Earnings Call: Q3 2025

Oct 21, 2025

Good morning and a warm welcome to Ratos and welcome to the presentation of the third quarter of 2025. Today with me in the studio, I have our CEO, Jonas Wiström, and our CFO, Anna Vilogorac. Same procedures every quarter. We start out with the presentation and then we open up for questions. With that, let's get started. Please go ahead, Jonas. Thank you, Katarina, and thank you everyone for joining us, joining Ratos this morning. We're quite happy having increased earnings in the market that still is subdued. Again, we live in uncertain markets. We have the trade policies, we have geopolitical uncertainty, and so on. I want to say actually that we see some signs of improvements. Coming back to that, in some markets, defense is of course still strong and will be even stronger. Happy that we have improved EBITDA and EBITDA margins. This is thanks very much to a lot of implementation initiatives to enhance efficiency and that really delivers results. For those of you who have been with us for a while, you know we have a very strong business system and that really showed what it can do this quarter. Also, I would like to highlight the fact that we had very strong performance in product solutions, coming back to that as well. We used to show the EBITDA growth numbers from 2018. We now take the last four years and then EBITDA continues to grow quarter by quarter, year by year, and the average now is 6%. If we look at the EBITDA, it's up 31%, but as we have noted in the report, we have contribution from the minority holding incentive that we didn't have last Q3. If we adjust for that, we still have a strong EBITDA growth with some 10%. EBITDA margin up and happy to say that we have improved EBITDA margin in all segments except industrial services, which I will come back to. Looking at the sales, sales is down 9%, but you know that we have had quite significant structural changes in Plantasjen, also with the reconstruction, closed stores, but also in XPIN. If sales are down 400, this is like 250. We also have FX effect on 100. I don't think the sales number is so interesting. We do have a negative organic growth of 3% and that is related to construction and services. As you might remember, Precision had a very, very strong Q2 and the periodization of change orders coming in were very few in Q3. That also took sales down together with the fact that the Finnish market for rail electrification has been even worse. XPIN is also contributing to lower sales. However, it's important to underline that we still have a solid order backlog. Industry flat on sales. We had organic growth in product solutions, coming back to that, and we were down in industrial services. Consumer, actually in Plantasjen, we had like-for-like sales. In KVD, we were down very much because of that we deliberately had lower inventory levels to not have so much capital binding on balance sheet. Also, prices are coming down in the used car market. Let us go into industry. Again, product solutions, we grow 3%. EBITDA grows with 17%. The main drivers are HL Display and DIAB. Strong demand and also in DIAB, we were able to focus our production and write down some assets in markets that we don't believe in coming forward. I could also mention Waste Outdoors, who had a very strong order intake for 2026. I think we can look forward in very good performance there also coming forward. Industrial services, there we have an organic decline in sales, but even more in EBITDA. Speed is in transformation to grow quite significantly. We do have automation projects that will take OpEx from us for a couple of quarters more. That has impacted profitability negatively. Also, we continue, I've said this before, the biotech market is weak and that hurts TFS. We're taking down OpEx now in TFS and we hope to see that we have reached the bottom quite soon. A market point I think is that Knightec Group, the integration between Knightec and Semcon, is now finalized. We could see some synergies already in this quarter, it is the first one. We will see synergies increase going forward until when we have the corresponding numbers being with the benefit from synergies. The last quarter of that will be Q4 and then we have got all the synergies for the integration. I have mentioned a number of 50 million here. Now it looks actually a little bit more than 70 million. That is a good thing going forward. The market though has been quite weak in, as you know, a very small quarter with a holiday period. We had the same number of working days in Q3 as last year. Adjusted EBITDA remained on par. You see, and so we have the same EBITDA actually and the EBITDA margin is also in level with last year. Going over to construction and services, I mentioned the fact that we had a very strong quarter in Q2 for Precision Infra, a weaker quarter for Q3. It was a periodization effect. I want to say that the underlying sentiment for infrastructure is overall unchanged. We see positive growth in Aibel, although we don't take in their sales in our report. One thing with this infrastructure market is we have talked about a bad market for rail electrification in Finland. It is actually worsening in this quarter. Order backlog, as I mentioned, up and adjusted EBITDA again, then we have the Sentia contribution. Excluding that, we are actually down minus 16%. Adjusted EBITDA margin again, it's Sentia there, but we should look at the 3.0% EBITDA margin. A bit lower than last year for the reasons I just gone through. Consumer, I think I mentioned already that we had like-for-like sales in Plantasjen and the fact that KVD had lower inventory to sell from and also lower prices. Excuse me. Plantasjen increased its result with SEK 67 million. We will see also in Q4, of course, that the reconstruction really works. Deliberate inventory levels, I've mentioned that already. Adjusted EBITDA is up SEK 65 million and we have a small positive EBITDA margin. With that, I am happy to leave over to you, Anna, and take us through the financials. Thank you, Jonas. Let