all those oil-based products and affected products, I should say, we are doing very active updates on price levels, etc, to follow the market and protect our margins. T hat's some flavor on proactive management. Then just to repeat on delivery capacity, the situation is still the same. It's good and stable in all countries. We see no major disruptions despite all these effects, and we see our ships with containers coming from Asia having to take longer routes, etc.
W e have the margin and the flexibility to maneuver that, and also the partnership with the freight companies so that we get our products on time to our logistic warehouses. G ood to see, and again, repeating that, from a delivery perspective, we see no big hiccups at all. That's good. Then going into the third quarter, and at the first glance, this can look quite good. We have a revenue growth, roughly 5%. We do organic growth of 1%, which is the fourth quarter in a row now. We are growing organically as a company, which is, of course, positive. We are improving our profit and we are sustaining our profit margin or even improving it slightly. A gain, at first glance, this is quite positive.
T hen, of course, when you look underneath, which we will talk about more, it is a very varying picture across the company or the countries where Finland is doing really well and developing nicely, beyond our plans, basically, or faster than our plans. T he softer market in Sweden and Norway is problematic for us, and we are going to be honest and say that we are disappointed with the development we see in Sweden and Norway. O f course, with our proactive management, we have already taken measures during the quarter to handle and mitigate this as quick as possible and to react both in a short and a long perspective. O verall growth, quite similar to second quarter, but growing slightly in, I shouldn't say the wrong areas.
You always want to grow in all areas, but we are growing towards segments and countries with less kind of margin, and we have a slower or softer market in the areas where we typically do a bit higher margin. That is why our profit is not increasing even more, which we, of course, want. L et's come back to those details with the help of Irene further on. If we are going to take some highlights for the first quarter, again, the strong improvement in Finland, higher volumes. We see it across the customer base and again, coming back to that a bit more later. R eally positive and thumbs up for all the hard work that has been done in Finland over time, and that is now paying off really well, and that we are, of course, continuing to do.
Then we have the last couple of months pushed ourselves in terms of sales activity in Sweden, Norway primarily then, of course, Finland as well. W e are working both short term, of course, to make sure that we are super relevant and steering ourselves towards the right customer segments, etc. We have also launched a quite broad agenda with a mid, long-term perspective on how we are going to prioritize and focus our activities. I will come back to this in detail later on to describe what we are doing there. Also important to say, we see a continued positive development in our service offering, and this is, of course, good to see. We have talked a lot about ReCare as a new service we have launched, where we start to see really good customer pickup and really good dialogues.
We have Smart Service as a service we have discussed before, which is growing continuously and is a very good way to create attractiveness and long-term relationships with our customers. T hen there are plenty of other services we offer as well, and we are focusing more and more on them as a whole to make sure that we are relevant not only from a product perspective, but also how we serve the customer with these products. On operations, I think the key highlight is in a way profitability improvements. We have, of course, as we said, a continuous monitoring of our cost level and we adjust gradually over the year in relation to what we see. W e have pushed that agenda a bit more in Norway.
We did that during summer, just after summer, and we do a cost takeout more in a program form now in the second half of the year, which will give some strong effects as we move along. We are just in the making of this now. Across the board, continuous cost cautiousness and focus on capital efficiency, that is part of our DNA. Obviously, when we are a bit disappointed with the results we see, that is so to say, even more applied to the whole organization and to ourselves, even if it is part of our DNA and something we always do. Then also some strategic initiatives. We have said before that we are expanding our logistic capabilities in Örebro. This is according well, according to plan. We will deep dive also on that. I t is important for us.
Örebro is a very cost-efficient distribution platform for us, and we are utilizing that even more now across the full base of countries. We can do that even further when we have expanded it, and that is positive for us both from a delivery capability, but also from a cost perspective. Also we are, and we will review ourself from a strategy perspective now in the second half of 2026. This is a very natural thing to do. There has been, of course, a long-lasting strategy within Alligo for a number of years, where we have done all those good things in combining towards Swedol and TOOLS and building this solid platform that we are operating from.
