Welcome to Netel Q3 report for 2026. For the first part of the co nference call, the partici pants 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 CEO and President Jeanette Reuterskiöld and CFO Fredrik Helenius. Please go ahead.
Good morning, and welcome to our presentation of our third quarter results. My name is Jeanette Reuterskiöld, and I am President and CEO of Netel. With me, I have, as usual, Fredrik Helenius, our CFO. During today's presentation, I will start by running through the key developments in the third quarter, as well as information about the announced merger with Infrea. I will also give you a market update and highlights from our recent business wins in the quarter. Fredrik will then, as usual, go through the financials in more detail before I make a short summary, and then we open up for your questions. We are well prepared for the merger with Infrea, with expected completion 4th of November. During the third quarter, we strengthened our financial position and took important steps in the preparations for the new group.
It was particularly gratifying to see the strong support for our rights issue, both from existing and new investors. The issue was oversubscribed, and together with the overallotment issue, it provided us with SEK 140 million after transaction costs. I see it as a clear confidence in Netel and in the potential of the group we are creating together with Infrea. The formal decisions have also been put in place. The extraordinary general meeting on August 21st approved the merger, and all relevant authorities have given their approvals. In parallel, we continue to simplify our own organization. The Swedish Companies Registration Office, Bolagsverket, approved the merger of seven Swedish subsidiaries in August, and we will complete the last five subsidiaries in the end of October. It is an important step towards consolidation of our Swedish operations into one operating company for next year, 2027.
It will provide us shorter decision-making paths, lower overhead costs, and more efficient work in areas such as purchasing and product management. The work is part of our cost-cutting program, which aims to reduce costs by SEK 15 million-SEK 25 million with full effect in next year. We also entered a merger with a positive cash flow from operating activities of SEK 60 million during the quarter and an order backlog of approximately SEK 3.7 billion. Our internal improvements are having an effect and strengthen our starting point for the new group.
Together with Infrea, we are creating a group with sales of around SEK 5 billion and more than 1,200 employees. Our offering and customer bases complement each other. This gives us better conditions to take on larger and more complex projects, while at the same time gaining capacity for the more smaller assignments. We also see significant opportunities for cost synergies.
It is with this potential and focus that we are now preparing the next step. If we look at the financial development, we see an improvement in the third quarter, with increased sales and strengthened adjusted profitability compared to the same period last year. Sales amounted to SEK 682 million compared to SEK 652 million in the previous year, mainly due to the good development we see in Infraservices and Power. The cost savings that we initiated in the last year are now having an effect, and together with higher production volume, it has improved the profitability. Adjusted EBITA amounted to SEK 20 million compared to SEK -34 million last year, corresponding to an adjusted margin of 2.9%. Our order backlog amounts to approximately SEK 3.7 billion, as I said earlier, and is characterized by good profitability, which gave us a good starting point for continued work forward.
We also see an improved cash flow from operating activities, which amounted to SEK 60 million during the quarter. At the same time, we need to be clear about the challenge in Telecom. The transformation in the Norwegian market is going faster than we expected and affects our assessment for the full year. We therefore no longer expect any growth for 2026, but our assessment of improved margins remains firm. In summary, we see that our actions are paying off, while at the same time we need to adapt our operations and organizations to the changes in the Norwegian Telecom market. Now, let's move on to some markets update from our divisions. Infraservices is on the way towards increased profitability. Increasing sales and improved results, but the winding down of a company continues to weigh on profitability.
Sales increased by 26.1% to SEK 169 million, compared with SEK 134 million in the previous year. EBITA improved to SEK -2 million from SEK -23 million, and the margin - 1.2% from - 17.5%. The winding down of a company acquired in 2022 still has a negative impact on earnings, but excluding the effects of this company, the EBITA margin was 1.7% for the division. The process of closing this operation is expected to be largely completed before the end of this year, with only one ongoing project with production under next year, 2027.
But this shows a positive underlying profitability for Infraservices in a competitive environment. In Power, we see a strong development with growth in both Sweden and Norway, and with particularly strong development in the Norwegian operations. Sales increased by 30.1% to SEK 255 million during the quarter. The higher production volumes also contribute to the improved earnings.
