Hi everyone and welcome to the third quarter interim report for Troax Group . My name is Martin Nyström and together with Anders Eklöf, our CFO, we will present the numbers and key events for the third quarter. After the presentation we will open up for a Q and A session which I will lead. Let's dive into the quarterly numbers. If I'd start with the third quarter, I'd say that we were offered a mixed market development and we had some mixed outcomes. In total, we reported a -7% order intake growth, but this is distributed very differently. If we start with the big exclamation point, APAC continued very strongly in the quarter. I think it was also very good to see a broad-based and significant growth in all the countries.
I think this is a good sign and also a good sign of the value proposition that we have also in the Asian markets. If I look at Europe, we continued largely as we did in the second quarter. Overall, I'd consider this to be relatively slow and also the long-expected recoveries, we're still waiting for that to see a broad-based recovery. However, I'd say there are some positive signs during the quarter. In Europe, we did see a gradual comeback or recovery for the warehousing segment and this segment has been fairly or very slow for quite some time. I do think there are some positive good signs in this segment. This is also our largest segment and exposure in Europe.
The counter side of this is that we have seen the demand in the automotive side decline a bit and here I'd also like to note that we're meeting very strong comparables from last year. We do see the automotive sector being somewhat slower in the third quarter. In Europe, we continue to experience a slow market in the Nordic construction environment. All in all, it means that we had a declining order intake in Europe. I would also like to point out that in the numbers for the third quarter, we also have a negative one-off effect due to the cutoff effects that we get when we now start to transfer the Polish factory and close that down and we're moving that to Sweden. There is an impact on the order intake side from this.
Last but not least, in Americas, we continue to see a decline and I think here we do see pretty high activity. The quoting activity is very high, but the customers still hesitate to make decisions and this is then driving the decline in the order intake in the quarter. If I move over to profitability, we have in the quarter, we have low volumes compared to what we have installed capacity for. We were also impacted by the production transfer in Europe in the quarter. We also had some operational challenges and issues in the U.S. which lowers the profitability and we reported 16.1% as EBITDA margin. If we dive into the margin a little bit more, I'd say that the gross profit overall is on an acceptable level. We did have the volume drop, factory transfer, and of course the operational challenges in North America.
If we try to dissect this margin a bit more, the temporary effect from the factory move from Poland to Sweden diluted the EBITA by roughly half, 100 basis points. In the U.S., due to the hesitancy in the market, we also have struggled a bit with the pricing implementation during the quarter. In total, this diluted the EBITA margin by 100 basis points as well. Here I'd say we have taken good measures during the quarter going into the fourth quarter. From an activity point of view, I do think we have taken action. Last but not least, supporting the margin is the cost reduction program that we launched in the second quarter. This is delivering well and as planned. We do see underlyingly that the sales and admin costs are starting to come down during the quarter.
We also delivered a strong cash flow, so EUR 12.6 million or a cash conversion of 122%. We continue with good discipline in terms of inventory management, how we collect our accounts receivables, and also how we pay our suppliers and our accounts payable. This means that our balance sheet continues to enable investments, both organic ones as well as acquisitive ones in the quarter. I'd also say that we've done solid progress on several of our strategic priorities and I will come back to that a little bit later during the call as well as during the Capital Markets Day next week. If we then move into how the markets are moving. All in all, we reported a -7% decline on order intake. If I'd start with the geographical perspective first, in North Europe we reported a -7%.
Here I'd say all segments but the warehousing segment are down, automotive has been down, construction continues down, process others, and the whole North European market was down in the quarter. I'd say the promising sign is that we now start to see the warehousing market waking up and also that we start to see that activity moving into order and order intake during the third quarter. That makes me cautiously positive about the fourth quarter as well as 2026. Moving over to Southern Europe where we reported a -4% on order intake, we also see decline in the automotive and warehousing sectors. Here there is also a good development on the process side, and process is one of the areas where we do think we can gain share and grow in the coming years.