Now it is a quite natural time to also ask ourselves a bit more the question, how do we utilize and take benefit out of this strong platform in the next, so to say, horizon? There is plenty of ideas, opportunities, discussions ongoing now in the company. We are doing this in a quite inclusive way together as a company to make sure that we stay super relevant to our customers and again, utilize the platform that is built. I t is a refinement or an evolution of the strategy we have had, and it is going to be the base for how we continue our growth journey in the coming years. Yes. Let us then do a few deep dives, and we will go through two in Finland and give you the status of the program and the evolution of the development we have had there.
We will talk about growth initiatives both in Sweden and Norway, and also give you a status then of Örebro. In Örebro, automated storage handling is what you see on the picture here, which is a fascinating operation, super efficient way to provide our customers with their needs. We will give a status update of how we are expanding this. S tarting with Finland. As you know, Finland historically has been a challenging market and of course there are many reasons for that. We have launched a program long ago, several months ago, which has been executed really well by the management team and all the people, of course, working close to Finland and in Finland. We now see good effects across the customer mix. W e have good development towards the industry within the manufacturing segment and the defense area.
W e also have good and strong development in the store sales towards small and midsize customers. It can be construction companies, plumbers, electricians, whatever. Fascinating to see that the development is positive across and despite the fact that we have also moved away from two quite big customers within the last 12 months. We are able to recover that and grow in total with 12% in the quarter. Also then, in addition to all the commercial activities that have been applied, there has been an efficiency program with a cost takeout, and we have pushed, of course, our price level a bit. I n totality, we are landing an adjusted EBITA of 6%. That's almost twice in percentage what we did last year.
H ats off, really impressed by all the good work that has been done towards Finland and is continuously done in Finland by all the people involved. There is more to do. We will definitely continue this journey and trajectory and see how far we can stretch and improve our business in Finland, g ood so far. Next up then, we have a lot of ongoing activities both in Sweden and Norway. Of course, there is always ongoing activities, things we do to improve ourselves, both in the short and long perspective. Then with the proactive management that we apply, we are sharpening ourselves quite quickly here, given that we are disappointed, as we said, with the outcome of the third quarter. If we talk a bit about short-term actions, I think there is a lot of good initiatives now in Sweden and Norway.
Let's start with Sweden. We start to talk about tailored industry specific offerings. What do we mean with that? If you look on Alligo and then Swedol, if we're now in Sweden, we have a huge opportunity in the broad customer base that we operate towards. A really broad mix and high number of customers across various segments. That's fantastic, and that's really something we are building on. W hat we want to achieve is of course, also that we are razor sharp towards all the specific niches. W hen we speak with a plumber or an electrician or a construction worker, we come with a tailored offering, which is very unique and attractive for that specific type of customer. W e are now step by step building a bit more structure around those specific offerings, and we are putting them to the market.
W e do that both in Sweden and Norway, we should say. That started some months ago, and I think we see early good signs and good outcome as we launch these offerings one by one, basically. A good initiative. It can give a kick on short-term, but it's also going to be a way that we strengthen ourselves in a longer perspective. Then if we come to pricing, always relevant in any company and in a trading company, maybe even more so. There is a continuous process how we review our pricing and make sure that we are relevant, towards all type of customers.
S pecifically now, of course, we have been targeting some key products that we know is super important for our customers. We have also, in partnership with our suppliers, made sure that we have a very relevant price point in the right way with the right margin. We have also been focusing price discussions with some bigger customers, and this should be mentioned also for Norway, to make sure that we really have a good situation and the profit we need to get out from the business. Quite a lot of price discussions ongoing right now, primarily then with bigger customers. This is important. In Sweden, it is very positive to see now the stepwise increase of cross-selling within the existing customer base, of course, but also within the group.
There are plenty of good examples when we have gone hand in hand with our welding companies together, then with Swedol, we are in Sweden, and we can see that we can now start to sell welding components and products to industry customers of Swedol. We start to sell Swedol products to various welding company customers from the past. We go together approaching these customers with our full offering. This is still in an early phase, but again, very positive signs, and we want to make that even more structured.