EBITA amounted to SEK 4 million, compared with SEK -20 million in the same period last year, and the margin landed at 1.7%. Behind the demand is electrification and the energy company's need to strengthen and expand the capacity of the electricity grids. This is also evident in our new contracts, where we have won important contracts in both Sweden and Norway, including with Elvia and E.ON and another large energy company in Sweden. These assignments strengthen our order backlog with SEK 230 million for 2027 and beyond, and include both upgrades of existing stations and new construction.
Telecom is undergoing a structural market transition, as we said earlier, particularly in Norway. Sales decreased by 20% to SEK 258 million from SEK 322 million. Traditional customers are moving from large installation volumes in mobile networks to more service and maintenance. The overall volumes are decreasing. This reduces volumes in both Sweden and Norway.
In Germany, on the other hand, continued upgrading of older networks and rollout of fiber is making a positive contribution to sales. Despite the decline in sales, EBITA improved to SEK 4 million from around zero, and the margin to 1.4%. The result provides evidence for the improvement with the cost-cutting programs and good development in Germany. In a business with declining volumes, the cost-reducing measures are increasingly important in order to adapt to changes in the market. In Norway, the change in business direction is brought forward. Lower volumes and tougher competition means that Netel is broadening its customer base beyond the traditional Telecom operators. The focus is more on project operators for public and private customers, as well as the defense industry, corresponding to the change implemented in Sweden. The profitability in tendering is prioritized over growth.
At the same time, Germany provides new business opportunities, and after the end of the quarter, Netel signed an agreement with a new customer, SachsenEnergie , for fiber expansion and laying of electrical cables in Struppen. The project is worth approximately SEK 40 million and is expected to be completed in the spring of 2028. The accelerated Norwegian transition, as we see, is also the reason why the group's growth expectation for the full year 2026 has been removed. However, the expectation of improved group margins remains unchanged. This is a forecast for the group, not a separate margin target for Telecom. Fredrik, let's move on to our financial performance in more detail.
Thank you, and good morning, everyone. Looking into the financials here in the third quarter of 2026, we achieved important advances on several objectives. The year-over-year comparison is, of course, reflecting the transition, improving our position since last year's activities. We continuously focus on our capital and our ability to generate cash flows, and we are adapting and planning for a new organizational structure in Sweden, and not at least the ongoing merger together with Infrea. In general, the financials in the quarter supports the continuous improvements for Netel during this last quarter as a standalone company. The net sales in the quarter amounts to SEK 682 million, a growth with 4.5% as we noted good contributions from both the Infraservices and Power divisions. Power in Norway continues to perform well with both ongoing projects and new opportunities.
In this particular quarter, we noted further important contributions from Infraservices in general and good contributions from the Telecom business in Germany during a shift of demand, which puts light on our ability to adjust during swift market updates. The growth may be a little bit less than previously expected, and we lower our expectation on the growth for the full year 2026, whilst we continue to focus on our main objective being improved profitability. And through the order backlog of SEK 3.7 billion, we find support for the continued improvement going forward. The backlog remains around the SEK 3.7 billion from last quarter with the help of mix of projects and a relevant duration for the coming periods.
In addition, during the start of the fourth quarter, we have added several interesting projects to the backlog as communicated and as mentioned by Jeanette , for instance, the contributions within Power in Norway and in Sweden, and also through the new interesting clients in Germany. The macro climate and FX markets continue to be somewhat volatile and with the strength in NOK and EUR, we note positive contribution of 3.5% from FX effects in the quarter, and that is approximately 1.7% for the first nine months of 2026. The adjusted EBITA in the quarter amounted to SEK 20 million, a significant upswing from the SEK -34 million last year, and in line with the previously communicated profitability improvements. The Telecom operations in Germany and the Power business in Norway continues with strong performances and a strong momentum, increasing our profitability for the group.