From that point of view, I do think it's good to see process growing in the quarter. I'd say the big disappointment from our point of view is the development in the Americas. We reported -26% during the third quarter. Here we'd say that all the big segments for us are down. Automotive is down, warehousing is down, and others is down. We see a lot of activity and deals not being lost. It's been very difficult for us to convert this into orders. Last but not least, we have our APAC region, which was up 66%. We had a very good development during the first half of the year overall, and this continued into the third quarter. Here I'd say that all segments and all countries are growing nicely, and we have a lot of green arrows here on the bottom.
Good to see the development and the continued growth in APAC. With that, I'll leave that over to you, Anders, for some more digging into the financial numbers.
Thank you very much, Martin. I start with the order intake development. We reached EUR 62.2 million in order intake for the third quarter to be compared with EUR 67.0 million in the third quarter of last year. That equals a decline of 7% of which 6% is organic. Another percentage point comes from negative FX. Going over to the sales side, we reached EUR 64.2 million in sales to be compared with EUR 69.0 million in the third quarter of last year. This corresponds to - 7% in sales, also here 6% organically. Another percentage point comes from FX. Moving over to the profitability side, we reached EUR 10.3 million in EBITA for the third quarter of this year to be compared with EUR 13.6 million in the third quarter of last year. The EBITA margin for this quarter was 16.1% to be compared with prior year's 19.7%.
You can see here on the arrow side that we are trending upwards compared to the first two quarters of 2025. Next, cash conversion was good in the third quarter. We had EUR 12.6 million in free operating cash flow, which is 122% of EBITA. On the financing side, we have a good financing situation still. The net debt excluding the IFRS 16 impact is 1.0 and it has been rather stable over quite some time now. Next please. Just to summarize everything, you have this in the table. I have touched everything here except for the EPS. Adjusted EPS was EUR 0.12 in the third quarter of this year to be compared with EUR 0.16 in the third quarter of last year. With that I hand over again to you, Martin.
Thank you, Anders. To conclude the presentation part of the call, I think we had a very mixed market environment during the third quarter as well, similarly to what we've seen in the past quarters. Despite the order intake growth, I do think there are some early good signs when it comes to recovering in the warehousing segment. We also do see some of the key markets in Europe improving a little bit. In Central Europe, we do have low volumes and we are very busy transforming the supply footprint, transforming the group, which have some negative impacts in the quarter of one-time character. We did deliver a strong cash flow in the quarter. All in all, a mixed bag of outcomes. I do think we're also now preparing for being ready when the market recovery hopefully comes.
I do think we will approach that being stronger than ever as a group. Before we move into the Q and A session, I'd like to also come back to the financial targets that we have announced earlier today. We have set ourselves a set of targets for 2030. When it comes to sales growth, we've set ourselves a target of at least EUR 550 million by 2030, which corresponds to 15% CAGR sales growth. This is the total CAGR, so both organic as well as inorganic. On the profitability side, we have set ourselves to target to be at least 20% EBITA margin over the cycle. On the capital structure, we will continue to have a target of net debt to EBITDA over time less than 2.5x. On the dividend policy, we have a target to be within the interval of 40%- 60% over time.
I would say on the dividend side that this is not an ambition to lower the dividend. This is a way to enable us to have a stable and steadily increasing dividend over time. It's not a lowered ambition in that sense. I'd also like to make some commercial for our Capital Markets Day, which we hold next week in Hillerstorp, where I will provide some more insights as to the targets as well as our plans to reach the targets by 2030. Hopefully, I'll see many of you in person next week. Capital Markets Day for us is next week, where we aim to present our strategy and our plan, our financial targets. You get the chance to meet our group, some of management members, and we of course want you to touch and feel the products and see how they are being made.
There is also the chance to have a Q and A and a dialogue with myself, Anders, and some of the key team members as well. With that, we have come to the Q and A session. I would kindly ask you to raise your hand and then we'll open up the mic. I will start with Jonny from SEB. Hopefully your mic is open.
Hi, can you hear me perfectly well?
Hi, Jonny.