Of course, create an offering where we are really relevant with all store networks to all type of small customer needing anything in relation to welding, and where we have a nice transition up to the specialized and expert niche companies in welding when the customers have more complex demands or needs, s o that we are establishing now across Sweden. As always, there are many campaigns launched in this type of company. The Swedold agen, or the Swedol Days, I think is a famous theme for all of us, and we are running them right now.
That is always a landmark in how we approach our customers, and it is very appreciated across the country with high energy and engagement across both our sales and customers. T hat is happening right now. In Norway, there is also good reasons to accelerate our sales focus even more. The activities is about the same, I should say, as in Sweden. Here we also have an ongoing cost adjustment, as we mentioned. That will imply a quite strong cost takeout, and that is going to help us as we move forward.
In addition, we are focusing a bit further on service takeout and applying all our service concept across the country, and that can be both Smart Service, which is evolving nicely, but also how we work with foot scanners, etc, in stores to strengthen our PPE offering even further. A lot of things happening in Sweden, in Norway, in addition to all the things happening in Finland, of course. In the long-term perspective, there is more that we want to do structurally. We talk about tailored industry offerings, we talk about pricing initiatives. All of that also goes into strengthen our sales management and our steering towards prioritized segments in a bigger context. W e are working in parallel with the short-term actions, but also establishing a bit stronger steering and management of sales in all aspects for the longer perspective.
We are working on that. We are continuously now developing our omni-channel presence and penetration with customers. The store concept will always be the heart of our operations. That is how we connect with customers, we build relationships and relevance. Our customers will not only buy from us in stores. They also have needs and reasons why they sometimes want to buy it online. We have that capability, we have fast deliveries, and we are just now making sure that we are really, so to say, omnipresent across the customer base so that we follow the customer both when they have needs from a store and from any type of digital channel. That is also going to be both a short- and long-term priority. As we said, we have a strong service offering that we can develop even further.
We are already happy with all the services we have, and we are pushing them across the customer base to create an even stronger relevance with our customers. Plenty is happening, both in the short perspective, but also building ourselves even stronger in the long run. To finish off the deep dive, Örebro is a fantastic logistic hub that has been developed over time, super efficient and so fascinating to see this automated store concept and how we very efficiently then package the stuff we are going to supply to customers and to stores. We need more capacity in Örebro, and we have communicated an investment that will increase our capability with 6,500 new sq m , which is quite a lot.
We are then also moving towards an additional land, so that the whole yard we are utilizing becomes bigger and we are building part of that as a first step. Design details, everything is now being finalized and some regulatory approvals as always when building something, and then we will start construction early 2027 and the new capacity will be in place early 2028, which we think fits really well with the development of the company and the needs of simply more capacity. Looking forward to see the finished expansion of Örebro. That was the deep dive. Now I leave it over to you, Irene. Please take us through the financial a bit more in detail.
Thank you. As Samuel mentioned, we delivered another quarter with organic growth and improved profitability. This was the fourth consecutive quarter of organic growth and the fifth quarter of improved results. However, sales development in Sweden and Norway was, as Samuel mentioned, disappointing. Revenue increased by 4.9% in the quarter, supported by 1.1% organic growth, 1.5% acquisition-related growth, and positive currency effects. Finland continued its positive organic growth trend while Sweden and Norway developed weaker. Fewer project orders in the oil and gas segment explain the lower sales in Norway, and the Swedish market remains slow, and sales were weaker in several customer segments except the defense industry. EBITA reached SEK 168 million, up SEK 10 million or 6% versus last year, and the increase was driven by improved results in Finland, supported by higher volumes and cost reductions.
Gross margin was 41.1% versus 31.4% last year, driven by less favorable country and customer mix. Moving on to some highlights of each market's development in Q3. Total revenues in Sweden were in line with last year. Acquisition-driven growth and somewhat higher internal sales offset negative organic growth in both the integrated and non-integrated business. The sales development in Sweden was disappointing with declines across several customer segments. In September, we also completed another e-commerce platform upgrade that disrupted customer traffic. We estimate the negative impact on sales and primarily on our own brands in the range of SEK 8 million-SEK 10 million. EBITA was slightly lower than last year due to lower volumes and lower gross margin driven by customer mix. Following the weaker profitability, we will continue to adjust the cost base while maintaining a super strong focus on sales.
