Good morning, everyone, and welcome to this Q2 report for 2025. I'm Petter Moldenius, the CEO of Karnell, and with me today, I have my CFO, Lars Neret, and we will be walking you through our financials performance for the quarter and discussing our strategic initiatives and providing insights into our recent acquisitions. Here is what we have lined up for you today. I'll start with a brief introduction to our Q2 report. Lars will then give you more details around our business units and their performance. I will then give you a short introduction to our acquisition, Warwick SASCo , even though we talked about that during our last call, and then LundHalsey, which is the company we acquired on July 4th. We have also reserved some time at the end for a Q&A session.
As I mentioned the last time, we have decided to slim down the introduction as our audience knows us really well. We are also very happy to have introductory calls with institutional investors. Just contact us at ir@karnell.se. Karnell is an active long-term owner of industrial technology companies, focusing on acquiring small to medium-sized companies with strong positions in niche markets. We have a disciplined acquisition strategy, prioritizing quality and industrial leadership. As of now, Karnell comprises 18 companies across Finland, Sweden, and the U.K., employing approximately 700 people. We strive for transparency, even if it means sharing numbers that may sting in the short term. We believe that will benefit Karnell and our shareholders in the long term. With that introduction done, let's turn to our Q2. Karnell delivered a strong performance in the second quarter of 2025, despite the continued macroeconomic uncertainties.
Both revenue and EBITDA increased at group level. During the second quarter, net sales increased by 21% year on year to SEK 431 million. Organically, revenues grew by 1.4%, which is a decent result given the market conditions that we operate in. EBITDA increased 54% year on year to SEK 63 million, which is a 17% growth generated organically. That's something we're very happy with. The EBITDA margin improved to 14.6% versus the 11.4% last year, and that is a rise of 3.2 percentage points. In Q2, in Q1, EBITDA growth was partly flattened by one-time costs that incurred in the prior year. I would like to stress that the effect is now gone in Q2, so there are no material IPO-related costs for this quarter last year. The 50%, 54% EBITDA uplift is driven by our underlying improvements, primarily our niche manufacturing businesses and supplemented by acquisitions.
The quarterly cash flow, the operating cash flow, was at SEK 20 million, which falls short of our own expectations, and Lars will break that down and the drivers shortly. On a positive side, net debt in relation to EBITDA remains low at 1.4x, which leaves us substantial headroom to continue our expansion through selective acquisitions. Now, zooming out, looking at a trailing 12-month basis, our EBITDA margin has climbed to a record 13.3%. That represents a 0.8 percentage point improvement versus Q1 and moves us steadily towards our long-term target of 15%. We have also recorded a significant increase in both earnings per share and return on capital employed during the quarter versus last year. The niche production segment performed well and contributed positively to the result and is getting back to levels where we want to see them, whereas the product company segment showed a more mixed performance.
This quarter confirms that our strategy is holding up well, even in more challenging market environments. We continue to grow both organically and through acquisitions, and our focus on international expansion is delivering tangible results. With two acquisitions in the United Kingdom, which we'll come back to, we have also strengthened our position and our geographical footprint outside of the Nordics. With that, I'll hand over to Lars, who will walk you through the financials more in detail.
Thank you, Petter. We then look a little further into the second quarter and starting with a breakdown of net sales on the left here. Total sales increase was 21%, with organic growth just above 1%. The market was still a bit cautious but stable during the quarter. As Petter mentioned, this quarter there were some differences between our two segments, which we will look at shortly. Acquisitions were 21% of the increase and currency effects a - 2% in the quarter. EBITDA increased by 54% with an organic growth of 17%. If we exclude the central costs and only account for our two business segments, our operating units, we had a combined organic growth of 14%. We are very happy with the growth this quarter within these market conditions, and the growth comes from acquisitions as well as organically within niche production.
