Welcome to Studsvik Q2 2025 report presentation. For the first part of the presentation, 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 CEO Karl Thedéen and CFO Peter Teske. Please go ahead.
Thank you, and welcome to Studsvik's interim report for quarter two of 2025. Just a short intro of Studsvik: we are empowering the nuclear industry with solutions from new build through to decommissioning. These are our financial numbers for last year: SEK 893 million. Truly international company serving the nuclear industry all the way from Japan to the U.S. We are about 500 people. The majority of those are in Europe, but we also have a pretty large setup for our software business in the U.S. We have received many questions over the years on what we actually do, so we try to come back to that on these calls. We see the life cycle of nuclear from new build through to the more than 400 operating plants in the world, and also in a safe way decommission sites that are no longer in use.
In addition to that, we have also other services providing radioactive, supporting other sectors working with radioactive materials, such as life science. The big new thing over the last five years is the new activity in new build in basically all territories. Here we have an increasing, we'll come to that later, increasing amount of questions from many people, many companies developing new kind of nuclear technology. The operating plants are all in service and require constant maintenance, constant development, and modernization. We are very active in that space as well. Decommissioning for nuclear sites takes a lot of time and needs to be done in a very safe and controlled way, and we are actively supporting customers mainly in Europe with that.
If I come to the earnings results for quarter two of this year, we see a very solid sales number of SEK 227 million in local currencies, basically exactly the same as last year. It was also a strong quarter last year, and this is actually, in fact, our second largest quarter two for the last 10 years, so a very strong Q2 from that point of view. Maybe even better and more important for us is that our operating profits are increasing, and we're seeing almost a 30% increase in operating margin, coming up to a 7.7% margin level versus 5.8% of last year. The strong developments are mainly driven by our business area of Fuel Materials and Waste Technology, FMWT, which, as you may remember, was not doing very well in Q3 and Q4 of last year. We have turned the corner here.
We are seeing a big demand for our services and offerings in that area, and we also did strong results here. As you will see in the presentation, we continue to see strong and positive market developments in our industry. Key milestones in quarter two 2025. Maybe start with the appointments of my new Executive Management Team. Increased focus on synergies. We have operated very separately for the business areas in the past. We will still have focus on the different business areas, but there are also synergies we can take here. In areas like sales and business development, strategy, M&A, and obviously other functions like HR. We have also appointed a new person heading up our Strategy and M&A department called Jason Babik, who comes with a strong background both for the European and American nuclear sector.
He will be based in the U.S., and he also has a long history with the company Westinghouse. We see a continued high interest for the specific products and solutions based on the more positive investment cycle. This means that there are more incoming needs, incoming requests for both our existing services, but also additional new services. We have a very positive development in the quarter where the U.S. Nuclear Regulatory Commission, NRC, approved Studsvik's fuel optimization software to be used for applications for new modular reactors, SMRs. This is just a proof of our strong technology there and also that we are relevant for the new developments and the new technologies developed in the SMR sector. We have a continued strong operating margin development, as I just highlighted. We are definitely reaching some key milestones here in quarter two.
Let me go through the different three business areas we have, and I'll start with Decommissioning and Radiation Protection Services, DRPS. It's a business area that serves mainly the German, Swiss market, but also some Nordic and some in the Benelux countries for decommissioning and planned maintenance outages work. Here we have not lived up to the expectations of profitability, not in this quarter and not in the first half year. We have, however, seen a bit of improved business performance from the acquired Extrem Borr & Sågteknik, ebs, which is very positive. Here we are taking actions to improve profitability, review what our offering should be in the future, and work on increased efficiency because this is not where we should be. It's important to state that the market is definitely here.