We do so in addition to the continuous transition of improving the underlying performance within the core markets of Sweden. The seasonal patterns remain and through the start of Q3, which was slightly lower than we expected, we showcased a good ability of ramping up production during this time of the year. We do expect that the fourth quarter will follow our seasonal characteristics ahead of the year-end closing. As we described during the second quarter, especially the intended merger with Infrea and the synergy realization implied additional cost recognized as items affecting comparability here in the third quarter. In total, our adjustments amounted to SEK 24 million in the quarter, of which SEK 11 million refer to the ongoing merger process. Approximately SEK 10 million refer to our restructuring activities, achieving scale and cost efficiencies through the full integration of our Swedish operations.
The merger between Netel and Infrea will be completed shortly, and so will the costs of this process. In the next few days, as Jeanette mentioned, we do expect to complete also the new organizational structure in Sweden. These are relatively greater items affecting comparability, obviously, but just as important is the timing and expectations on complete processes during the remaining months of 2026. With these fairly higher levels of adjustments, we note a negative EPS of SEK 0.52 in the quarter. But again, we do look forward to the continued development and progress during the remaining part of this year. Before we move on to the operating cash flow in the quarter, I thought it would be helpful also to have a quick look on the completed share issue during September. We are intensively working on the preparations and integrations ahead of the merger between the two companies.
As communicated previously, we announced the intention to complete a share issue in connection with the merger process, further improving the financial position for the combined new group. We are very pleased to achieve an outcome of SEK 149 million in total, being SEK 140 million net of costs, implying approximately SEK 20 million through the overallotment allocated to the issuance of new shares in Netel. With participants amongst existing owners in both Netel and Infrea and additional new investors, we strengthen the ownership structure and support for the company, creating a strong foundation for the future and the upcoming processes and significantly lowers the net debt position here in Q3. The operating cash flow in the third quarter was SEK 60 million.
After a relatively intense working capital buildup during the first six months, we managed to leverage on our focus to improve invoicing processes and benefit from the production phase during Q3 and performing above our seasonal expectation. The year-on-year improvement in operating cash flow is good, and we continue to monitor our progress of achieving small improvements in all individual projects. Our focus very much driven by our operating teams and ultimately managers in our projects. As of today, we remain with our view that we expect a healthy cash release as we enter the fourth quarter with normal seasonality bringing projects to an end, finalizing production and improving our financial position. Liquidity-wise, the cash flow in the third quarter and completed share issue imply that we have well above SEK 400 million in available funds, and we are fully compliant and well in line with our financing agreements.
As communicated in connection with the merger with Infrea, we have secured a new bridge financing that will be in place upon completion of the process, and we will continue to evaluate additional long-term alternatives for the combined group after having reviewed the bond market here during the third quarter. Looking at the divisions and segment performance, Infraservices reported sales of SEK 169 million in the quarter with a growth of 26.1%, further implying growth also in the year-to-date period, January through September. We continue to note healthy contributions from b oth ongoing and newly won projects, but we still need to add additional projects and volumes for both the year of production on our way to improved financial performance and for the start of the next season.
This is again a normal state for our Infraservices business, where we typically have relatively shorter projects and projects with lower volumes being both started and finalized intra year. The EBITA for Infraservices amounted to SEK -2 million or - 1.2%. This includes costs of approximately SEK 3 million in the quarter relating to the continuous process of winding down one company within the Infraservices division, which is then adjusted for at group level. Excluding these effects, Infraservices performs relatively well in the light of a transition year and showcased an EBITA margin of approximately 2% in the quarter, or 3% for the nine-month period. The high activity in the market is still to be viewed in the light of high competition, but the need for these services will remain both in the short and in the long term.
Going forward, we of course very much look forward to the merger between Netel and Infrea. This of course holds then for all three divisions, but Infraservices in particular will gain advantages of increased coverage in Sweden, potential cooperation between the upcoming infra and paving segments, and further initiating and increasing the scope of combining our expertise within Power, infra, paving, and Telecom, where the infra competence and production is very visible within most of our projects. Looking at Power, we reported sales of SEK 255 million, a growth of more than 30% in the quarter, with an EBITA of SEK 4 million and 1.7% margin. Coming from important decisions and actions last year, Sweden has been working on this transition, winning new projects and ramping up production, and now delivers 17.2% growth with many finalized processes within the necessary turnaround for the business units focusing on the distribution networks.
