Okay, so it's 9:15 A.M., and welcome to AQ Group's fourth quarter and year-end report for 2025. The picture that I start with, it's from our new paint line in Radomir, Bulgaria. It is a very advanced production line, which enables us to paint high volume and low volume, large parts and small parts with, I would say, world-class powder coating in a very cost-efficient way. It is enabling us to increase our volumes in Bulgaria, but also improve the quality to our customers and reduce also energy consumption and paint consumption. So it's an investment that is now up and running. It will be in full swing in February, and we believe that this will be attracting even more customer to this factory for doing sheet metal.
Now, let's get into the business. Normally, we start with this slide, AQ Group. We have had an earnings per share CAGR of 14% over the past 10 years. We've made profit every quarter since the foundation in 1994. We are exposed to industrial market segments with high underlying growth. Electrification, which is power grid electrification and data centers. We are exposed to defense markets, we are exposed to MedTech. We believe they will grow for many years going forward. Then we also have a long history of acquisitions, and this year we bought two factories and a design office in Germany and Czech Republic. Also, a small one in Sweden, and we have a very strong balance sheet with the net cash position. Some facts about AQ. We're 8,000 employees.
For the first time ever, we're above SEK 9 billion in turnover for a year. We have seven business areas, more than 15 markets that we serve, with manufacturing in 17 countries. We have more than 4,000 customers globally, and we made profit, as I said, every quarter for more than 30 years now. And, yeah, the other things there I've said before. And, and then we are part of UN Global Compact since 2012, which is our sustainability initiative. So for some numbers then. For the fourth quarter, we managed to increase sales with 9% to SEK 2.3 billion. It is a little bit below our goal of growing 15% per year, but still it is a decent number.
Operating profit increased with 5% to SEK 216 million, and the profit after financial items increased with 2% to SEK 212 million, and the profit margin before tax was 9.1%. And the profit after tax was SEK 168 million, a little bit higher than last year, and cash flow from operating activities came in at SEK 123 million. Get into the details a little bit later in the presentation. And then the earnings per share before dilution was, SEK 1.84, which is higher than SEK 1.69 a year ago. For the full year, then our net increased with 6% to SEK 9 billion.
First time ever, we are above that number, and the operating profit was unchanged, SEK 840 million, and EBT was increased by 1% to SEK 831 million, and the profit margin EBT was 9.2%, compared to 9.6% the year before. And profit after tax was SEK 677 million, a small increase from the year, from 2024. And cash flow from operating activities came in at SEK 900 million, approximately. And earnings per share increased to SEK 7.38, and the equity ratio is well above our target, and the board of directors will propose a dividend of SEK 1.80 per share, compared to SEK 1.60 last year. Some highlights in the quarter, organic growth improving, and we almost reached our target.
So we get to 8.6%, which is much better than the previous quarters. This is mainly impacted by growth in data centers, electrification, also in defense. We have strong growth in the quarter in net sales and order intake for electric and data centers, and we have during quarter four signed a new letter of intent between AQ Trafotek and Finland with one of our legacy customers to deliver medium voltage transformers and inductors to data centers in the U.S. We've also got an order for the design and manufacturing of low voltage, large transformers to hyperscale data centers in the U.S. through an electrification customer, an American one.
We have also received in the quarter additional orders for medium voltage transformer for our factory in Hungary, but they are also taking some components from our factory in Czech Republic and in Shanghai. I'm happy to say that we've also finally recently gotten a EUR 4 million order for supercapacitor cabinets from one of our biggest customers in Europe. Supercapacitor is like a big battery, but it is you can charge it in microseconds and discharge the energy in microseconds. So it's not really used for storage, it's used for balancing of the power grid. And this product we have developed together with our customers for nine years, I believe.
The development started in Sweden many years ago in one of our plants, and we have made like 30 prototypes, and now finally our customer gets their big first order. So we will deliver like almost 300 cabinets now. We believe that this is a field that will expand going forward as well. We see strong growth from inductive components and electrical cabinets to customers for ventilation or you can say cooling for data centers. Those activities are in Bulgaria and in China, and it's a little bit different. Electrical cabinets are delivered to a company that is focusing exclusively on data centers, and they are delivering cooling solutions for that.