Acquisitions accounted for 41% of the growth and currency effects a - 3%. As Petter mentioned, EBITDA margin increased from 11.4% to 14.6%. Looking at our business segments and starting with our product owning companies, we had a little softer quarter compared to a strong quarter last year, with an increase in sales of 22% to SEK 218 million. The increase came from acquisitions, and we had an organic change of - 7%. EBITDA increased by 33% to SEK 32 million, and the growth here also comes from acquisitions, and we had an organic change of - 11%. The EBITDA margin improved, however, from 13.5% last year to 14.8% this year. The product companies had a little softer quarter compared to a strong quarter last year, with temporarily weaker demand but still with good margins. At the same time, we see strong performance from our latest acquisitions.
For our niche manufacturers, sales increased by 19% to SEK 213 million. The increase came from both acquisitions and organically, where we had an organic growth of 9%. EBITDA increased by 51% to SEK 42 million, and here we had an organic growth of 35%. EBITDA margin as well increased from 15.6% last year to 19.7% this year. The market still shows a little lower activity, but it is looking to stabilize. With that said, our niche manufacturers had a strong quarter with continued recovery from a weaker last year, and we are happy to see that the increase in both sales and profits are across the board from all our entities. Moving on to cash flow then, cash flow from operating activities increased by 28% from last year on a rolling 12-month basis, but for the quarter, it decreased by 34%.
The decrease is due to higher working capital at the end of the quarter, especially inventory. This is due to several entities building their inventories for deliveries during Q3. This is a normal process, but there is a timing difference here where this year it's been more of a June rather than July as it was last year. We are, of course, not happy with this, and working capital is a focus area for us. At the same time, we're not trying to optimize working capital at each quarter end. Onto our capital structure and net debt. In this quarter, we made one acquisition, and we also paid out earnouts for roughly SEK 10 million. We also bought additional shares from our minorities using our put call options, totaling roughly SEK 40 million.
This caused our net debt to increase to SEK 332 million, but we still maintain a low leverage of 1.4x. If we include leasing, earnouts, and put call options that you can see on the right side of the table here, then we had a leverage of 2.2x at the end of the quarter. Back to you, Petter.
Great, thank you. Yes, Warwick SASCo. Again, we mentioned this during the Q1 presentation. As it happens in early Q2, we thought it worth mentioning again. The company is based in the U.K., and it specializes in reusable specialist plastic products for hospitals. It's used in surgery rooms, nursing, and general patient care. This includes items like instruments, trays, galley pots, kidney dishes, and autoclave safety containers that you can see here on the right side. These products are certified according to the E.U. MDR standard. Warwick SASCo has built a strong international reputation with exports to over 60 countries and a global customer base of medical distributors. The company is well positioned to benefit from ongoing environmental and regulatory shifts that are phasing out disposable plastic products in favor of high-quality reusable alternatives.
This is a family-owned business founded in 1981 by the father of the current CEO, Darby Booth, who will remain in his role following the acquisition. We have acquired 90.1% of the shares with an option for full ownership in the future. The selling shareholders retain 9.9%, ensuring continuity and deep domain expertise going forward. To our most recent acquisition, LundHalsey. The company manufactures and engineers world-class control room consoles and technical furniture. It is providing expert control room design solutions for mission-critical 24/7 environments globally. These premium control room consoles are used in sectors such as aviation, broadcast, security, and industrial processing. I think the images on the right here illustrate the product better than any description. They show aviation-graded consoles designed for air traffic control centers, which, of course, are mission-critical environments where operators work 24/7 year-round.
In these settings, the consoles are an essential part of the safety system. Why do we think LundHalsey is attractive? First, the company offers a highly modular console range that meets strict ergonomic and design standards demanded by clients who require 24/7 operator continuity and monitoring. Second, LundHalsey already serves a global customer base and is well positioned to ride strong tailwinds on infrastructure upgrades, growth in industrial processing and aviation, and a broader push towards operational centralization. Third, the company has a solid management team. It was founded in 1982 by Christopher Lund. The team has successfully expanded the business from its broadcast roots into the new vertical and geographies that we talked about. The strategic fit for us at Karnell, I mean, the acquisition strengthens our product company segment and complements existing businesses and opens up long-term opportunities in the global growth markets.
