Welcome to the Instalco Q3 presentation 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Thank you. Good morning and welcome to Instalco's presentation of our report for the third quarter of 2026. My name is Per Sjöstrand, CEO of Instalco, and with me today is our CFO, Christina Kassberg, and for the Q&A, our Head of Investor Relations, Mathilda Eriksson. The third quarter is normally seasonally weak. This year, we improved the margin, not only compared with last year, but also compared with the second quarter. That is not something we usually see, and it says quite a lot about where the business is today. Let's change slides. Let me start, as usual, with a short reminder of who we are. Instalco is an installation group with more than 7,000 employees working within heating and plumbing, electricity, ventilation, industry, and technical consulting. From this quarter, Germany is our fourth operating country through Fabri.
The model is the same in all four countries, specialized local companies close to the customers, supported by common standards, tools, and governance from the group. Much of what we do is driven by long-term needs such as energy efficiency and electrification, and that has not changed. Then a quick look at the last 12 months numbers. Net sales amounted to SEK 14.6 billion, and we ended the quarter with an order backlog of SEK 11.7 billion. That corresponds to around 80% of our sales over the last 12 months, up to 77% in the second quarter. Up from 77%, I will say, in the second quarter. EBITA is now right above SEK 1 billion, and the LTM margin improved to 6.9% from 6.6% last quarter. So in general, a strong development. Cash conversion is the exception.
It came down to 74% from 90% in the second quarter, largely as a mix effect from our growing share of industrial customers. I think Christina will come back to that later on. Let me sum up the quarter in four points. First, we continue to grow organically and profitability improved again. Getting both at the same time is what we have been working towards, and this quarter we did it again. Second, the development differs between our countries. Sweden had a strong quarter. Many of our Swedish companies are doing well, especially those working with industrial customers as well as our scaffolding companies. In Norway, challenges remain. The project delays we talked about last quarter have lasted longer than we expected. Also here, Christina will come back to what that has meant. Third, Instalco 2.0.
In the beginning, a year ago, it was about clearer responsibilities, better follow-up, and stronger operational governance. Today, that is simply how we work. Now we are building on it. During the quarter, we stepped up our sales training and gave our subsidiaries more hands-on support so they can run their projects more profitably. It's also about developing our offering. One example, Enervion, our Finnish startup in energy storage, started work on two large-scale battery storage projects during the quarter. Finally, Fabri is now consolidated, which makes Germany our fourth market. It contributed already in its first month. Christina, I will leave the details to you as usual.
Thank you, Per. Let's start at the top line. Net sales increased by 16.4% to SEK 3.5 billion. Organic growth was 8.2%. Acquisitions added 6.8% and currency 1.4%. Sweden stands out with organic growth above 15%. The order backlog grew by 30.1% and by 14.2% organically. Acquisitions added 12.7%, mainly Fabri, and currency the rest. On the backlog to sale ratio that Per mentioned, Fabri's full order backlog is included, but only one month of its sales. That lifts the ratio and the effect will fade gradually over the coming quarters. Service made up 36% of sales in the quarter, with strong growth in absolute numbers. Here, Sweden and Norway made up the increase. What did that mean for the earnings? EBITA increased by 41% to SEK 254 million, and the margin rose from 6.0% to 7.2%.
The improvement comes mainly from Sweden, and in particular from our companies with industrial clients. Their margins are driven by technical expertise and the ability to meet each customer's specific needs. On top of that, we see the effects of better project selection and follow-up within Instalco 2.0. One month of Fabri also contributed positively. A noteworthy thing Per already touched upon, if you look at the chart, the third quarter usually dips compared with the second due to seasonality effects. This year it did not. 7.2% compared with 7.1% in Q2. Let's go through the segments, beginning with Sweden, where we saw good progress. Net sales rose to SEK 2.4 billion. Organic growth accelerated to 15%, and acquisitions added another 2%. EBITA increased to SEK 179 million from SEK 105 million, and the margin improved from 5.0% to 7.4%.