From China, we deliver inductive components to an American company that are doing cooling for hospitals and data centers and so on, but the growth is coming from data centers as well. Then we're happy to see that on-time delivery has improved to 96% in December, and it has steadily improved during last year, so it's much better than the year before. So it's good that we start to deliver more on time. Some lowlights in the quarter. We've had quality defects that has impacted profitability negatively in the quarter. We always have these kind of things, unfortunately, but it's a little bit bigger in quarter four than normally, and it's not products that we have produced in quarter four, it is products that we have produced maybe a year earlier. And it is also related to data centers.
So, we have done a design, and it didn't work perfectly, and now we have redesigned it, and we believe it will work perfectly now. We've also added a lot of new testing equipment and so on, so that we can detect these faults before they happen. Then, I think I indicate here it's slower growth in defense market than expected. Its orders are there, we are getting orders, but we are not delivering out as much as we would like because it is not the ramp-up, especially in Europe, is not going so fast for our customers. We try to help them as much as we can.
We're providing them with more engineering services, and making more parts as well so that they can, they can ramp up faster, but it's not going, the growth is not in the invoicing as fast as the order intake. And then we have low capacity utilization in Mexico and New York. Since bus volumes are quite slow there, we have new customer there, and it is ramping up, but it's going slower than we want, both us and our customer, but I believe it will get better during the year. And then we did some inventory write-offs in Bulgaria, I would say, due to poor material planning. We have put in place a development program for them, and this should not happen going forward.
Then inventory turnover, it improved to 3.2 turns per year, which is sort of a record level for us, but we're still not happy because we don't reach our target of 3.5. I think it's possible to do it in 2026. Go to some more numbers, then the earnings per share increased a little bit this year, not as much as I wanted, but still it's a small improvement, and the dividend is proposed by the board to increase also to SEK 1.8. The historical performance is decent, though. Regarding the sales development in the full year, our organic growth is 2%, which is way below our target, and we're facing some headwinds from some of our market segments, like in trucks and in buses.
But on the other hand, we're able to offset that with the growth we have in electrification, defense, and data centers. So at least it's a growth in the year. Then, our organic growth in Q4 is much better and, coming up to 9%, and, we are working very hard to deliver out all these products now that we have orders for, so to try to make the organic growth continue in this way. So in all in all, quarter four for the growth, we're quite happy for the full year, not satisfied, but it's maybe okay. Here is, now showing the historical organic growth by quarter and, almost reaching our target of 10% in quarter four, but we stay we want it to be higher.
We have done it before, as you can see, so we are working hard to come above the green line for the quarters to come. Some new recent customer and project wins. So, as I said before, these supercapacitor cabinets, you can see a glimpse of them on the right side. That is two cabinets, and we're going to deliver almost 300 cabinets in 2026 and 2027, and we are making the complete scope there. So it's full sheet metal production, and then we integrate the supercapacitor banks inside. We do the electrical testing, and we deliver it to a customer in in Germany, actually. And then, we have also won additional EUR 2 million for electrical cabinets for HVAC, too. That is the supplier for data centers. That's also from Bulgaria.
Both of these projects are made in Bulgaria. We see also increased volumes for inductors to, large, as I said before, HVAC OEM in North America, and that is deliveries from our factory, sold by our, U.S. transformer unit, but produced in, in our Shanghai factory and delivered to the customer in Mexico. Then we have received the first prototype for the design and manufacturing of large transformers from a new U.S. electrification customer for data centers. That's exciting. It is, however, quite a small order at the moment. We believe it will be a big order coming, but first we need to deliver the prototypes for them.
And then we have received orders for about 40 pieces for a couple of small of these medium voltage UPS transformers, you can see on the middle picture, during the quarter, to increase to our already big order that we received or the two big orders we received last year. More orders are expected to come there, but we are quite fully utilized. Our capacity is increasing, but for quarter one, we will be quite full and deliver out as much as we can. Then we get increased capacity in Q2 to deliver out more because of the investments that we have made and qualification of the Finnish site and so on.