There is a big request for these services, but the competition mainly in the German market is very stiff, driving down profitability in the quarter. If I continue then with Fuel Materials and Waste Technology, you can say that's the heart of what we do here at Studsvik. This is mainly driven out of our site, just south of Stockholm in Studsvik. We here have a very strong operating profit in a very dynamic and growing market. The SMR technologies, small modular reactors, we're starting to see more interest from those vendors to get support on material testing, fuel analysis, different things around licensing as we have a lot of capabilities there for them. We have also continued interest in our in-drum waste technology, and a lot of customer visits come into our demonstration facility at site.
If you recall the last quarter, we announced the customer ESS, European Spallation Source, that we are working to help them with the take of their waste, and we are taking all the permits for our in-drum to build an in-drum for them at site. The numbers are truly strong here. We have more than doubled the profit in the quarter, and we have strong growth as well. Very happy with Fuel Materials and Waste Technology. Studsvik Scandpower, which is now, you can say, two different businesses. One is our fuel optimization software business, and driven out of our strong knowledge about how fuel is behaving in the reactors. That is a solid business. In the quarter, we have lower license sales. This happens. It's a very seasonal business, which indicates that we actually had a lower sales and lower margin in the quarter compared to last year.
This is a normal seasonal effect, and we will continue to see those in the coming years as well. We have done another business that we acquired called BlackStarTech, where we provide a software solution to monitor safety solutions. The main safety that we bring out now is related to our battery technology, both for emergency lighting and power backup, but also things like fire alarm systems. Here we see low sales in the quarter. This is very early days. We are building an organization. We are building the fund on, which is with a strong interest in our technology. The ongoing sales in the quarter were low, but we have very high hopes and high belief that this will be a very important business for us going forward.
With that, I'll leave over to CFO Peter Teske to take us through some of the details in the financials. Please, Peter.
Thank you so much, Karl. I will start with our go through our three segments, business segments. After that, we look at the consolidated group numbers, and then we talk a little bit about our financial targets. Here we see on the left, we have the Decommissioning and Radiation Protection Services, DRPS. The sales for the quarter amounted to SEK 89.7 million, and for the first half year, SEK 176 million. This is in local currency, a decrease of 8.3% in the quarter and 1.6% for the first half year. Both the quarter and the first half year were characterized by tough competition and strong cost focus among our customers, which combined with the cost-saving program reduced our opportunities for additional sales.
This had a negative impact on our revenue and the operating profit. The decline compared to last year also affects due to the planned maintenance outage in Switzerland, which took place in Q2 2024, but now is rescheduled to Q3 2025. The acquisition of EBS, Extrem Borr & Sågteknik, contributed during the quarter with net sales of SEK 6.7 million, and for the first half year, SEK 10.8 million. As Karl mentioned, we are now back on a higher utilization rate. On the right side, we have the Fuel Materials and Waste Technology, FMWT. Here we see the sales in the quarter amounted to SEK 107.4 million, and for the first half year, SEK 205.1 million, which in local currency is an increase of 9.2% in the quarter and 5.1% for the first half year.
The increased sales for the quarter and the half year are a result of good progress in our project and improved productivity. Also, we had during the quarter a fuel transport that impacted our sales positively. We see a strong improvement compared to last year in the operating margin for the quarter where the margin increased from 7.2% to 18%. That's an effect of good progress in our project, improved productivity, but also an effect by our cost efficiency program that we have implemented. We have improved our purchase routines and streamlined the delivery organization. The business was during the quarter classified as an electricity-intensive business, which resulted in a tax repayment of SEK 3.3 million. That had, of course, a positive effect on the operating profit. On the other hand, we had a cost of SEK 1.4 million attributed to the ongoing streaming effort affecting the quarter.
Compared to last year, we had also in the first half year 2024, our property sales amounted to SEK 2.3 million. Our third segment business area, Studsvik Scandpower, the sales decreased in the quarter to SEK 35.5 million, but in the first half year, we have an increase to SEK 81.7 million. In local currency, we have the decrease in the quarter of 3.7%, but in the first half year, the increase is 12.9%. As Karl mentioned, the business is subject to seasonal variations in sales, which was appearing now during the quarter. The sales increase for the first half of the year was primarily driven by the deliveries of the GARDEL monitor system, as we spoke on during Q1. The profit of the quarter is also affected by the seasonal variations in sales, of course.