As I have mentioned before, an important driver for this development was our companies with exposure to industrial clients. It is also worth noting that the improvement is broad. A majority of our Swedish companies across geographies are delivering higher earnings than a year ago. The order backlog amounted to SEK 7.3 billion, up to 16% from last year. Turning to the market in Sweden, the Swedish market continued to improve in the quarter and the signs of higher activity are becoming clearer, especially in the metropolitan areas. Residential is showing cautious signs of picking up from low levels. Public investments in defense, healthcare, and critical infrastructure remain important drivers. Costs are still high, and private investors remain cautious. Competition is also still tough, but with more projects coming to the market, we can be more selective. Norway, on the other hand, had a weaker quarter.
Net sales were SEK 553 million, up from SEK 518 million, but the increase is explained by currency. EBITA came in at SEK 20 million compared with SEK 28 million last year, and the margin fell from 5.4% to 3.5%. In Norway, results continue to be affected by the delayed project starts we have described earlier this year. The delays are mainly due to permitting and decision processes on the customer side. Several of the larger projects are now expected to start at the beginning of next year, 2027, which is later than planned. The quarter was also burdened by certain project losses and some credit losses. The projects are still there, and the order backlog stands at SEK 2.6 billion, up 35% year-on-year. But until they move into production, utilization in parts of the business will likely remain lower than we want.
In the theme for this quarter, Per will come back to this. The Norwegian economy is doing well, but the installation market remains challenging, though we are seeing signs of stabilization. Residential is still weak, but public investments, commercial properties, and renovation are more promising. As mentioned, several project starts have moved further out, in some cases, into next year. Data centers stand out with strong growth and several larger projects under construction or in planning. Then to our third segment. From this quarter, this is Finland and Germany. First, a note around Germany. Fabri comes into our numbers with a one-month delay. That means our September holds their August, a typical holiday month in Germany. From Q4, we'll have a full quarter. For the segment as a whole, net sales grew to SEK 536 million from SEK 435 million.
Fabri, with one month in the numbers, added 36.9%, while organic growth was negative at 13.3%. There are two main reasons for the organic decline in Finland. Last year's third quarter was strong, which makes for a tough comparison. A couple of our Finnish companies have had a weaker year with lower activity between larger projects. We are working actively with them. The rest of the Finnish business is developing well, not least within energy storage. Over the first nine months, organic growth in Finland was 5.2%, which gives a fairer picture of the trend in a segment of this size. EBITA increased to SEK 56 million from SEK 48 million. The margin was 10.4% compared with 11% last year, which is still the highest of our three segments. The order backlog amounted to SEK 1.8 billion, which is more than a doubling compared to a year ago.
Acquisitions, in this case, Fabri, made up 132% of this change. In Finland, we see cautious signs of market improvements, but the recovery is slow and competition is high. Traditional construction is still weak, while data centers and industrial investments drive demand. Over time, the data center build-out should absorb capacity and improve the competitive situation in other segments, too. In Germany, the installation market is showing signs of recovery, with clearly more positive sentiment than in the economy as a whole. Energy efficiency and modernization of buildings create long-term opportunities. Let me end my part with cash flow, which was weaker this quarter. Cash flow from operations was negative SEK 66 million compared with a positive SEK 133 million last year. EBITA improved to SEK 366 million, but a further SEK 281 million was tied up in working capital. This is largely a mix effect.
A growing share of our business is with industrial customers, including our scaffolding companies. These are some of our most profitable operations, but they tie up more working capital. Invoicing and payment terms are often longer, and the larger part of the work is invoiced afterwards. You can see that in the report, both in higher trade receivables and in higher contract assets. The pattern is similar for our technical consulting who invoice in the same way, report growth, and good profitability. It is, however, worth noting that the receivables are with established customers, and overdues has instead developed positively compared to last quarter. On a rolling 12-month basis, cash conversion is now 74%, clearly below our target of 100%. When looking ahead, historically, the fourth quarter is our strongest cash flow quarter. But part of the change is structural.
As the industrial share grows, our working capital will be somewhat higher than before. That makes invoicing discipline and payment terms in our subsidiaries even more important, and that is where our focus is here and now. Cash flow from investing activities was minus SEK 270 million, mainly from the acquisition on the majority stake in Fabri. This was financed through debt. Our cash flow from financing was also impacted by the purchase of minority shares in subsidiaries. As a result, net debt increased. Since Fabri only contributed one month of EBITA in this quarter, the reported leverage ratio doesn't yet reflect the business we now own. Pro forma with a full 12 months of Fabri, net debt/EBITDA was 2.9x . The reported figure was 3.3. Per, back to you.