Then we received also in the quarter, an award from a European electric truck supplier for power cables for electrical vehicles, and we're happy with that. If they sell as many as they want, then it will be a huge order, but we are very pessimistic that their sales will be as high as they claim. But still, it's good to be in new products and new projects. We learn as well a lot about this type of product, so it's, we're very happy that we have won this order. Regarding growth from acquisitions, it is mainly in Q4, this mdexx acquisition that we did. We have several targets under evaluation and negotiation, but we are very picky with the prices we pay.
We don't want to overpay, because then you will have a hell of a problem later. We're negotiating hard and we are staying true to our nature. We will not buy anything that is too expensive. We made a small bolt-on acquisition in November. It's a small prototype machining workshop that is working with, I could, we could say defense mainly, and this will be integrated in our AQ engineering workshop that is basically the Tech ROi acquisition that we bought in 2024. And mdexx is gradually developing according to plan, and the margins are improving, and we can see the photo down there. It's a new machine for winding of this medium voltage transformers. This is helping us also to utilize the people and the workshop that we have bought.
So it is, they will grow a lot this year and, in combination with the other transformer workshop, that will also continue to grow in 2026. We talked in the report a lot about transformers. You can see on the left, on the bottom left, the, in the net sales development of this business area, we have made now three big acquisitions in the area. We are getting into these data centers that we have talked about a lot already in this presentation, and we have a growth CAGR of 30% in this business area, and it has gone in 2018, it was 5.6% of our sales, and in 2025, it's now, I think 24.99% of our sales, something like this.
So it is a little bit special for us because we do a lot of design here. So we have design engineers, and then we produce the parts as well in the locations that you can see on the map, the green dots there on the map. And it is a very demanding field. It is not so easy to do it. We deliver really special, customized transformers for specific applications that's supposed to be very cost efficient, smallest weight and footprint in the customer's product as possible. You can also see the customers that we have there are well-known and renowned customers within electrification and data center, and railway.
So we're very happy about this, and we want to continue to grow this business, and we want to be a world leader for this niche-type, dry-type transformers. And, we are on the way to be that, which is fun. Regarding margins, we are now on the twelfth consecutive quarter above our EBT target of 8%. It was 9.1% in the quarter. I think cost control is very good. However, in quarter four, we made several provisions for quality issues, that we've had. It's not products that we have delivered out in quarter four, it's products that we've delivered out previously that has not, been up to the, has not fulfilled the customer's specifications completely. And, it is sometimes really hard to design these products for new applications.
We believe that we have now taken corrective actions, and we have better testing in place and have a more robust design in these instances, and we have taken the costs that we believe we'll incur for these known defects in quarter four. Also, mdexx still dilutes the margin a little bit, mainly now because of personnel reduction costs that we have had in the quarter. Still, we see the development is going in the right direction, and in December was quite good, in fact. And then we have a couple of underutilized factories, one in Bulgaria, one in Mexico, one in New York, and one in India, where we need to sell more and be more active on the sales side.
But, my sales teams are energized, and they, they are working really hard to bring in more volume, and I think we can see it also on the, on the organic growth development that we've had in quarter four. We believe that there is more to come, and, it is, not that, volumes will fall down from the sky. We, we really need to work hard to, to, to reach the organic growth targets that we have, and I believe that we do. I'm really impressed by our team's performance in this area. Regarding inventory value and the turnover, we are a little bit disappointed because we don't reach our target, which is 3.5. Currently, we're at 3.2.
However, it is the highest level that we've ever been to, so it is not, not too bad, but not great. When we add new businesses, normally we see that the inventory turnover is lower than the AQ legacy plants. So then we put in a team of people to support them. We also change the ERP system and so on and improve the planning. It normally results also in better delivery performance and better quality, and it's also easier with bookkeeping and everything when you have less inventory to count and so on at year-end. So we have done a lot of improvements during the year. I'm really happy with the team that is working with this specific project to improve this, but still, we have several plants that can be much better.
We have now a focus on electric in Bulgaria, our wiring plant in Canada, our wiring plant in U.K., our injection molding factory in Hungary, and our wiring plant in Mexico. As a group, we want to reach 4, but the target first there is 3.5, and then we can go even further. Regarding the cash flow, it is a little bit lower in quarter four, and it is heavily impacted by increased in accounts receivables. It's natural when you increase sales, then accounts receivable go up.