During the quarter, we also see a little bit lower sales for BlackStarTech products, but it has a low negative impact on the overall profitability for the business area. For the first half year, we see increased sales that contributed to the earnings that have improved the contributed earnings, and we see that underlying business is demonstrating stable profitability. The business area was positively impacted by exchange rates movement in both the second quarter and the first half year. The majority of the exchange rate movements relate to revaluation of balance sheet items. If we then go to our group numbers when we consolidate it, here we see the net sales per quarter. The net sales for the quarter amounted to SEK 227.6 million, and in local currency, that's a decrease of 0.4%, but basically it's stable.
This quarter is the second strongest Q2 in the past 10 years. We have a decrease in sales for Studsvik Scandpower and Decommissioning and Radiation Protection Services, but we have seen, compared to last year, higher sales within Fuel Materials and Waste Technology. If you summarize it for the first half year, the sales amounted to SEK 454.6 million, and in local currency, that's an increase of 3.7%. There we have Scandpower and Fuel Materials and Waste Technology that increased their sales. If we then go to the operating profit, the operating profit for the quarter is SEK 17.6 million, and the margin is 7.7%. As we mentioned before, the improvement from last year is driven by FMWT. Studsvik Scandpower, we have some positive impacts of the exchange rate movements. If we look at the operating profit for the first half year, it was SEK 37.0 million.
That's an increase of SEK 11.3 million. We see an increased operating margin. The increased operating margin is an effect of our strengthened financial discipline, our cost-saving program, and some positive one-off items, like the tax repayment for electricity-intensive businesses that I mentioned. We have some exchange rate movement, but also some negative effects, for example, at the cost of the ongoing streaming effects. If we look at the cash flow for Q2, the cash flow from operating activities for the quarter was positive at SEK 3.5 million, and the free cash flow was negative at SEK 1.3 million during the quarter, but it's still a big improvement compared to last year. If we look at the cash flow for the full first half year, it's positive at SEK 39.7 million, and that's an increase of SEK 56.5 million compared to last year.
The higher operating profit and the positive development in working capital are, of course, impacting the cash flow really positively. We are working continuously with our working capital. For example, we have now improved our accounts receivable procedures and our procurement procedures, increased cost control, and we have better follow-up. Our free cash flow for the first half year was SEK 38.3 million, an improvement of SEK 79.2 million compared to last year. There also, we see the improvements contribute with the higher operating profit, the working capital change, and lower investment levels this year compared to last year. Finally, if we go to our financial targets and compare the first half year and the full year 2024, under growth we have a financial target of 6% or above, and we did achieve that during 2024.
For the first half year now, we are reaching 3.7%, but as we mentioned, we are affected a lot by the challenging market situation in Germany. We see a positive improvement of the operating margin that we go from 3% to 8.1%. That's because of our good development in our business, our improved internal efficiency improvement, as well as our work with our financial discipline. We also see a positive trend on the equity to asset ratio. With that said, I will hand over my word to Karl, our CEO.
Thank you, Peter. Let me then continue to talk a little bit about the market developments. Let me start with small modular reactors, which we see several announcements and several build-outs of this new technology.
In many cases, this is traditional light water reactors built in a smaller, more where you can do a lot of production in different factories and then ship it to the sites. We have seen, we see ongoing plans. The first that will go live is most likely the one in Ontario in Canada, which is planned to go live somewhere around 2030. Many of these others are coming alive in the early part of 2030. It's still SMRs used to build for SMR campuses that will produce a high amount of electricity in traditional sites. In addition to that, we will also see more and more smaller SMRs to support AI data centers and other industry processes in different countries. Here you can see an example of an SMR campus. Why is SMR of interest for utilities and others that want to build more power? They are more flexible.