Revenue in Norway increased, supported by currency effects, acquisition-related growth, and higher internal sales to Sweden, but negative organic growth partially offset this. The decline in organic growth was mainly due to fewer project orders in the oil and gas segment, which began to slow in the second half of 2025, while sales in the construction segment improved in Q3. EBITA was slightly lower than last year due to lower volumes and a slight gross margin decline driven by unfavorable customer mix. As Samuel mentioned, we established a project during the quarter to improve the unsatisfactory profitability in Norway, and activities include initiatives to drive growth, improve gross margin, and adjust the cost base by SEK 35 million. We expect the cost-saving initiatives to have full impact from year-end. In Finland, sales continued to recover in several customer segments, primarily manufacturing and defense.
We are seeing a positive trend in attracting SME customers, although from a low base. This development more than offset the impact of the two larger customer relationships that have now been phased out. As Samuel mentioned, the efficiency program in Finland is progressing according to plan and has strengthened operational execution across the business. EBITA improved during the quarter, driven by higher volumes and ongoing cost-saving realization. When it comes to cash flow, the third quarter is seasonally the weakest quarter from a cash flow perspective. Operating cash flow was lower than last year despite an EBITA improvement, but remains significantly higher year-to-date. Q3 last year benefited from a positive tax timing effect, and this quarter we have negative working capital moments. Inventory typically builds up ahead of the Q4 season, and the increase was slightly higher this year.
The increase in receivables reflects business growth and a higher share of customers with longer payment terms. The decrease in liabilities mainly reflects lower purchasing volumes and timing effects of the supplier payments. Average net working capital as a percentage of sales reached 27.7%, which is 1 percentage point lower compared to year-end. We still have work to do when it comes to capital efficiency, and we aim to reduce average working capital as a percentage of sales to 24%, the level achieved in 2022. Investing activities during the quarter relate to organic investments and final purchase price settlements for the recent welding acquisitions, and the CapEx to depreciation ratio was 0.8 on a rolling 12-month basis. Finally, financing activities reflect amortization of a revolving credit facility and leasing liabilities, but also cash outflows to former product media shareholders selling their remaining shares.
Net debt at period end was SEK 1.6 billion , down from Q3 last year and year-end, driven by strong operating cash flow. Leverage improved from year-end, supported by higher EBITDA and lower net debt, but was slightly higher than Q2, which is typical since Q3 is the weakest cash flow quarter. The net debt to EBITDA ratio was 2.2 at quarter end, down from 2.5 at year-end, which is well below our financial target. Our covenants relate to interest coverage and equity asset ratios, and we met all covenants at year-end with good headroom before reaching the threshold.
As mentioned earlier, we refinanced the business during the year, and currently we have SEK 1.9 billion in available cash and unutilized credit facilities. Combined with healthy operating cash flow, this provides us with a strong financial position and the capacity to continue investing in organic growth and capitalize on attractive acquisition opportunities. I will hand it over to you, Samuel, for summary and outlook.
Thank you. To summarize the third quarter, again, at first glance, continued organic growth and roughly 5% growth in the quarter. Of course, that is good. Finland recovering really well and developing more or less quicker than expected in the improvement program, which is also very positive. As we have said, challenging and disappointing even in Sweden and Norway, and a long list of actions that we started to take already around summer, and of course, some of them also being part of a natural evolution that we continuously do as proactive managers. That is where we stand. Happy with the platform, all the opportunities we have moving ahead, and it is going to be a lot up to us now to develop also the way we operate and work so that we get the full benefits out.
If we take the outlook for the rest of the year, and also looking a little bit into 2027, it is a partly slow market environment still, and there are some effects in that. Of course, we want to deliver growth across, despite market in a way, but looking forward also to a more positive market development in Sweden and Norway. Long list of items, actions, things we are on the way to do to strengthen ourselves the way it should be, and we see good trajectory or progress in the things we are launching gradually now across Sweden and Norway.
