Hello and welcome everyone to the Garo interim report April to June 2025. My name is Becky and I will be your operator today. During the presentation, you can register a question by pressing * followed by 1 on your keypad. If you change your mind, please press * followed by 2. I will now hand over to your host, Jonas Klarén, CEO, to begin. Please go ahead.
Welcome everyone to Garo's Q2 presentation. I am Jonas Klarén, CEO, and it's great to be here today. With me is Helena Claesson, CFO, who will walk you through the financials later. Let's start with the key highlights for the quarter. Next slide, please. Operation and highlights. I want to start by emphasizing that Team Garo continues to move from structure to execution. We have a clear direction and an increased operational pace. Garo Electrification growth areas. We see continued volume growth and a strong performance in Ireland and the UK, alongside early signs of stabilization in Norway. Stable demand. Demand in commercial, public, and renovation projects remains stable. Challenges. However, the Swedish residential construction market remains weak, and the segment continues to face pressure. Improvements. Outside Sweden, margins are improving in several markets, and we are focusing on expanding our product portfolio to reach new market segments. Outlook.
The outlook remains stable with continued discipline on margins. Garo E-Mobility. Headwinds. The market remains challenging, particularly in Sweden and Germany, with delayed investment decisions. Actions. We have completed cost reduction measures, optimized inventory, and shifted to a more focused go-to-market strategy. Sales drivers. AC destination solutions are returning to growth, and sales of our Garo Entity platform are going in the right direction. Progress. We have signed strategic framework agreements for a larger infrastructure project in Uppland and with Östersund municipality for both stronger market references. Outlook. The outlook is for gradual recovery in public charging, especially AC charging. Strategic focus. Leadership. On the leadership side, I have taken on an interim responsibility for E-Mobility, and we have appointed a new Country Manager for Sweden. Integration. We now will have clearer priorities and joint action plans for each business area and country. Readiness.
Financial control has improved, and we have repaid part of our credit facility and lifted the special covenants from our bank. Innovation. We continue to adapt to new market requirements, including UK cybersecurity standards. Outlook. Long-term growth drivers remain intact, and we are focused on execution and profitability while keeping short-term caution. In summary, we are delivering on our plans, making strategic moves in the right direction, and preparing Garo for the market recovery we know will come. Now over to you, Helena. Next slide, please.
Thank you, Jonas. I would like to start by looking at the financial summary for the second quarter. Net sales amounted to SEK 266 million, a decrease of 13% compared with the same quarter last year. The uncertain and varied market situations continued to affect sales in the quarter. Garo Electrification as a business area showed a stable business, but the demand in Sweden was weaker than expected. E-Mobility remains challenging, not least in Sweden. We noticed a lag in order intake and also that some new product categories have not yet made an impact on the market. Gross margins have been at similar levels to previous quarters, where strong margins within Garo Electrification have been offset by lower gross margins within Garo E-Mobility. The adjusted EBIT for the quarter amounted to SEK 1 million, compared to negative SEK 4 million in the same quarter last year. Next slide, please.
Now let's look into the two business areas separately, and we start with Garo Electrification. Net sales dropped by 7% compared with the same quarter last year and came in at SEK 206 million, where the overall market for the Electrification business area was mixed. While Sweden experienced a significant decline, primarily in the product area project, our market managed to exceed expectations. Our sales to Europe, excluding the Nordic countries, showed a growth of 10% in the quarter, and sales in Ireland continue to be very strong. The market for new construction of single-family homes and apartments in Sweden remained at a very low level during the full first half of this year. Positive signs such as lower interest rates and expected falling inflation are overshadowed by negative global uncertainty related to tariffs and escalating conflicts in various parts of the world.
Sales within our product area project and temporary power both decreased by 19% compared to the same quarter last year. The entire decline in the sales within the product area project is attributable to Sweden, while the other markets actually have a positive development, albeit from lower volumes. Adjusted operating profit, also the EBIT for the period, amounted to SEK 15 million, compared to SEK 20 million in the same quarter last year. Adjusted operating margin came in at 7.4% compared to 9.2%. The ongoing ERP project is burdening this business area, which, together with the pressured prices and lower sales in the product area project, explains the lower profitability. Next slide, please. We move up and focus on the Garo E-Mobility business area. Net sales amounted to SEK 61 million for the quarter, giving us a negative growth of SEK 24 million compared with the same quarter last year.