We acquired 90% of LundHalsey with an option for full ownership, and the seller retains 10%, ensuring continuity and ongoing expertise within the company. This is our first proactively sourced acquisition in the U.K., and I think that's clear evidence that the team's capabilities and ability to identify targets, build relationships, and see the transaction through from that first call or first point of contact to the closing of the transaction. This now makes our fourth portfolio company in the U.K., and we have colleagues at Karnell level outside of London on the ground, and the U.K. is now developing into a more established market for us. In short, LundHalsey brings modular mission-critical product know-how, a global footprint, and a driven management team, and it's an excellent fit for Karnell's strategy and portfolio. Last slide, highlights and key takeaways. Key takeaway: solid financial performance.
Q2 delivered strong top and bottom line results, underpinned by organic growth and the new platform acquisitions and a disciplined cost control across the group. Signs of market stabilization across the broader economies. We're starting to see interest rates edge down, early indications of demand is firming up. Our portfolio companies, especially those in niche production, are performing well, and our decentralized operating model continues to prove its worth in a mixed market condition. We head into the second half of 2025 with confidence, while recognizing that last year's Q3 sets a tough comparison. Continued capacity for growth. Our low leverage gives us ample balance sheet headroom to continue to invest. Our robust M&A pipeline, we continue to work proactively and are evaluating new industrial technology targets that meet our long-term value creation criteria.
In short, solid Q2 results, early sign of stabilization, and continued strong balance sheet for further expansion. With that, I would like to open the floor to any questions that you may have.
If you wish to ask a question, please dial pound key five. If you wish to withdraw your question, please dial pound key six. First caller is Max Bacco at SEB. Max, please go ahead.
Thank you. Good morning, Petter and Lars. Well done here in the quarter. Just a couple of questions from my side, perhaps starting with the cash flow and the working capital, which you mentioned here, Lars, that during the first half of 2025, you have tied up, I think it's SEK 75 million in working capital, divided inventory and receivables. Do you expect to release the full amount during the second half or at least some of it? I think you touched upon this, but if we could circle back to that.
Yes, thanks. Absolutely. I'm not sure about the full amount, but definitely some of the amount. It is more than usual, and both receivables were high in Q1 as well. We expect to release quite a bit, and then inventory as well. Since most or a lot of our companies are building inventory for Q3 deliveries, we expect a big portion of that to be delivered. We can also mention that all of our companies are also adding to the buildup of working capital during quarter ends.
Understood. Thanks. Turning to the operational performance here in the quarter, niche manufacturing is very strong, whereas the product companies are a bit softer. You mentioned that the strength among the niche companies was broad-based. Was the a bit softer performance among the product companies also broad-based, or was it some specific companies that had it a bit more challenging here in the quarter?
Sorry, you mean for the product-building companies?
Yeah, yeah, exactly.
Yeah, I think that's a fair statement. A little weaker across the board, nothing that really stands out. I think also important to highlight is, of course, that the Q1 organic growth was really strong for many of these product companies. It's also somewhat of an effect of deliveries in the last period of March. If you look year to date, we still have an organic growth in the product owning sector with 2.2% on top line.
Okay, good clarification. On that note, I know that you don't give any guidance, but you mentioned that when you enter here, second half of 2025, you do so with confidence. Is that mainly for the niche companies, or is it also for the product companies? Do you see a bit better performance here during the second half compared to Q2 for the product companies?
Yes, we enter the second half with confidence, as I said. I think also recognizing, again, the Q3 last year was a very high or good quarter. It's a tough comparison going in. With that said, I think we also see that there are, let's say, volatility or a market out there that is waiting a little bit. It's stabilizing for sure, but it's stable at a fairly low level versus what we've seen before. We don't guide, but that's what we can say for Q3.
Okay, perfect. That was all the questions from my side. Thank you very much, and once again, well done.
Great, thank you.
Thank you.
There are no further questions.
Great. With that, we thank you all for listening in and wishing you a good summer for those of you who have holidays coming up. Thank you.
Thank you.