Then to repeat the strategy refinement towards 2030, really building from our core strengths, building from our customer needs and customer dialogues, and twisting and turning on ourselves, how we can evolve the way we work into something even stronger and take benefit of all the opportunities we have. This strategy refinement process will continue throughout the year. Then, of course, we will implement and work actively with that when we move into 2027. I think that's it. That's our presentation for today. Of course, now available for any questions.
Thank you. 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 one again. Once again, please press star one one to ask a question on the phone and wait for your name to be announced. To withdraw your question, please press star one one again. If you wish to ask a question via the webcast, please type them in the question box and click submit. We are now going to proceed with our first question. The questions come from the line of Emanuel Jansson from Danske Bank. Please ask your question.
Good day, Samuel and Irene. I hope you can hear me. A couple of questions from my end, relating to the development in the Swedish market for you. Given the more positive Swedish manufacturing and also looking at building material index here in Sweden, which is growing, I think it's around 7% year-over-year in Q3. Can you help us understand the gap to your negative organic growth that you displayed in Q3? Do you think it's mainly customer exposure or timing or are there areas where you are losing market shares at the moment?
As you say, we also see a bit of a gapped view where there are definitely improvements in the market on parts of manufacturing industry, a little bit depending on your exposure, and also in parts of the building material sector. We definitely don't believe that we are losing market share, but maybe the uptake of our products and the niches we operate in, specifically then towards construction industry, maybe comes a little bit later in the cycle.
Obviously it's positive to see now that our construction companies in Sweden are talking about positive numbers and improvements. We think it's early stage in what they do and will build as we move along. Of course, we will follow them along the way. No, we don't see that we're losing market share, but definitely we expect to be part of the growth cycle if it continues, of course, across the market.
All right. Thank you for that. Looking at your sales initiatives, Samuel, you have not been in the company for that long, but the company itself have highlighted increased sales activity for some time, and yet the organic sales growth in Sweden remains weak. What do you think has held back the impact of earlier initiatives, and why should we think now that the new actions will be working to a greater extent than before? It's a better extent than before.
Yeah. No, good question, Emanuel. Just to the start question, if they have paid off well or not, it has been a very challenging market for Alligo over time. I think there's plenty of good things that have been done to remain relevant and active on the market that has been there. O f course, you can always add a twist and flavor. Again, it is both positives and to a certain extent, challenging. We have a very broad opportunity base across so many types of customers, many customers, and also serving them with many various products. What we will develop a bit more then is our approach on how we're addressing them with that big sales organization and store network, so that we are even stronger in relevance towards each and every type of segment.
That is a bit of a new approach to us, and we will also add a layer of steering on that, which is a bit more robust than what it has been in the past. I would say adding some flavors in terms of steering and approach that is a bit different from the past. We strongly believe that this will help us to get even more efficiency out of our sales organization.
All right. Thank you for that. Have you seen any early indication of positive development from these actions or activities already now in the fourth quarter?
Yes, I will comment on the third quarter. Definitely, as we have applied a bit different pricing structures on some areas, we talked about those initiatives, but also a few concepts relating to customer offering. The uptake has been positively received both in our own sales organization as a start, which is important, but then towards the customer base. We definitely see early positive uptake on those items. I would say we are early in a mid-long journey, so to say. Let's continue to progress on those things and adapt, of course, if we see anything else. Currently, yes, positive.
Right. That's good to hear. When we're talking about pricing, you mentioned growth in lower margin segments and ongoing price discussions with larger customers. Is it possible to quantify or how much of the margin pressure in this quarter is due to mix versus pricing with existing contracts, you would say?
I'm looking a bit at Irene here. I will not be able to quantify that specifically. That's a big question and, of course, important one. Definitely, if you look on the totality, we will know that the store concept in Sweden is by far the most profitable concept that we have. We also talk a lot about own brands. Those two together is what's driving profit. Unfortunately, in the quarter, clothes sales was a bit slightly weaker than normal. We think that relates to the weather. We also have some IT incidents affecting clothing sales most. That's probably the impact. We are addressing the bigger customers where typically volume flows are bigger, but margins is slightly lower, with active price discussions to make sure that we stay relevant.