Thank you, Christina. Let me put the last 12 months in the context of our long-term targets. Sales have been developing well organically for several quarters now, and with the consolidation of Fabri, the contribution from acquired company also goes up. The EBITA margin is 6.9%. That is still some way from 8%, of course, but a year ago it was 5.4%, and we have covered a good part of that distance. Cash conversion, as Christina just said, is 74%. It is, of course, a priority for the whole management team to improve this. Leverage is above our target of 2.5x , around 3.3x reported and 2.9 pro forma. Our dividend policy and our climate target are unchanged. For this quarter's theme, I want to spend a few minutes on something that is fundamental to our business. What actually drives profitability in the installation industry?
This is something that we get quite a lot of questions around, and a topic that interests me personally a great deal. In fact, it's one of my favorite topics. We often talk about market conditions, growth, and order intake, and of course, all those are important. But they don't tell the whole story. Even companies operating in the same market with the same technical discipline can deliver very different margins. Having worked in this industry for many years, I have seen how much of that difference comes down to the decision made in the individual companies and projects. So I'd like to share a few perspectives on the economics of our industry and what we believe really matters for profitability. One of the most fundamental drivers of profitability in our industry is simply supply and demand, and it's not rocket science.
When there are plenty of projects available, installation companies can be more selective. Competition tends to be less intense, and there is generally more room to price projects at attractive margins. When demand weakens, the opposite happens. More companies compete for fewer projects, and pricing comes under pressure. This is definitely something we have seen over the past years. An important part of this is maintaining discipline in how projects are calculated and priced. Particularly in a competitive market, it is essential to make realistic assumptions about costs, productivity, and risk, rather than allowing the price a customer is willing to pay to dictate the calculation. As market conditions improve, the opportunity to be more selective increases, of course. Combined with stronger project discipline, that creates better conditions for profitable growth. Of course, a good estimate is only the starting point.
The next challenge is delivering on it, and that starts with choosing the right projects and understanding the risk involved. Experience with similar projects is extremely valuable, both when calculating the tender and when planning the work. Good planning is essential. You need the right resources at the right time, but you also need good coordination with the customer and other contractors. Delays or changes elsewhere in the project can have a significant impact on our ability to work efficiently. Then there is the actual installation work. Getting things right the first time makes a big difference. Having to go back and correct work costs both time and money. Let me give you a great example from one of our subsidiaries that work only with electrical installations for residentials, a market that has been very much under pressure.
The example, the electrical installation in a normal three-room apartment usually takes around 70 to 75 hours. This special company do it in about half that time. When you hear that, it is easy to assume they must be cutting corners, and I will underline that they are not. The speed comes from how the work is organized, not from doing less of it. They have, for example, standardized the way they work all the way from how materials are delivered to the site, to the order in which each step is carried out. Everyone knows what to do and when. The logistics are planned in detail, and the work is done properly the first time to a very high standard. That is a big part of why it works. They almost never have to go back and fix anything. They also work on fixed price.
That means every hour they save goes straight to the margin, and that is why they have made money on their projects through this downturn, despite tough pricing. That was the example. Throughout the project, you need to know your numbers. Continuous financial follow-up allows you to identify deviations early and take actions before small problems become large ones. Finally, there is a commercial side, of course. Managing change order, documenting additional work, and making sure you are compensated for what you deliver. None of these things are particularly complicated in theory, but doing them consistently well across a large number of projects is what separates a good installation business from a less successful one, I will say. A few words about business mix. There is sometimes an assumption that certain types of installation work are inherently more profitable than others.
For example, that electrical installations have different margins from heating and plumbing and ventilation, or that service is always more profitable than project work. In practice, the differences are not necessarily that straightforward. Service often has higher gross margin, yes, but it also comes with higher overhead costs. When we look at operating margins, the difference is not often that significant. What we find more important is the nature of the customer and the end market, the company's expertise and experience, and the characteristics on the individual projects. Industrial customers, for example, can offer attractive profitability, particularly where specialist expertise and a deep understanding of the customer's operations are important. Contract structure also matters. Fixed price projects can offer attractive margins, but also greater exposure to execution risk, of course. Partnering and similar models where we share the risk with the client tend to give more predictable outcomes.