Norway continued on the growth path from the second quarter with double-digit growth, 31.4% growth in the third quarter, leveraging on the momentum and the operational excellence of the company. We continue to win interesting contracts with recent additions within Norway during the quarter and within both countries during the start of the fourth. We do have the SEK 100 million regional network substation in Sweden, for instance. Market activities within Power remain high, and we look forward to utilizing on the positive development from the recent contract wins going forward. As said during previous conference calls in 2026, the transformation within the Telecom market with our additional or traditional clients, and the telecom operators providing lower rollout volumes within both fixed and mobile networks have, as expected, impacted our Netel sales and profits negatively. Now, however, we noted somewhat faster pace and quicker than expected market transformation in Norway.
With these updates, we noted - 20% growth in total for the division and lower our expectation for the top line of the group for the full year 2026 performance. Our team in Germany, however, has successfully been navigating the trends and demand in the German Telecom market, and as such, delivering a growth of above 25% with continuously healthy margins. In total, Telecom generated SEK 258 million in sales in the quarter with an EBITA of SEK 4 million and a margin of 1.4%. We continue to work on our cost savings, our direct actions across the Norwegian operations, and especially our client diversification across the Telecom division as a whole in order to support the transition with improved financials going forward.
There is and will be a need for our skilled teams and expertise in Germany for the prolonged rollout of fiber networks and within the Nordics for the industries, for the defense and public sectors, and for other parts of the overall Telecom markets. All in all, we present our quarter overall in line with our previous comments, normal seasonality. We are really looking forward to the completion of the ongoing processes. But first, Jeanette, thank you very much for the word, and please go ahead with a few closing comments on Netel's third quarter report.
Thank you, Fredrik. I will now finalize today's presentation with some concluding remarks. We have taken important steps in recent years to restructure and strengthen Netel, creating a more focused, efficient, and resilient organization. I would like to extend my sincere thanks to all of our dedicated employees whose commitment and drive have helped bring about this change. Thanks to your efforts, Netel is well prepared for the merger with Infrea and the next step of our development to create a larger, stronger group together with a position as a leading player in critical infrastructure services. We increased sales with 4.5%, Infraservices with 26%, and Power with 30%. That, together with our cost savings, improves our adjusted EBITA to SEK 20 million with a margin of 2.9%.
In Telecom, we are adapting our operations to lower volumes by developing the service and maintenance business and broadening our customer base, as well as adapting our organization to lower volumes. We have strengthened our financial position through a cash flow from operating activities of SEK 60 million and issue proceeds of SEK 140 million. In parallel, we are gathering our 12 Swedish operating companies into one company. That work is going according to plan and will be finalized in the last of October. It is an important step towards consolidating our Swedish operations into one operating company. It will provide us shorter decision-making paths, lower overhead costs, and more efficient work. The work is part of our cost-cutting program, which aims to reduce costs by SEK 15 million-SEK 25 million with full effect next year, 2027.
The next major step is the merger within Infrea, which has been approved both by shareholders and relevant authorities, and which we expect to be completed 4th of November, in other words, next week. We adjust our full year 2026 indication and expect a margin improvement for full year, supported by our savings and current market conditions. We expect no growth as the Norwegian Telecom market is changing faster than planned. In a brief summary, it has been all hands on deck with our operations, within our support functions, and across management teams to continue the transition towards improved financials. Of course, with the soon-to-be completed merger within Infrea. Additional information will be available through our website and of course through upcoming press releases in line with the process. With that, Fredrik, we open up for questions.
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. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
All right. No voiceover questions. Let's see if we have any written ones. I think there is a question here regarding the potential bond issue, which I think, well, in general, was a very good process with a lot of relevant meetings, several investors. I think it's fair to say that this sector and this company has an understandable and relevant position in the credit market. Then again, I think that we have a lot of processes ongoing that we are yet to complete and finalize the process with the merger between Netel and Infrea. We now have seen our Q3 report where we can shift the SEK -34 million in EBITA last year to SEK +20 million in adjusted EBITA this year.