You can put, in this case, you have, I think, up to six or seven, but you can have actually one or two as well. They're very flexible. You don't need to build one big site. You can build many smaller. They have reduced lead time for the construction. This has been one of the problems in the industry that some of these bigger sites have taken a long time and have also suffered from a lot of delays. The promise of this technology is that they can be more easier to manufacture and also to then construct and keeping lead times and costs down. We have also seen positive nuclear market events based on government decisions. The nuclear power industry is obviously an industry driven by market demand, but also controlled and, to some extent, driven by different decisions made by the governments and politicians in different countries.
In the quarter, we have seen three significant and very important decisions by governments. If we start with Sweden, the Swedish parliament passed a legislation to finance new generation of nuclear reactors, which are key to the energy security in the country and achieving net zero emissions. This will drive applications for building new large sites, but also most likely SMR campuses. In the U.K., there's been a similar, but actually probably larger, big government funding released supporting both the development of SMR technology in the country. One of the vendors that was mentioned in that support was Rolls-Royce, which is a very important European vendor of SMR technology. That will also lead to the U.K. starting to build more of that kind of technology into the U.K. grid. Last but not least, the executive orders signed and passed in the U.S.
support a large increase of nuclear capacity through power updates to existing reactors and new reactor constructions, basically making sure that legislation and regulatory things would go faster for new build. All these three countries are really pushing for and supporting the new build and life extensions of existing plants. If we continue a little bit by the market development, we can see that there are projections of 25% of the added capacity that is required would be from SMR technology. Thirty countries have announced that they're considering moving forward with introducing nuclear power into their NMX or building new. We see a demand for electricity continued consumed from data centers expected to triple, and we have seen that very much in the U.S., but we also have dialogues and discussions where we see that also happening in the European marketplace.
By 2050, the global nuclear capacity could increase 2.5x the current capacity. To do that, it's required both to make sure that you extend the life of existing plants and add new capacity. That's just exactly the two things that we at Studsvik are very engaged with. Talking a little bit about what we do in addition to what we have done in the past is obviously we are driving a lot of innovations into the marketplace. We have discussed before our in-drum technology, and this is a picture of our demo site where we can reduce waste in drums with radioactive material with some 90%. This is generating a lot of interest from different companies around the world. We're also very active to drive new software and initiatives versus the SMR developer, both for the ones doing traditional light water, but also for the advanced modular reactor sector.
Last but not least, the acquisitions of BlackStarTech, which is a new technology that will be very essential for new build, but also for modernization of the existing power plants. Let me go then to my final comments. If you remember from last, we have focus areas to drive and improvement of our financials. That starts with enhanced commercial management. That is to focus more on the markets and the customers as a group, not as separate business areas that we have done in the past. That we're going to increase our efforts in marketing and also make sure that we are more controlled and disciplined when we come how we offer and what kind of terms we have in our offers. That is already happening. We're starting to see the result of that. We have a lot of mid and long-term organic growth opportunities.
Some of them I just highlighted with our innovations, and we continue to drive those opportunities. We have executed on our M&A strategy EBS and BlackStarTech during the last 12 months. We have appointed a new Head of Strategy and M&A to drive the agenda on M&A continuously to see more opportunities for strong and good M&A to add to our portfolio. Of course, very important is to drive the growth from the acquired companies of EBS and BlackStarTech to prove that we can actually be a good host for new companies. It's an intense war for talent. The nuclear industry is waking up, and we need to work hard to be the preferred global employer wherever we are for companies into this sector.