Right. Thank you for that. Maybe a question for Irene here about depreciation, amortization, and the impairment charges fell around SEK 20 million year-over-year. What explains the decline, and what run rate should we assume going forward here?
Yeah. It's a little bit down, but I think the level that we have on a rolling 12-month basis is the run rate going forward.
All right. Thank you. Maybe last question from Finland, very positive development there, and you described a broader recovery in Finland. Alongside benefits from pricing and efficiency measures, is the current margin a sustainable base to build from, you think? How should we view that 6% EBITA margin?
Yeah. If we look midterm ahead and even half long-term almost, we think this is a sustainable margin level in Finland. There is a strong uptake with quite a broad customer base. As long, of course, that the market develops in a nice way and it all goes well, this should be a sustainable level. That's not to say we need to work more. Of course, there are always more opportunities to capture and to grow, but we are quite comfortable with the level we are at now.
Perfect. I think that was all my questions for now. Thank you much, Samuel and Irene. Thank you very much.
Thank you, Emanuel.
We are now going to proceed with our next question. The questions come from the line of Karl-Johan Bonnevier from DNB Carnegie. Please ask your question.
Good, I guess I'll probably say still good morning, but getting close to good midday, Samuel and everyone.
Good morning to you too.
Lots of good colors already. Maybe a little more on Norway and the initiatives you are now driving there. If I remember correctly, the oil and gas project-related headwinds that you now have seen for a couple of quarters, both really starting in Q4 last year. Is that the right interpretation that we are getting into maybe also slightly easier comparisons coming into Q4?
That is correct.
When you look at the initiatives, you alluded to, Irene, that you hopefully pull impacts of it from year-end, but have you already started to see a ramp-up of it?
It has started slightly to ramp up, but we expect the full impact from year-end.
Yeah. It has been a gradual effort, you could say, for some time that we have pushed further in Q3. There are gradual effects, but it also takes some time to get the cost base in new shape.
Continuing on the earlier question on your market share in Sweden, how would you interpret the different development in Norway and Finland in the same context on your relative position in the market?
You mean the question if we are losing market share or where we are basically on market share?
Exactly.
Finland, I would say, obviously, we are taking market shares. That just has to be the case. I think there is an underlying growth in the market, but growing with 12% is, of course, beyond market. That is super positive, and we are well positioned there with some core players, which is great. Norway is more difficult for us to interpret right now. Various signs of how the market is developing, what is happening. If we look across the base, okay, base oil and gas is very easy to understand, and we see the project phasing out.
It is a natural kind of happening when you have had those projects. Then if you look across the base and across the geographies, the development is quite the same across. It goes independent what customer segment you are in or a little bit where you are in the country. For us, that is, of course, another interpretation of that it is a market-related issue, which is also what we believe. A bit of a mixed picture. I think we need to come back on that and let me see how the development progresses.
That is fair. Irene, just on the gross margin development, I understand there is always a lot of things moving in your mixes in the company. W hen you start to look now at the big swings we have in the currency, I guess this year you should still see quite a substantial positive impact on purchasing, whereas it might turn more, say, normalized or negative going into next year. How do you see that playing out?
Yeah, that's true. We still have a positive impact from U.S. dollars. We expect to have that also in Q4. That positive impact was offset by the negative customer mix effects in each country, and on top of that, the negative country mix since the sales are weaker in Sweden and we grow in Finland where the gross margins are significantly lower compared to the Swedish business.
If I interpret that right, you're still seeing in some verticals or most verticals then a positive impact on the currency coming through. Then, say, the big swings in the mix is then diluting that on group level?
Exactly.
Excellent. On that, I have seen that you normally have your Swedol Days during October, and I guess we are at least halfway through those events. What kind of client feedback do you get, and what kind of store traffic do you get out of those events in, say, a little longer comparison?