All of these processes will of course add up to the bond process with potentials of looking into additional alternatives for the long-term financing going forward. I think it is important, again, to note, as we said during the call, that we do have a secured financing here for the merger process and will, of course, evaluate additional alternatives going forward. I think the questions was also written that a larger, more diversified group, if that will be beneficial for these processes. Obviously finalizing these processes, creating clarity, having common financials in that sense for the new group will, of course, be beneficial for our financing processes going forward.
Yes. We have another question. Given the repeated gap between expectation and actual performance, if we consider the group's targets realistic. As we said, we have made changes in the indication for this year, but it is on the revenue that we do not see growth due to the changes in the Telecom market slightly faster than we expected. But as we said, 2026 is a transition year for Netel, and we have, through this year, worked with the margin improvements and the cost-cutting programs as planned. So we stick to the margin improvement for indication for this year with the firm. So we feel that we are in a good position for the indication for this year.
Yep. Next question refers to having been reporting one-off items for a period of time, and when we do expect reported EBITA to match the adjusted EBITA. Well, I think as, again, we said during the call, we do have a lot of major processes ongoing this year, not at least the merger between the two listed entities. We do have the merge process internally within Netel Sweden, being 12 companies being merged into Netel AB. These processes are quite big in the sense of greater values for the items affecting comparability in 2026. However, we do expect to finalize both the process with the merger between Netel and Infrea now November 4th . We have expectations for finalized mergers of the remaining five companies in Sweden end of this week, actually, last of October.
With that, of course, the cost coming from these processes will come to an end, and we will be completed for these non-recurring items. So yes, going forward, we do expect the gap between the reported and adjusted EBITA to close down over the next few quarters going forward. There is now a question regarding the merger, if we will distribute any material covering the new entity, the merged entity, following next week's closing of the process. We will not provide an updated consolidation as of 4th of November. There is a bit of information on the pro forma balance sheet and P&L from the prospectus, obviously. But until then, we do have the first report coming in February, February 19th, which will then reflect the merged entity.
Yes, and we have another question for Telecom in Norway. Is the fast-changing market only due to not securing the Telenor contract? What is the customer concentration in Telecom, and is there a risk for further loss of customers? The indication for this year is not due to the extension of the Telenor frame agreement. That will affect the volume possibly for next year. We see an overall decreasing market volume in the market for the Telecom operators in Norway. For us, we will make a strategic decision to go to more project operators within public and private and within defense as we have done in Sweden. So we are, of course, adapting our organization in Norway due to that.
It is according to plan, and we just have to be quick and keep on working with our cost-cutting programs so that we can adapt the organization to new market conditions for us in Norway.
Okay. I think lastly, we do have a question regarding the synergy and synergy realization relating to the expected completion of the merger process between Netel and Infrea. If we can be a little bit more specific on the SEK 50 million as communicated in cost synergies. Well, I think the SEK 50 million can, in general, be split into two parts. One part being the fact that two entities become one. We will only have one listed company, one group management function, and a lot of similar processes that will generate approximately half of these SEK 50 million.
It is fair to say that we have already identified and started to work with more than SEK 20 million of that SEK 25 million bucket. We do have a few costs of realizing those synergies. Some costs taken already now in Q3, and the remaining parts will be taken then in Q4.
The other part of the SEK 50 million is relating to the procurement and purchasing within the company, where we simply believe that being slightly bigger in this industry is better. We do have a very strong position, at least in the Swedish market, with a very good potential of lowering our prices for our procurement and purchasing with a mere 1%. That is basically that calculation on the base of slightly more than SEK 2 billion in purchasing for our project-related items. So we are well underway on several processes. Then again, the merger process is yet to be finalized and completed next week. So we have just been able to do that much up until this point. Okay, it does not seem that we do have any additional questions at this time. So back to you, Jeanette, for just the closing remark.
Yes. Thank you all for listening in. Next, the fourth quarter will be published on 19th of February next year, and it will be our first report for the new group. Thank you all for listening in.
Thank you, everyone.