us dig a little bit deeper in both top line and bottom line development, which we noted in this quarter. Starting with the organic growth, as we mentioned, it was -3% for the quarter on an organic basis. Just in order to break them down a little bit further, I would like to show this picture. Here we have our different business segments and business areas and in some instances, companies. As you can see, we noted good growth for product solutions. I would say even higher in some of our companies, such as HL Display and DIAB. Industrial services, I would say, had a bit worse trend due to the automotive demand. KVD, to Jonas' point, was impacted by deliberately low inventory levels and also some market declined prices mostly. Plantasjen, like-for-like, was actually on par with last year. Summarizing all of those, as you can see, it is flattish, slightly negative, but it's not a huge change. What is hurting us in this quarter is actually the construction and services with quite a significant decline, -12%. If we were to break that down even further, I would say it has to do mainly with Precision Infra. This is the timing of these change orders. I don't know if you remember, we grew quite significantly in construction and services in quarter two. It was up by 16% organically. Now it's down by 12%. It is a timing between Q2 and Q3 in which we, for the last previous year, saw quite a significant number of these change orders coming through in quarter three. If we look at the year-to-date development, it is flat for Precision Infra. That is comparing it to a strong, very strong year in 2024 for Precision Infra. Also worth mentioning that we exit the quarter with 7% higher backlog for Precision Infra. Going back to the same picture, as you can see, the contribution out of these -3% on top line was quite significant on the bottom line. I just want to give some color in regards to what is going on in that as well. Of course, these change orders, unfortunately, come with a quite high gross margin. The impact of that is also quite seen in our profitability. Another thing is the automation projects, which we are working hard with within our Speed Group. They have entailed, of course, that the cost, direct and indirect costs, have increased. Up until these projects are finalized, we will see an improvement of that. Last but not least, we saw that the central costs were a bit higher than previous year. This is only a periodization impact. Year-to-date central costs are really flat. This is a quarter over quarter impact. Stepping into the M&A box, I would say we are happy with the acquisition made. There are some acquisitions and some smaller disposals in here, as you can see, really margin-accretive. Looking at the margin of that M&A box, it's 20%. I would say you shouldn't expect that going forward. Normally when we acquire companies, they are from the get-go margin diluting, and when we extract the synergies, they will be on par or better with the Ratos group. This is specifically great to see that we get good contribution. Looking on the right-hand side, we see that big impact on the top line stemming from closed stores in Plantasjen, but also exiting some legal entities in XPIN Group, quite a significant impact. It's minus 5% on top line. As you can see, it's hugely supporting on our profitability. Plus SEK 57 million or accretive by over 100 basis points in margin. We have done the right thing of exiting these loss-making businesses. As we saw in previous quarters, we are struggling a little bit, having some headwind from strengthening of a Swedish krona, particularly in our case versus the Norwegian krona. Good to see that the impact on bottom line is negligible. Another major piece to the puzzle is the minorities. We have Sentia minority ownership in Sentia contributing really nicely to that, also margin-accretive. You need to bear in mind that this was not a part of the numbers in the same period last year. Overall, an EBITDA improvement of above 30%, but excluding that Sentia contribution, just making it like-for-like, it is plus 10%. Stepping into networking capital development, as you can assume, a lot of course has changed due to structural changes of us listing Sentia and exiting airteam. What you can see in the graph is that we have adjusted for this. We are looking at current structure going back to Q3 last year and even a quarter before that. It is quite stable. We will no longer have negative networking capital, which of course was much due to Sentia's prepayments, customer prepayments. We are looking to much more predictability in our networking capital, as you clearly can see from the bars in quarter three. We saw a slight decline versus the same period last year. On the other hand, we saw a slight uptick versus the previous quarter. Nothing strange about that one. I would say it's mainly due to timing in accounts payable. Summarizing that and how that flows through to our operating cash flow, on the left-hand side, again, a picture that is impacted by structural changes, but also in Q3 now, us getting that DIAB settlement. Legal settlement, which actually brought in quite enough cash. Hence, I would say that we can look at the right-hand graph where we have adjusted for these kinds of effects. We're looking more like-for-like. There we can see that our cash flow has actually tripled compared with the same period last year. It's very nice to see the consumer again here having a fantastic contribution versus the previous year. We see a decline in the industry, and I would say it's industrial services mainly. A little bit of a lower result, but also some timing issues in networking capital. All in all, more than triple of the cash flow for the quarter. Ending off at us looking at how leverage has developed, I would say you can clearly see that uptick in Q1 2025. It is driven mainly by composition dividend made in Plantasjen, if you remember that, and also minority dividends which were paid out. Another step upwards, and I'm talking now about the adjusted leverage, so the orange