Swedol is always a fantastic event for us and our customers. Some store late September, as you say, and then evolving through October. What we can say, I guess, is that high customer traffic, so definitely relevant and appreciated, and that goes across. This is an event where people want to go to, so that is definitely on a good level. Then it is interesting to see. We don't normally maybe talk so much about weather, but if you look on the earliest Swedol Days, which took place in September, so in Q3, obviously people were more looking into shorts and T-shirts than looking into winter clothes.
Then you can understand that naturally, as the weather goes more in a normal way, which is quite cold, that impacts also the assortment and the volumes of things that we can sell in general, but also on Swedol Days as we move into October. We see that that has developed nicely in the way we want. Even if, of course, that is more things we are going to talk even more about when we present our fourth quarter.
Looking forward to that. Now, I know you mentioned, Samuel, that you now have a couple of product lines where you might have a little more of a cyclical exposure, like the welding equipment. What kind of demand development do you see in the things that should be a leading indicator maybe in your product ranges?
It's interesting with welding. You could slice that in two different areas, more or less. You have direct material in welding that goes into manufacturing processes, of course, wherever welding is applied. There you can measure or you can see an industry level activity quite nicely. H ow much direct material are they buying. Then, of course, we have all the type of equipment and the machines, etc, and the accessories, which is more that you buy at need, so to say.
It doesn't directly link so much with the industrial activity. O n the direct material side for Q3, we see a quite flat-ish development. We're trying really to understand this well. We don't say that we are losing market share, definitely not. Of course, we also see signs in here that manufacturing in some industrial activities are now increasing. O n the welding side and orders of direct material, that is quite flat to last year, which is an indication as well on the market as a whole.
Interesting. Maybe raising the view a little, you talk about the strategic refinement towards 2030. Maybe a little more color on that and how you see it tying into what you feel that you need to do to maybe tie it in with the financial targets and getting to those levels.
Yeah. The base of that strategic review is, of course, to achieve our financial targets and do that more or less, if you say, independently of the market or on this market. O wning our own way forward, our story, and our way to develop so that we deliver what we have said to ourselves that we're going to do. Then if the market comes on top, that's fantastic. T he whole idea here is that we're going to create plans and activities and a way to achieve those as is, so to say, from a market perspective. T hat's one entry into it. Second entry is, of course, a lot of customer dialogue, feedback, etc. K nowing exactly of our position and relevance and how we can strengthen that even further.
Thirdly, of course, building on our strengths and this platform that we like to talk about, where we have now so much commonality across the group, that we can really learn from ourselves, so to say, and we can utilize and get good, strong scale effects out from that platform. Those are entry values. The question to ourselves is that how do we now, so to say, build ourselves for the future in all aspects so that we are super relevant with our customer and to give some flavors to it, maybe the omni-channel experience. The store concept will always be very dominant in a way that that's how we interact, meet, and build relationships with our customers. I t's important, of course, that we also follow them across the channels, as the channel mix develops. That's going to be a flavor.
We talked about sales steering. We talked about this really broad customer base and all the opportunities it comes with. W e want to tailor ourselves a bit more so that we are super relevant in addressing the right segments, and all segments, of course, efficiently. Then we can talk about services and many other things. It's early in the making, but we are reviewing ourselves from these aspects and setting the plan for how to evolve in the coming years.
Excellent. Thank you very much and all the best out there.
Thank you.
Thank you.
We are now going to proceed with the next question. The question comes on the line of Albin Barnevik from ABG Sundal Collier. Please ask your question.
Good morning, Samuel and Irene. I was thrown out of the call a couple of times, so you have to excuse me if I am repeating some of the questions here, but I will try to keep it short.
No worries.
Starting off with Sweden then. We saw the Swedish building material index pointing to a clear pickup in Q2, yet we saw a negative organic development, of course, in the segment here in Q3. How much of that would you ascribe to weather and timing, and how much would it be that your end markets perhaps are lagging somewhat the recovery here?