But also we have, during the quarter, terminated a lot of, all I would say, factoring agreements that was in mdexx and Michael Riedel, and this impacts the cash flow quite a lot in the first quarter when you do it, and then when you finally get to the end of the payment term that we have with the customers, then, this will improve again. But on the other hand, we have a super good balance sheet with the net debt of, well, a net cash position of SEK 427 million. So we have a lot of money to buy companies for and to invest in, in, in this ramp-up for the transformers, for data center and so on. So we're, we're, we're very careful with the shareholders' money. I can assure you of that, and you can see it also in the performance.
So final slide for today, earnings per share CAGR of 14%. It's actually 14.5% in after 2025. So you can, if you're inclined to positivity, you can say it's 15%. Profit every quarter is in foundation. We like to work with these industrial market segments that are growing, and we have a long history of acquisitions, and we are going to make acquisitions going forward as well. And we have a super strong balance sheet with a net cash position. So then we move to Q&A. Maybe we have Johnny first, SEB.
Hi, good morning, James. I hope you can hear me.
Okay.
I have a couple of questions, starting with.
Mm-hmm.
Data center, which is obviously very exciting right now. And you mentioned some letter of intents of 200 transformer here in the quarter and some prototype orders as well. And I think in the last quarter, you said order book was at EUR 15 million, if I remember correctly. So how much data center would you say you have now in the order book? And also, what sort of lead time can we expect on those orders? Are they set to be delivered here in 2026, or what can we expect there?
Now, the expectation is to deliver those 15 that we received last year, that we communicated already in quarter three, that we are supposed to deliver those out before June this year. So we're working super hard in the factories. Of course, this is not software that we're delivering, so it and it's a lot of people, machines, testing equipment, shipments, and so on. But the target is to deliver out all of that before June. And then, as I also presented here, we have received some more orders for some smaller data centers as well, so we've just received another 40 units for that. So it will continue, and I think we will get more orders for 2026. But of course, that's what I think doesn't matter at all.
I mean, we need to get those orders in. The LOI for Finland is really related to production capacity that our customer wants. So they have agreed to buy 200 units over the course of 2026, 2027, 2028. And that is to enable us to buy the necessary equipment and to qualify the units also in this factory. So it's the same units that we today deliver from Hungary. We'll be able to deliver also from Finland, and we are also working on to deliver those from the U.S., and then we deliver components of the transformer and inductor that goes inside this cabinet now can also be produced in some of our other sites in Shanghai and in Hungary as well. So it is a system of products.
Then for all these big components that we're talking about now, there is also, I think, 18 smaller components in each cabinet as well, which we deliver today from our factory in Shanghai, but we'll also qualify now our factory in Bulgaria for this volume. So there's a lot of activity ongoing, and we're happy that we have such a good collaboration with our customer, and that we continue to develop the business and qualifying more sites to be able to deliver the volumes that they believe will come and that we hope will come, you can say that.
Yeah, understood. Sounds exciting.
Yeah.
A quick one on the quality complaints here a little bit. Is it possible to say something about the magnitude of those extra cost and provisions here in the quarter?
I think I would like to pass on that one because it is like this, that we always have quality issues of some sort. On the other hand, we like to highlight that in this transformer field, there is a risk. I mean, it is, I would say, very beautiful growth, hopefully, and profit margins, but it's also possible to go wrong. So I think it's our duty to talk about those risks. But on the other hand, it's not so small in the quarter because then we wouldn't mention it. So it impacts the EBT. Yeah, but to go into the details.
Ah.
Because it's several different projects and so on as well. So, so I'd like not to go into details there. Thank you.
I understand, I understand. But I mean, I assume as you mentioned it, as you said, I expect it to be, at least, as you said, impacting you. So can we expect it to be closer, 0.5 percentage points, maybe on, EBIT level? Is that a fair assumption, closer to 0.5 percentage points than, than not?
Very good question, John, but maybe we take next one.
Okay, fair enough. I need to try at least.
Yeah.
Okay. I have, I have one on the defense orders. I mean, you, you mentioned some slower deliveries to defense than expected, and I think other suppliers to defense companies have also said similar. But do you expect this pattern to continue here in the near term, or can we, expect some sort of catch up in deliveries here in the near term?