Garo Entity, the new charging platform, accounted for the larger part of the business area's total sale in this quarter. This is a statement of strength and confirms the market's reception of the platform, which has now reached good technical stability. Garo has signed a framework agreement for a larger project within infrastructure to deliver a large number of charging stations and also some DC fast chargers. The agreement constitutes a strategic reference for the future and strengthens the position with charging infrastructure connected to Sweden's critical energy supply. Furthermore, in collaboration with the wholesaler Rexel, Garo has signed a multi-year agreement with Östersund municipality. This agreement includes the installation of approximately 700 charging points spread across the municipality. The adjusted operating profit, also the business area's EBIT for the quarter, amounted to negative SEK 14 million and is entirely explained by the low sales. Next slide, please.
We look a little bit on the cash flow and balance sheet. Cash flow from operating activity before changing working capital amounted to SEK 0.3 million. Cash flow from operating activities after changes in working capital amounted to SEK 9 million. Tied-up capital from inventories decreased net with SEK 4 million. We have a deposit with the supplier for materials ordered but not yet called off. The deposit, being in euros, has remained unchanged during the quarter and amounted to the equivalent of SEK 44 million. Our net debt position amounted to SEK 279.6 million compared with SEK 293.2 million in the year earlier quarter. We had an equity asset ratio of 51.4% and available liquidity, including overdraft facilities, of SEK 75 million. As Jonas referred to earlier, as a result of improved cash flow over time, Garo's separate bank covenants ended on June 30 .
In July, the availability of overdraft facilities was reduced and €2.4 million was repaid. Now back to you, Jonas. Next slide, please.
Thank you, Helena. Navigating change, strengthening Sweden for the future. Sweden is the heart of Garo. Success here strengthens the whole group. Niklas Rönning, as I said earlier, decided to leave E-Mobility, and I sincerely thank him for his dedication and contributions. To ensure stability and a clear direction, I would take on the interim leadership of E-Mobility. We are also merging the two Swedish sales organizations, Electrification and E-Mobility, into one national organization. This removes duplication, increases collaboration, and gives us one clear face to the market. Daniel Emilsson becomes Country Manager Sweden with full responsibility for sales, support, marketing, personnel, and results. With his 18 years in Garo, Daniel has the experience and the relationships to succeed. The aim is a stronger, energized sales team closer to customers, capturing synergies across our four product areas.
We are also creating a Swedish steering group: sales, operations, R&D, HR, and finance, ensuring aligned cross-functional decisions. These changes are about a stronger foundation in Sweden, enabling faster growth, both at home and internationally. Next slide, please. Execution path. As I showed you before, we have laid the foundation in Q1. Structure, governance, and leadership in place. In Q2, we moved into alignment and strengthening with early results from integration. Now in Q3 and Q4, we move into integration and acceleration, embedding transformation into daily operations. We are fine-tuning the plan as we move forward with the finalization in the budget and strategy process later this year. The message is simple. We are staying the course. Next slide, please. Outlook. Staying the course, ready when the market turns. In Q2, we saw a clearer increase in operational pace after the leadership changes earlier this year.
We made the decision to restructure and integrate Swedish sales operations and now changed and implemented as we speak in Q3. Electrification performed strongly in our international markets, even though the Swedish residential sector remained weak. Our cost control measures and inventory optimizations are delivering results with improved cash flow and EBIT back in positive territory. In E-Mobility, LS4 Solutions and our Entity platform are gaining renewed traction for the year, and the strategic contracts are strengthening our market position. Looking forward, I will take the interim leadership for E-Mobility to ensure stability and clear direction. We will fully implement the Swedish sales and integration under Daniel Emilsson, and the market recovery is slow, however, we are seeing early signs in both housing and charging infrastructure. The long-time drivers, electrification, energy efficiency, and infrastructure remain strong in our focus.
Garo is ready to accelerate when condition shifts, and we have the ability to adapt quickly, act with discipline, and always move with purpose. Thank you, and next slide, please. Questions?
Thank you. If you wish to ask a question, please press * followed by 1 on your telephone keypad now. If for any reason you want to remove your question from the queue, please press * followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Sophia Soling from DNB Carnegie. Your line is now open. Please go ahead.
Right. Thank you. Hi, Jonas and Helena. Can you hear me?
Yes.
Great. Okay. I have a couple of questions, and I'll start with focus on the E-Mobility segment. Could you give us a little bit more details on your strategy ahead within this business area? What will be your main focus point? If I start there.
For sure, the main focus point will be sales, as we now have a fully functional platform. That goes for all our countries. As you all know, we have struggled a few years now with the functions, and now we have a very good product ready to accelerate in sales.
All right. You mentioned, could we expect, for example, new product launches ahead, or will you expand on already developed products?