That's also an area where we have a lot of focus as we are set on a growth trajectory. In summary, Q2 of 2025, strong profits in the quarter driven very much by the strong demand for our FMWT services in this quarter. We have a dynamic market that continues, and which is in the quarter underpinned by government decisions creating opportunities for Studsvik. We have positive developments in the U.S. Nuclear Regulatory Commission (NRC) with respect to our software for use by SMRs. We have a new executive management group appointed, and we have two new board members added to our board, and we saw ARMADA Investment AG become our largest shareholder in this quarter. With that, we end our presentation and are happy to take 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. Next question comes from Kaleb Solomon from SEB. Please go ahead.
Hi guys, just a few questions from my end. The margin in Fuel Materials and Waste Technology was up to 18%, and I mean even without the one-off related to the electricity tax, it's up to 15% from just above 7% last year. Can you maybe just give us some color of how much of that is strictly due to the cost savings program versus kind of higher utilization rates? Was there any sort of one-off effect related to reevaluations on the balance sheet in this segment? How much can we sort of extrapolate of this profitability boost moving forward?
Thank you for the question. Very good question. I think in general what I saw when I joined as CEO in October, this area is an area where we have not that high competition. A lot of the other parties in the world that can do this are state-owned laboratories in the U.S. specifically. I think we have a very good and strong competitive position, and we are set out to use that, quote unquote, in a better way, which means that we have started to increase our prices for different services. We have started to change our payment terms. Also, it's all about the efficiency in the labs, making sure that we can do it to the times that we set aside for when we do the business cases for the different offers. I think we have been better in all these areas.
Basically, the higher demand gives us more opportunity to be more bold in terms of how we set our prices and so on. A very strong competitive position leads to increased margins. It's very strong in the quarter. The electricity side, I think, ends up in this business area. Other than that, we have very few one-offs. We also have some one-offs that go negative in the business area. For this, I wouldn't say 18% is the new sort of target, but definitely this should be a very high margin business.
Just sort of a follow-up on the sales growth, how much of that was due to the fuel transport carried out during the quarter?
We just highlighted fuel transport. We do fuel transports every quarter. Sometimes we have more than other quarters, but that's part of our business. It's nothing totally unusual. It's a usual part. It's a normal part of the business. We just highlight that what happens when we do that, it comes in as a pretty peak a little bit too. It's not material to the growth, but it's one part of the things that we have done in the quarter.
Okay, that's clear. Thank you. Just a question on BlackStar, you mentioned you're seeing a large number of interesting opportunities. How much of that should we sort of expect to maybe show during the second half of this year?
I think we should be reasonably conservative of the big things for revenue in this year. This is a business that is both software licenses and hardware rollout, which means that we can take larger orders, but the revenue will come as we roll out the projects. When we say that we see big indices, we see a lot of big players also outside the nuclear sector interested in this technology. The actual revenue recognition of this can take some time before we build into substantial or material numbers.
Okay. Just one sort of housekeeping question. SG&A and development costs seem to be flattish year-over-year, but the other operating income is up almost five times in Q2, and it was up quite a lot in Q1 as well. Can you just sort of break down what that is and how we should think about it moving ahead?
Yeah, the majority of the other operating income corresponds to the movement of FX exchange rates. I think it's SEK 3.3 million is the tax return.
Okay, that's clear. Thank you. Just one last question. In Q2, the U.S. Nuclear Regulatory Commission approved your fuel optimization software for use by companies developing SMRs. Can you maybe just explain what this sort of means and when we could see this starting to impact growth?
We have had, you know, for more than 12 months now, an intensified dialogue with all these SMR vendors to use our software for their design activities. When you start to go into the regular regulator to be in search for approvals, you will need to prove how you've done these kinds of calculations. What this means is that when SMR vendors are looking for software that can actually do this, we are one of them, and not that many, that can actually be used. That gives us a sort of quality stamp that the SMR vendors will benefit from using our software to get sort of less questions from the regulator. Positive things for our opportunity to sell into this sector.
Okay, that's very clear. That's all from me. Thank you for taking my questions.
Next question comes from Lara Mohtadi from ABG Sundal Collier. Please go ahead.