I mean, it's not slow. It's still on a very high pace for us compared to what it has been historically, but it's not growing as fast as we thought going into 2025. I believe that it should catch up because our customers have a lot of orders that they need to deliver out. So but when that catch-up effect is coming, it's hard for me to tell. But for sure, there will be more deliveries, I think, in 2026 than it was in 2025.
I understand.
But.
I understand. Yeah, we'll see. Just a final one. I mean, it's always interesting to hear, what is your general gut feeling here on demand and the general economy right now entering the new year?
Yeah, I'm not so good at doing forward-looking statements, and we don't really do them. So, I mean, as we have written in the report, I think there is a great demand in power grid electrification, in data centers, in defense. There is also, most of our markets are moving normally, and then it's a little bit slower in trucks, and it's a little bit slower in buses, it's a little bit slower in food equipment. But I think we are working really hard to win new business, and I think we are so small still, so we should be able to counter those market segments that are declining by winning more business at these customers and take market shares.
Understood. Thank you.
Thank you.
Yeah, that was awesome me. Okay, have a great day, James.
Thanks.
Albin.
Albin?
Yes, thanks, James and Christina. Can you hear me?
Yeah. Hi.
Perfect. Yeah, yes, the first one on. If we can get some comments on the type of companies you currently have in the M&A pipeline. I mean, is there a typical AQ sort of turnaround acquisition we can expect, or are there companies with a good profitability you're aiming for? And also, if you can comment something on the size of the company you're looking for.
Hmm, very good question. I think it is. I mean, I could, I could sit here talk all day about all the companies that we are looking at, and, and, and I mean, so, so I, I think we, we are currently. I believe that we will not buy so much in the defense sector because those multiples have become too expensive for us, for turnarounds and for, for, for companies that show a little bit profit. We believe it's hard for us to buy with the prudent way that we see on contract manufacturing acquisitions. Maybe there is, in the other hand, an opportunity to buy something in med tech with, with healthy margins.
But to answer your questions, I would say like this: we look at both, we look at some companies that are actually doing really well, and we look at some companies that are doing a little bit poorly, where we have to put some work into it in order to make it, I mean, a classic, as you said, AQ acquisition, where it's a little bit cheaper with nice machines and customers, but there we need to do a little bit more work. So both of them we're looking at, and, and I mean, our target is to grow with acquisitions 5% per year, and if you take 5% on SEK 9 billion, it should be something like turnover of SEK 500 million if we are successful with what we want this year.
But on the other hand, I don't want to promise anything.
Yeah, that's a, that's a good question. Good answer. Sorry. And, yeah, just another one for me. You have flat year-over-year personnel, in number of personnel, but we can see you're up 11% in cost, personnel cost. And also we can see that personnel cost has been around 26%-28% of sales. Now we're at 29%. So, is this given more complex products that we should expect these levels and/or is this a function of underutilized factories or? Yeah, any comment on that would be great.
Yeah. No, but it is, of course, varying a little bit. You can say that our biggest business area, that in terms of personnel is in the wiring systems business, and they're exposed to truck and bus and the construction equipment volumes. So there we have seen a decline in volume from those customers during the year, and that, of course, reduced the number of people. But as you said, the people is flat. We are reporting the headcount that is employed by us. We also have, I would say, like, 15% of the employees that are also rented. So that also has an impact. And then we have, of course, increased around 400 people when we bought mdexx and Michael Riedel as well.
So, the Germans actually pull up a little bit. Even though they're not so many, they actually pull up the cost picture for the personnel cost. But we have done some reductions in Germany during quarter three and quarter four, which also is showing in the personnel cost for the fourth quarter and the full year. So, yeah, I hope that answers your question.
Do you think 29%. But do you think 29% is a fair level, as well, given you go, forward to.
It is very much. Yeah, I think it's a fair level, but I would say like this, that it is so much dependent on what type of products we deliver. Some products we have more working content, and some products we have less content in. If we deliver more electrical cabinets, then the amount of work in those are much lower than, I mean, work cost is much lower because the components inside are much more expensive. So it's also a mixed thing, but I would say it will be in this ballpark sort of.