That is hard to say. I mean, if you're asking merely for the E-Mobility segment, there will always be upgrades such as plug and play, plug and charge, you can call it, and also vehicle to grid that we are working on, like all other players in the market.
All right. Okay. A more explicit question then, could we expect that you will do any product launches within E-Mobility during this second half of 2025, or will that be more expected into 2026?
I don't think we will launch any new products. We have to wait a bit more for the market, as we are seeing that there still needs to be a more push of larger sales in the segment, I would say. We have a good platform, and electrical safety is the driver for Garo, and we will continue to work on that.
If I continue with the E-Mobility segment, the expansion into Germany and Spain, could you give some more details on that type of strategy ahead?
The expansion is somewhat we are just waiting for the market, you can say. Germany has still been a slow-moving market, and that is mainly why we haven't allocated the resources to make the bigger move on Spain yet, because we want to see that Germany, for us, is moving before you shift focus and move even more onto other markets.
Okay. If we go to electrification, it seems like it's still quite a weak market, especially in Sweden, as you mentioned in your report and your presentation. Can you give any reflections on the current renovation market if you see any changes regarding perhaps CapEx investments among commercial or residential buildings? Have you seen any change now compared to previous quarters or perhaps the same period last year? Perhaps difficult for you to say since you're a new CEO, but have you seen any change in the CapEx appetite among your end customers, so to speak?
What we have seen and what we have experienced is, as we have discussed with some of your analysts before, is that electrical is the last thing that is put in in the new buildings. As we are supplying products, we have been the last, so to say, in the food chain of this following years here. What we have been experiencing now is basically almost two years after the big drop. We are at the tip of the tail of the civil engineering phase. Our drop this year is basically that we have caught up with the market. Of course, we are very active on the sales now and speaking to engineering firms that are also, again, now preparing a lot of new projects that will be coming as we see.
It will take some time before the electrical material will be bought and put inside of the new buildings. The drop has been around 70,000 newly built was the baseline three years ago, and it has dropped to around 30,000 or 28,000. We are following that closely to see when it will be turning. We see that there will be a move forward. When it comes, it's hard to say.
All right. Okay. Let's see. We'll go to the next question here. Just on your financials, you mentioned that the covenant was ended. The covenant linked to the cash flow was ended by the end of June
Can you give some more details on this? Should we expect that you will not have any covenant ahead, or is it possible? Why does the bank agree on, yeah, ending this covenant?
We went into an agreement with the bank regarding covenants. I think it was, yeah, fall 2024 for the upcoming, so to say, year or so. That was based on our cash flow improving over time. That agreement was in place until June this year, and we have fulfilled our obligations and met the KPIs towards the bank. This was just a result of the entered agreement with the bank.
The measures we did last year have also fallen into place.
If we were to enter into new agreements with the bank, I would say that would depend on other activities within Garo.
Okay. You haven't had any new agreements with the bank now, if I understood you correctly?
No.
Okay.
Correct.
Okay. My next question is about the cost measurements. You mentioned a little bit in the report that you will cut some costs, perhaps in E-Mobility, improve profitability. Are there any more cost measurements you actually can do now? You can talk separately with the Electrification and the E-Mobility, or is it just necessary with sales to increase ahead?
No. I would say that if we start with the electrification, we did two cost-saving programs in 2024 relating to both staff within construction and elsewhere. They have had the desired effect. The weaker margins within that business area right now are, as explained, due to the ERP project and weaker sales within certain product groups, project being one of them. I would say that it will not be any more cost reductions. More or less the same goes for the business area E-Mobility. We made a big saving program late 2024, which has come into place. If you compare the quarters, I would say that, yes, we are following that. We are on the OpEx side saving somewhere between SEK 4 million and SEK 5 million per quarter, which is what we communicated.
The result or the EBIT levels we are at right now is fully explained by low sales volume. This is, as Jonas Klarén said, this is not the volumes we would like to have.
No.
is something we are focusing on.
All right. The ERP project cost, how much was that in Q2?
It varies a little bit, but right now, we are entering into a more intense period. Hopefully, we will launch the new ERP at the beginning of next year. Somewhere, perhaps between SEK 1 million to SEK 2 million per quarter.
Okay. All right. Thank you so much for answering all my questions.
Thank you, Sophia.
Thank you. As a reminder, to ask a question, please press * followed by 1 on your telephone keypads. That's * followed by 1. We currently have no further questions, so I'll hand back to Jonas Klarén for closing remarks.
I just want to thank everybody for listening. Stay tuned for the Q3 report in a few months' time as we are continuing the course. Thank you.
Thank you.
This concludes today's call. Thank you for joining. You may now disconnect your lines.