Hi, Lara here from ABG. I'd like to start off with your Fuel Materials and Waste segments. Margins were very strong this quarter, and obviously you flagged a few key drivers in your presentation as the reason for this. How should we think about a sustainable normalized margin for this segment going forward, especially considering you had some positive impact from some one-offs in the quarter?
Thank you. I think I partly answered the question before. I think obviously this was in this quarter we had some one-off effects pushing it up to 18%, but also, as I mentioned, I think we should consider this to be, it should be a high margin business based on the fact that we have a very strong competitive position and we have increased demand for these kinds of services. I'm not going to give you a target number, but we should be in high margins for a service, for an offering in a business area like this. We should also add that into the business area is not only fuel and materials, but waste technology. Waste technology is a very reasonably small offering at this stage, and it's under strong business development, and that is an investment there.
We also have investments that we're doing in this that could also obviously impact the margin negatively, but we are trying to control that, make sure that we have the right amount of investment in that kind of investment area like in drum.
Great, thank you. If we turn to Scandpower, given the seasonal patterns and the variability in the product mix, how should we think about the outlook for the second part of this year?
We have a strong offering. We definitely have customer demand for this. These license sales can be very, they can hit very favorable when we get them. I think we see that we should have a good second half, but we don't know exactly which quarter they will hit, and it would probably be a bit back ended, which means that Q4 would be, as normal, a much stronger quarter for Scandpower than Q3, for example.
Okay, very clear. Thank you. Just to follow up on Scandpower regarding demand, where would you say you're seeing the greatest incremental demand? For example, is it more from the U.S. or Asia, or is it from more SMR customers compared to larger plant operators?
I think for now, the big dollars come from the operating plant sector, but we are definitely moving ahead with SMRs and making sure that they are using our software, which means that we have an increasing revenue potential from those vendors as those SMRs start coming alive and they use our software more and more and also can commercially use it, if you like. I think that's on the SMR versus operating plants. In terms of regions, the U.S. is the strongest region for this, but we also have, like in the fund and now, we have strong opportunities both in Western and Eastern Europe. We have some in the Middle East. We have Japan as a reasonably strong market, Korea as well. This is a worldwide business, but the strongest market is the U.S.
Very clear. Thank you. If we just move over to your decommissioning segment, margins declined this quarter, and you stated that this is due to increased competition and price pressure maybe. You briefly touched on your presentation on the measures you're taking. Could you please elaborate a bit on this and on what we should expect in the coming quarters when it comes to margins?
I think we should expect margins to be under pressure continuing through this year, and these measures and actions we take will take time to implement. In fact, this business area is obviously not one single group of people doing the same thing. There are different sort of services offerings we have there, and what we review now is what is the optimal mix between the different services and product areas that we have in that, obviously making sure that we can optimize that when we offer. I think we have opportunities to make this significantly better, but it's not the short-term fix.
Great, thank you. Lastly, I just wanted to ask a little on your cost savings programs. You previously guided for SEK 20 million in annual savings from 2025 in the FMWT. Could you maybe quantify how much of these savings have started to flow through the year and what remains for the second part of the year?
Yeah, we see that we have the CFX on the cost saving program during this quarter and a half year. On the total group level, we see, for example, that we are more than 20 people less on the FTEs, but still we are growing as a business. We are more efficient now than we were a year ago. We see positive effects from the efficient program. The question is how much is left. I think it's also going to be difficult to measure. We took them, but now we also need to make sure that we invest for growth, which means that we may see opportunities where we need to increase costs, and then it's going to be a little bit. In actual fact, I think you can split these savings pretty much over the year.
We took all the costs in Q4, and we had the lower cost entry into 2025. It's evenly split, I think, between the quarter. There could be cost increases as we hire for growth or take investments for growth.
Okay, great. Very clear. That was all from my end. Thank you very much.
There are no more questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Okay, thank you very much for listening. Talk to you again after our Q3 report, and thank you very much, and bye.