Yeah. Perfect. Thanks a lot. I will jump back. Have a great day. Thanks.
Thank you so much. Linus?
Yes. Hi, and good morning, James. Just a quick couple of questions here from me. Firstly, on the margin here, the margin declined year-on-year to, despite 8.6% organic growth here. I'm just wondering if you could, maybe not quantify, but perhaps rank the impact here from the quality reclamations, the inventory write-offs in Bulgaria, mdexx dilution, and the capacity utilization here below.
We don't really want to go. Then we would maybe have written it in the report if we want to go into the details. I mean, all of those things that you mentioned have an impact on the margin. On the other hand, in a normal every year, we have inventory write-offs, and every year we have quality issues. I would say it is a little bit bigger in quarter four than normal, but it is nothing really that unusual. Then, of course, the mdexx and Riedel acquisition still dilutes the margin as well, and that is the decline that we have seen, I would say, in general, for the full year.
Okay, thank you. And just a question here on Mexico and your capacity here. What is the current utilization rate here, approximately, and when do you expect them to normalize?
I would say like this, that in Mexico, the volumes for buses for us has decreased substantially in 2025, and we have now started to grow again compared to 2025 because we are getting in some new volume there, which is good. But when you get such a big decrease, then normally you also decrease your capacity. So we have reduced the workshop space, and we have reduced people. So it's a capacity is, of course, a moving target, but I would say that we could double that turnover. Then again, this Mexican plant is quite small. So but I believe we can double the turnover in 2026, and we are working very hard to achieve that with the customers that we have.
All right. Super interesting. Moving on over to the transformers here, just a question on the margin profile here. I mean, they are 25% approximately of sales now. How do the margins here compare to the group average, approximately?
Yeah, we don't report like that. But I would say like this, that since we are doing all the design work here, and also the risk is higher, then margin should be higher than AQ Group's target and AQ Group average.
All right. Super. Just one last question here from me. On the New Flyer ramp up, as you said, it's not yet at the expected levels. What are the specific bottlenecks here that prevent the faster scale up? Is it customer demand or supply constraints or something else?
No, but I mean, we, I think in Canada, we have ramped up very quickly, and we are at a higher pace. In the U.S., we are getting in some new volume, but it is also about switching. The customer need to switch from a present supplier to a new one. They need to get orders for the parts that for the products where we deliver parts to. Same with Mexico. We are newly qualified, and then we get parts for parts, and we're quoting parts, and we get parts, and so on. So it normally takes some time, but I believe that Mexico is on a good position at the moment. And New York is working hard as well, so I would say.
Do you have any timeline on that?
Maybe six months until we are on the volumes that have been agreed, I would say.
Okay, super. Thank you very much for taking my questions.
Thank you. Do we have any more questions? Then please raise your hand. Seems to be very quiet, so then I thank everybody for listening, and I wish you a really good day, and I hope to see you again next quarter. Thank you so much.
Transformers.
Ah, there's a question in the chat maybe.
Could your LOI of 200 transformers also mean that customers have signed LOI for the same type of transformers with other deliveries, just to make sure that they will not be short of transformers or are the data center market not so hot?
I don't know if you heard the question, but the LOI for Finland is for 200 transformers over a number of years. If the LOI is just an LOI, as everybody knows, so it doesn't mean that they have placed order with us. On the other hand, we are buying equipment to be able to produce these 200 pieces, and if the customer don't buy these 200 units, they will have to pay for the equipment. So then you can say, "Then we get equipment for free." Of course, we and our customers, it wouldn't do this if we didn't think that we will produce this volume. Then, of course, our customers, they will always try and want to have second sources, so of course, they're working with that.
But I would say data center market, we are scraping on the surface, and if our customer is as successful as they believe that they would be in this area, then there will be a demand that will, t hey would need more than they would need 10 AQs in order to be able to deliver all the products that they want to ship. So I don't see it as a, it's always a risk and so on, but I see that there is demand for everybody if we are successful. I think that was maybe the last question. Very good one. Thank you. And then I wish everybody a nice day again. Bye-bye.
Bye-bye.
Bye-bye.
Bye.