Hello, everyone, and welcome to our Q&A session following the interim report for the first quarter that was released this morning. As usual, we have received a number of questions, and we have here our CEO, Ulf, and CFO, Niklas, to be answering the questions. Let's get started. Organic growth was down 6% in Q1. How much of this is structural versus more temporary geopolitical effects? Has the improvement towards the end of the quarter continued into April? Ulf, please, can you answer that?
Even though we had a negative organic sales development in both business areas, there are some differences. Overall, however, we met the market in Q1 that was more cautious after the more positive signals we saw in the end of last year. We see this primarily as timing rather than anything structural. We don't see a short-term structural shift as regards customers and their fundamental situation in Q1. Yes, of course, there are great uncertainty out there, but most of all, our customers are continuing their operation as before, albeit at a lower pace. The development in business area industry continues at about the same pace as these last quarters. A general sluggish market with lower project sales and the situation in Denmark that has hampered growth these last quarters.
We are continuously addressing this, and we saw a clear improvement in EBITA margins in Q1 versus Q4 of last year due to cost reductions and stable gross margins. The development in business area infrastructure is mainly driven by lower activity in service and project related business, where customers were clearly more cautious, both in investments and in planned maintenance. Towards the end of the quarter, activity improved with more inquiries and a somewhat higher activity level across several parts of the group after a weak start to the month due to the geopolitical situation. The strong finish somewhat compensated for the slow start of the month, meaning that March as a total was an okay month.
However, Q1 is very impacted by March, as January, February are lower activity months, which meant that the final weeks in March was not sufficient to have a significant impact to the whole quarter.
Next question. In infrastructure, how much of the drop in organic growth is driven by service utilization, project activity, seasonality, and general caution? Ulf.
It's a combination of all those factors. It varies somewhat between the business units. In flow technology, the largest impact came from a more cautious market with the largest effect on project demands and also somewhat lower service utilization levels. In the business unit, we also saw a significant drop in sales in Denmark. In technical solutions, we had a more pronounced seasonal effect this quarter with lower activity in planned maintenance, which directly impacted utilization in our service operation. Also in this area, we have a company mix effect from the fact that some of the acquired businesses these last years had more noticeable seasonality in their businesses. Companies such as Avoma and WH-Service. Overall, it's a mix of seasonality, lower project volumes, and general market caution, not a structural change.
In the report, you mentioned postponed maintenance. Is this mainly timing? Do you expect it to come back in Q2?
We see this as a timing rather than a permanent reduction. Customers are postponing maintenance likely due to uncertainty relating to their own demand situation, and also focus on cost reductions as well as production planning, of course. Underlying need is still there. Historically, this type of work tends to come back, although not necessarily fully in one single quarter. It can be spread over time. Q2 to Q3 is usually the period where we have the highest maintenance activity levels.
More specific in Infrastructure, the customer who has postponed the maintenance in the quarter, is the effect broad or concentrated to a few larger customers?
Our customer concentration is generally quite low, so from a group perspective, the customers are not large. For a single company that have a handful of service technicians planned for maintenance work that is postponed, that of course, will be of great importance for that single company.
The next question, how did the project sales develop compared to last year?
As we state in the report, the general project activity continues to be quite weak, but has been so this last year or so. Nothing dramatically has really changed there. What has changed is the fact that in Denmark, we've had some larger projects in both industry and Infrastructure that have been completed during 2025. This reflects the cautious behavior we see among the customers when it comes to larger investment decisions.
Denmark was the weakest market. Is this temporary, project related, or something more structural?
Well, as I stated before, it's mainly project related and linked to lower activity in certain segments and these projects that I mentioned before. Denmark has been a strong country for us over a longer period. Part of what we see now is more of a normalization back to sort of the normal levels.
Gross margin improved despite weaker volumes. What is driving that? Is it mix related?
Mix is part of the explanation, but not the only one. We have seen somewhat lower volumes within certain lower margin product areas, and also the projects sometimes have a bit lower margins. The lower project volumes does partly explains this, but more importantly, this reflects the pricing discipline and the active management at company level that has been performed and the fact that we say no also to work that is not generating acceptable margins. Our businesses tend to adapt quickly to the market situation, which supports the gross margin even in a softer environment.
How much of the decline in the EBITA margin in infrastructure is utilization driven versus mix or pricing?
The majority is utilization driven. A lower service utilization has a direct impact on margins as we have the costs for personnel, and that is the main explanation this quarter. The drop-through rate from lower utilization is quite high.
How are you balancing short-term cost control with maintaining capacity and sales activity ahead of a recovery?
That balance is very important for us. We work actively with cost control and adapt where needed, but we are careful not to weaken our market position. We continue to invest in sales activities, customer relationships, and competence. Our decentralized model allows us to take these decisions closer to the customer and adjust in a pragmatic way.
You have completed two acquisitions year-to-date. How does the pipeline look in terms of deal flow, seller willingness, and valuation levels? Ulf.
We continue to see a good inflow of opportunities and an active pipeline. Seller willingness remains solid and many entrepreneurs are looking for long-term industrial owners. Valuations are relatively stable overall and assessed case by case, we see a supportive environment for continued acquisitions.
The pace of acquisitions seems lower than the strong start in 2025. Is that due to increased competition or something else?
The pace can vary between quarters depending on timing of processes. We don't see any structural change in the market or increased competition affecting us materially. This is mainly about timing rather than a change in underlying activity.
How do recent acquisitions compare in terms of seasonality? Is the revenue and EBITA profile similar to the group?
Broadly speaking, yes. The companies we acquire typically have a similar mix of products and services, so the seasonal profile is largely aligned with the group as such. There are some recent acquisitions, however, that are more seasonally dependent, such as Avoma, WH-Service, and Sulmu, all part of the Infrastructure business area. As the Infrastructure share of sales and EBITA has increased over time, seasonality have become more visible, where Q1 and Q4 account for a lesser portion of sales than before.
Now the last question today. With your entry into the U.K., should we expect further geographic expansion, and how are you working to grow in that market?
The U.K. is a natural next step and an attractive market for us. Our focus now is to develop the platform we have established, building on the existing businesses and identifying opportunities for further growth, both organically and through acquisitions. At the same time, the Nordics remain our core, but we are open to expansion where we see the right opportunities.
Okay, that concludes today's Q&A session. Thank you for listening. Of course, if you have any follow-up questions, please don't hesitate to contact us. Thank you and have a good day.