line. It stepped up a little bit more as we listed Sentia, and that is much due to them having these customer prepayments. It impacted our net debt negatively. The slight decline now moving into Q3 has to do with, I would say, DIAB settlement, of course, impacting our cash flow positively in a good way. One last reminder is that if we were to sell our 40% remaining shares in Sentia, that would add SEK 2.5 billion, which essentially would mean that our adjusted gearing would go from 1.6 times down to 0.5. Pointing out that we are very financially stable and we do have good firing power for structural activities going forward. With that, I leave over to you, Jonas, to summarize the quarter. Thank you, Anna. As always, a very good presentation. Let's round off. We have an even more profitable and resilient Ratos. We talked about the markets, EBITDA increases, EBITDA margin increases, and we heard about the cash flow. We will continue to focus on even more operational efficiency going forward. With that, Katarina, I leave over to you. Thank you very much. Thank you, Jonas. Thank you, Anna. With that, we open up for questions. As we are using Teams, can I please ask you to use the functionality of raising your hand? It's easier to understand who has questions. We do have a question from ABG. Henrik, please. Yes. Hi everyone. I wanted to just first ask a bit more about the Knightec integration. You mentioned a figure of SEK 70 million somewhere in the presentation there. Could you just explain a bit about the timing of when we'll see these cost savings and compare to what level that SEK 70 million figure was? Thank you, Henrik. Good to hear from you. I think, Anna, would you talk about that? Sure. Thanks for the question, Henrik. To Jonas' point, we did take some one-off cost additional now in quarter three, and that's because we saw additional savings, additional synergy savings. This takes us up to annualized saving of just above SEK 70 million. Looking for quarter two, I would say that amount is roughly SEK 20 million. We do expect the majority of these savings to come through as of Q1, Q2 2026, and then there will be a small tail at the end of 2026. All right, thank you. I'll have one more question if I can. Yes, please go ahead. On XPIN Group, you wrote that the Finnish market is seeing some weakness, but there have also been a lot of changes in this company during the year. I was just wondering if you could give us a bit of an update on the status currently here given these changes. We go for Anna again. You're quite deep into XPIN Group. I would say it's a story of two tails, so to speak. We have the Swedish side, which is doing great. We have still a very, very strong backlog. We have prominent major projects running currently. I would say not so much worry on that side. What has been known and perhaps deteriorated somewhat additionally now in quarter three is the Finnish market. We see fewer orders coming on. We see higher competition in those kinds of orders. We see higher price pressure. The Finnish market is really difficult. We are addressing it the best way we can. Of course, that is cost out, temporary and permanent layoffs. That's one of the things that we, of course, are addressing. I don't know if you read the press, but our big competitors have also done some personnel layoffs. It's a known weakness in that market. We're working hard on that to get grip of the situation. Yeah, roughly how big are the Swedish and Finnish parts respectively for XPIN? I would say you have ES Infra, that's the largest part. I would say Ratatek, which then consists of a Swedish and Finnish side. The Finnish side is actually much smaller. The Swedish side is actually much smaller. On the XPIN Group side, I would say Sweden is the majority of what we do. Okay, thank you. I'll let the others join us. Okay, thank you, Henrik. Thank you. You're welcome. Johan Sjöberg, Kepler Cheuvreux, please go ahead. Thank you. I have started off with the construction and services businesses. Could you talk a little bit about how we should think about Q4 here, given that you're coming from Precision Infra, a little bit messy quarter, third quarter, if I know from the outside here. Maybe you could talk a little bit about how we should think about Q4. My second question, Jonas, I don't know if I totally missed this, but you mentioned that you saw signs of improvement, and I would sort of like to hear your, where do you see that and in which business areas? Thank you. Should I start with that? We'd have to say that we believe that the consumer confidence has increased a bit, maybe because of interest rates, etc. We can see that. We have also had a, or we still have a quite weak market in secondary optics, saying Le Deal. We have taken in market specialists, etc., etc., and they feel that we now are on the bottom. We hope they're right. We see some signs, and we will also launch some new products from Le Deal. Defense is just getting stronger and stronger. That is my answer. The second was question? Precision Infra and the fourth quarter, Johan. Yeah, it's very much period. You said year to date, we are as last year. It's a periodization thing, but maybe you want to. Yes, of course, Johan. I would say, again, we don't see any deterioration in underlying market sentiment, even though it was a messy quarter with this timing of orders this year versus last year. I fully understand that difficulty. Going into Q4, I would say Precision Infra. No forecast. No forecast at all. I would just say it's a business that's highly dependent on what kind of projects you close off. It's also weather dependent. I wouldn't dare, and again to Jonas' point, we don't give any forecasts. I would say it is difficult for us to say, apart from saying what we have seen now, there is no change in the underlying market sentiment. It is very much about which projects you deliver when and the weather to some extent. Difficult to, even if I would guide, it would be very difficult. Thank you. Just the final question, if I may. Looking at the