Of course, it's great. The basic is great that construction activities are increasing in Sweden overall. That's a very positive thing for all of us and also for Alligo as a whole. Then, of course, one can discuss the kind of technicality and when those activities now start to accelerate a little bit, what's the timing effect on a company like us? We make sure, of course, that we also then take benefit from that positive development. We will make sure that we definitely do that.
We don't really see it yet in the numbers in Sweden, but we are also very confident that we are not losing market share. Then, of course, we unfortunately then, in a way, had that minor IT incident, which caused us a little bit of seasonality effect. Of course, that dampering a bit also the outcome in September of maybe that growth that is presumably there in the market, at least on the materials market.
All right. That's helpful. Perhaps can you say something regarding how October has started now? Do you think we'll see a return to organic growth already now in Q4?
As we said before, we have had a few quarters of organic growth in the company. Of course, that is both for our plan and ambition and target that trend is going to develop and continue.
We had a little bit of a glitch here in Q3. Too early, of course, to say anything about Q4, but definitely in the long perspective, we are here to grow, and we will do everything we can to stay and increase our relevance and make sure that we are a growing company.
Yeah. You also mentioned in the report that the cost base in Sweden should be adapted further. Can you give some examples of any particular measures here and perhaps quantify it a bit as well?
Of course, continuously, as you said, we always need to review ourselves from a cost perspective, especially when you have this type of decentralized or local store network. Even if the totality maybe only goes a few percentage up or down or whatever, but on the local market, you can go quite heavily up or down. T his is a natural process that we do all the time, and we look on the staffing levels basically and how it evolves. O f course, we will make extra reviews of that to really make sure that we have the right and relevant staffing across, and that also goes for the whole company and group functions.
A bit too early to say the exact effect. Again, we have been growing for some quarters in Sweden, and we also did a quite big cost takeout in Sweden about a year ago. We are on a quite slim level. It's not going to be a massive effect, even if we now for one quarter had a bit negative development. Again, we are reviewing it and will make sure that we are correctly staffed, slim and correctly staffed all across.
All right. Understood. Perhaps the final one for me then. On the Örebro expansion, could you perhaps quantify the CapEx figure here for 2027? I assume mostly in 2027, but also 2028 then.
The expansion in Örebro will naturally affect CapEx in 2027. Part of the investment will be covered within normal CapEx level. Of course, it will be slightly above the current 12-month running level, let's say.
All right. Great. Yeah, that's it for me. Thank you for taking my questions.
Yeah, thank you, Albin.
Thank you. There are no further questions showing on the phone line, so I will now hand back to you for the webcast question.
Let 's see. We are just now reviewing webcast questions. I get a question here relating to Norway and the correlation between the activity in Alligo's oil and gas business, "If there is a correlation with oil price as such, and what are the drivers in that specific market?" Good question. It always is when we hear about oil and gas now in the world, we think that that just have to be a great business, and I guess in many aspects it is. Oil and gas business should be split in what is operational, so the manufacturing plant in itself, and how much on what level they operate, which I, of course, assume, and which you all know, is on a very high level.
The other part of it is investment-based, so that you are building out capabilities and capacity, and that goes more in projects, and it can be very kind of intense in those projects. Then, of course, when they are completed, it goes down. I would say, I guess the oil price, now I am almost speculating a bit, the oil price, of course, is driving high activity level in the Norwegian oil and gas sector, if you look on production, definitely. There we see a stable and high level. It has been that for many years now. The project business that was driven by subsidiaries put out by the Norwegian government some three years ago, four years ago, whatever it was, and a lot of project has been built based on those subsidiaries, and many of those projects are now completed.
There are discussions in Norway to continue with that program and offer even more subsidiaries to continue build out of their capabilities. F or now, it is a quite low activity, actually, in building more oil and gas capacity in Norway. I think that is how we can answer that question. I don't think we have more questions for now. No? Okay. I believe that is it. We thank you all for participating and listening in and asking questions, and look forward to see you again in a few months time when we present our Q4 and full-year report. Until then, have a great day and afternoon.
This does conclude today's conference call. Thank you all for participating, you may now disconnect your lines.