Regardless of the type of project, good cooperation with the customer is always essential for efficient execution. Ultimately, what matters is not simply what type of installation work you do, but how well you can run the business. That brings us something we can influence ourselves. This is also the thinking behind much of our work within Instalco 2.0. Over the past year, we have taken important steps to strengthen how we manage our businesses and projects. We have increased our focus on project selection and risk assessments, making sure we take on the right projects under the right conditions. We have also worked to strengthen financially follow up so that deviations can be identified and addressed earlier.
Importantly, we are making better use of the knowledge and experience that already exists across the group. With more than 175 companies, we have an enormous amount of expertise within Instalco. The opportunity is to make sure that good practice doesn't stay within the individual companies but benefits the wider group. This is not about centralizing how our companies operate. It is about giving our local management teams better tools and stronger support to run their businesses. I believe we are already seeing the benefits of that work in our financial performance. To sum up the third quarter, we grew organically and improved the margin again in what is normally a weaker quarter of the year. Sweden drove that improvement. In Norway, the delayed project starts are still holding us back, but the projects are there, as Christina Kassberg said, and so is the order backlog.
The backlog strengthened further, both organically and through Fabri, which gives us a good starting point for the coming quarters. Cash flow was weaker, yes, and getting working capital back on track is a clear priority for us. In the market, activity is gradually increasing, although the picture still varies between countries and customer groups. Instalco 2.0 continues to deliver. When we launched it a year ago, it was about the basics: clearer accountability, better follow-up, and stronger operational control. That is still the foundation, but we have kept building on it with self-assessments in our companies in the spring and, this quarter, more sales training and more hands-on support to our subsidiaries. If you want to put a number on it, we are probably closer to Instalco 2.5 by now. With Fabri now part of the group, Germany is our fourth market.
With that, I would like to thank you for listening and open up for questions, first from the telephone conference, but those of you following via webcast can submit written questions as well that Mathilda will read out.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Simon Jönsson from ABG Sundal Collier. Please go ahead.
Good morning, everyone. Thanks for taking my question. I hope you can hear me good as well here.
Absolutely.
First, I want to start, Per, with the unusually strong margin here in Q3, especially very strong in Sweden. Can you maybe break the performance down a little bit? I know you talked a bit about mix effects and so on, but make it a bit clearer what the different segments below the surface, and what the market and what internal improvements, if you can give any color on that.
Yeah. A very strong August and September in Sweden, I would say. We had the holiday in July, but strong August and September. I will say a broad improvement across many subsidiaries. That's the main reason. It's not just that or that. It's a broad improvement across many subsidiaries, and I think Instalco 2.0 has had a big impact on that. I would say that that's the fact. I don't think you can see any changes in the market, any significant changes in the market. It's more like that we have improved across many subsidiaries. That's the simple answer, I think.
Hi, Simon. Mathilda here. I can also add a slight nuance to that. As Per is saying, we are definitely seeing a broad improvement across essentially all different types of subsidiaries, but some especially strong performance is coming from our companies working more towards the industrial side.
Yeah.
Broad recovery in general, but even more strong in the industrial companies, or is it more like a mix effect of things, so industrial companies with higher margins? Or how should we read that?
Okay. I think it's hard to say, but I think as Mathilda just said, I think of course we see an effect from the industrial side, maybe a little bit more than from the ordinary. But I think it's a mix, and it's very hard to tell exactly. But the improvement is broad, that is for sure.
Yeah. Broad improvement and even stronger improvement in industrial companies.
Yeah.
Perfect. I think you also highlight on the market effects that you haven't really. It's not mainly driven by a better market. Does that mean that when you see competition and pricing conditions improving here, maybe into next year, that the market should give you another lever on the upside, or how do you think about that?
We hope so, I would say. I would also add to what I said here, that of course, we can see that the market is ticking up. I think that's for sure. Slowly, but it's ticking up, and the demand, you know about the data centers, you know about the defense industry. Of course, it's ticking up. Slowly, but still. Also residentials. So, a positive direction, but a little bit uneven. I can add to that, Sweden is strengthening. Norway remains challenging with those delayed starts and maybe a little tougher price competition. Finland is subdued too, but appears to have bottomed out, I would say.