automotive segment in the consultancy business, I mean, it's obviously a big exposure for you. How would you say the mood is in terms of your automotive clients bringing back consultants? Are we there, or are we still sort of phasing out consultants going into Q4? Or let's say by the end of Q3, so you don't have to talk about Q4. No, no, no. I mean, even AB Volvo, Volvo Trucks showed signs of weaker sales and so on. Yes, one layoff people in Volvo Cars, of course, and also consultants. The unions want to get the consultants out first. It's been the same during all my time in this business. The recipe on this is to deliver projects, defined projects. We have very strong niches that our automotive segment needs in digital applications. I think, and I hope it will stabilize in the beginning of next year. You expect sort of the impact on margins, should that be sort of offset by ongoing cost cutting, synergies, etc. I understand the impact on top line here, but in terms of margins, if I may ask for sort of thinking about 2026 margins in this. At the end of last year, we said we should have $70 million lower OpEx like-for-like, and that should show in the results, of course. That's what I think. Thank you. Thank you. Okay, thank you, Johan. Do we have any more questions? Hello. Hello, from Pareto Securities. Yeah. Please go ahead. Thank you. Thank you for taking my questions. Just the two on the quarter, if we can discuss the profitability of XPIN year to date. Obviously quite a big loss last year. How is that looking this year? When do you expect this to become profitable again? I assume it's not. Of course, I would say it is much less loss-making now. It is a significant improvement versus the same quarter last year. We are doing the right things. On the other hand, now with the market deteriorating, we probably need to do more in order to kind of land a break-even number. Even though Ratatek business is a small part of total XPIN Group, I would still say considering very weak market conditions that we need to do more. All right. Looking at Speed Group and TFS, it seems like the ones performing the worst maybe in industrial services. Could you talk about your expectations for how long this will persist? I mean, are these structural challenges or do you expect them to roll off here in the coming quarters? If we start with TFS, I don't have that binoculars or I really, I mean, it's about financing of these biotech companies. I don't think I know more about that than you do, to be honest. What we can do is again to streamline our business, to get OpEx down, and to focus on sales. We have a new CEO there that has done a lot of that. It will continue in this quarter to reduce OpEx further. We have also decentralized the organization. We have very clear P&L areas in the company, so it's much easier to follow up and get control over this. The positive thing I might could say is that they have actually the last few months delivered better than their forecast. That's a good sign. I already forgot the second question. Speed. Speed Group, yeah. I think that, and I think I said that, that I think we need a couple of quarters more to get full efficiency in this expansion. Speed is a big logistics company, but they're also doing assembly for customers like Ericsson and others. It's very appreciated. We believe, it's talking 2027 now, but we think 2027 has a really good potential to grow EBITDA and sales, of course, but we're most interested in EBITDA. That looks very good. We are in a tough OpEx period right now. Would you like to? No, no, I agree with you, Hans. Of course, we are working as fast as we can with these automation projects to kind of fast track that in order to have a better balance between the hit on the P&L currently. They're doing everything they can. It is an expansion phase, which of course comes with these periods of lower profitability temporarily. Again, how long it takes, we will of course try to fast track that. That's what's going on. Quite a lot of larger projects. Understood. Thank you. Just a final one for me on the sort of future, both where we stand in terms of finding a replacement for you, Jonas, and then also maybe on the structural changes here in the group. We've seen a transaction market heating up a little bit now after summer. If you can update us on where you stand, both in terms of finding a replacement for you and on transactions that you might look to do and how close we are to finalizing any deals. I don't have more information about the recruitment process than you have. When I left my former job, it was the same. I really have no information about that. You have to find other sources. You can tell me then after that. The second, what was that? The second question is the market is heating up in regards to the trade sales, IPO. It's looking better. Yeah, yeah, yeah. We think that the M&A market is not gone at all. Again, we have learned not to forecast or give you anything. I can say that we are involved in several M&A processes as we speak. Again, we're looking for very synergetic acquisitions at low multiples. We will keep that tradition. Do you want to? Just following up, sorry, Jonas. On the you being involved in M&A discussions, is that both as a seller and a buyer, or are you specifically referring to M&A as a buyer here? Yeah, we want to both buy and sell. Yes. That's clear. That's all I have. I can say one thing, I think. That is we're not into an M&A to acquire a new platform. We are on add-on acquisitions on our companies that really have the profitability and stability. HL Display is, of course, one example you heard a lot about. There are other companies too who have reached that level. That is exciting. Do you want to fill in? No. No. Zier, was that your final question? Yes, it was. Thank you. Okay, thank you so much. Do we have any more questions? No. No? Okay. If not, Jonas, any last words, comments to our shareholders? Thank you for listening and being engaged. We read your reports and we learn from them. Hope to see you soon. Thank you so much.