All right. Another follow-up on that, given the mix change that we now see with strong performance for the industrial companies, or companies with industrial exposure impacting here in Q3, how should we think about seasonal swings more in general in the future, and especially if you look at Q4 here, for example, that's usually a very strong quarter and usually a very strong uptick also from Q3. Do you think that that pattern will be a bit different here, maybe more even, or how do you think about that? How should we think about that?
I think it is an interesting question, definitely. But I think we have no. Maybe Christina, you should. But I think over a quarter it will not change so much. If the project is there, if the backlog is there, I think we can just execute on it, and I think it will do. The difference between the quarters are rather even.
I can swap over to the expectation around the cash conversion, and Q4 next quarter is historically the strongest when it has come to cash conversion. That should give a better cash conversion for next quarter than we had this one. Bear in mind, as we have said in this presentation also, that the growing industrial share means somewhat higher working capital over time.
All right. It does not sound like you expect any major changes in the overall margin seasonality then.
On the margin seasonality, I think we probably see the Q3 being better than Q2 as a bit of an exception. It is not something we are expecting all the time going forward. But it is definitely a receipt that the internal work is going well. However, I think normal seasonality patterns remain.
All right. Thank you. On Norway, you talked about a more hesitant market and for the delays and so on. When do you see that growth should come back in Norway?
With the order backlog we have, I think it's just a matter of time when the project starts. We think we have been delayed now twice, I will say, a couple of months, and now everything seems to start up here in Q1. I think the projects that have been delayed, of course, are starting in Q1 2027. We are coming closer and closer, of course. But the order backlog is good, and it's just execute on that. My best guess is absolutely early Q1 2027.
We can add that in Q3 for Norway, that didn't manage to fill the gap in combination with the seasonality effect and some losses also from project and customers. Q2 was, if we look back at the previous quarter, they were a little bit better to fill the gap between projects that has happened during Q3.
Does that mean that if you turn to margin, say, for Norway, that there was a bit of one time effect in Q3? Or should we expect that that gap you mentioned should persist in Q4 potentially leading to weak margins?
As said, the delay is now more pushed into beginning of 2027, so no high expectation for a change in that during Q4.
We also believe that our order backlog in Norway has good numbers. We are not afraid about the order backlog as is, but the delay, of course, if we have an overhead cost, it's hard to do something really. Of course, we are trying to receive smaller projects during this time or increase our service part and so on, but still it costs us.
All right. One final from me, if I may, on the gearing cash flow. You talked about the cash flow a bit here. But if we focus on the gearing, when you are above the target, you say that Q4 is seasonally strong for cash flow. How fast do you expect to be able to delever and reach the target?
Let's say what we have, of course now in Q3 already mentioned, we had a higher debt and a higher gearing ratio this quarter, that's for sure. This comes from the investment and financing activities during the quarter that was very well planned and prioritized in advanced, also well communicated. So it's no surprise in it at all. But going forward in the closest coming quarters, the capital allocation will be more cautious, with clear focus on cash conversion and delivering. But of course, we don't state any forecast in it, but it's a focus to get it down from the level we stand at the end of this quarter.
All right. Thank you so much for that. I will get back into the queue.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
We do have a couple of written questions from the webcast as well. For the first one, the order backlog is growing. Where does the growth come from, and how quickly will it convert to sales?
All in all, growth in all segments with a good mix of project sizes and several multi-year contracts in Norway. Some larger projects have long durations and late starts, so conversion takes time. Important to say is that we have no cancellations. It is a timing of it.
Thank you, Christina. One final written question as well. Can you say something about Fabri's expected margin for the full year and what it was in Q3, if not already covered on the call?
To say, in Q3, we only had one month of Fabri in the quarter, only August. August in Germany is a holiday month. They have contributed positively and will give us a full quarter in next Q4. 2025, as communicated, they were at a margin at 12.7%, so we are looking forward to their contribution to the group.
I believe that was all of the questions. Per, over to you.
Thank you everyone for listening in, and thank you so much. Let's finish the call.