Hi, good afternoon. Just a couple of questions from my side. I think I would start with your new target. You mentioned you aim to double sales by 2030 and that does imply 15% CAGR from 2025 as baseline. What you implicitly say then is full year sales for this year of EUR 275 million. That implies now roughly 11% sales growth in Q4. Yet looking at the order intake, it continues down in this quarter. What makes you believe that sales will suddenly go up double digits next quarter? What can you say there?
I think you should see the 2030 target as a long term target. I don't think you should read into a specific commitment for the fourth quarter. I know you would really like us to hand you the number on the silver platter for Q4. I think you should see that. This says you should not see this as something we commit to or forecast for the fourth quarter. Specifically, I think you should look at the longer term ambition when it comes to this.
Yeah, yeah, I understand, but it was just that you written 15% CAGR from 2025 as baseline. That's why I would like some flavor on that.
Yeah, we could of course have put 14.7% or 15.3% as CAGR, but we thought it was a bit more pedagogical to say 15% on average.
Okay, yeah. Okay, yeah. On the 15% CAGR, you say how much should we read this organic or should we rather read it that you aim to accelerate the M&A going forward as well? Could you please give us a split there? How should things.
I think I wouldn't mention a specific number here today on what's organic and what's inorganic. If we go back, you know, the past decade or so we've had roughly 10% organic over the cycle and 2%-3% acquisitive. We think that nothing has materially changed when it comes to our exposure. I think we will have years where there might be a little more organic than the average, and I think there will be perhaps during this period years where we have a bit more of acquisitive growth. We'll come back to that during the Capital Markets Day and shed some more light on what's in there.
Okay. On another one, in the quarter you mentioned weaker automotive in Europe and North America. Looking at the order intake, growth seems to decline here and accelerate downwards in South Europe and Americas now. Could the warehouse segment really offset that ahead, do you think? How should we view, given what you see now, the order trend going forward?
I think a few points on this one. When we look at the automotive sector first, it's clear, it's true that we did have a decline in the quarter. At the same time, we had pretty strong comparables still in Europe last year. From that point of view, the drop looks perhaps in the quarter a bit more severe than what we think the underlying market is sequentially. At the same time, the warehousing segment is our largest exposure and also so in Europe. From that point of view, I do think that the warehousing segment can balance some of the shortfall on automotive. That would then of course require that this is a development that is sustainable. I think it's probably a little bit too early to say that the warehousing segment can compensate the automotive sector in full. That's of course what we're hoping for.
In the U.S., or North America, I think the situation is a little different. I do think the market or the decision making in North America is more hesitant, and I do think that we need to have some kind of external impulse for customers large scale to start making decisions again before we will see a turn. For sure, we're really at the bottom of this, and if we put some context to the North American situation, there is a pent up demand in the U.S. both from 2024 as well as 2025 in the automotive sector. I do think that the outlook in automotive in the U.S. is probably a little more positive than what we see in Europe for the time being.
Okay. Just a quick final question for me. I think you mentioned some one-off effect here of EUR 3 million in the quarter. If I interpret you correctly, that is affecting orders. Has that order disappeared or will it show in Q4?
I think it will be a mix on the orders. The reason why we have the EUR 3 million is basically that we can't keep receiving orders while we move equipment since this is a very short lead time business. We do need to cut the period of time while we move the equipment. When we then get the equipment up and running again, we can start to, we can put the order button on, so to speak, which means that some of those orders might then come in. Some of them might have been lost in that sense during the transfer period. Some might come into Q4, Q1, and otherwise we'd have the orders starting to come in for Q1 on this one.
Okay, we'll see. That was all for me. Thank you.
Thank you, Jonny. Next would be analyst. Anna Widström, your mic should be open.
Yes, hi, can you hear me okay?
Hi Anna.
Yes,
perfect. I just have a question on the issue that you had in the Americas. What was that due to, and is it something that we should expect potentially partly in Q4 as well?
Yeah. On the U.S. we have a few different topics. The first one is connected to the hesitant market and the fact that we do need to push for price increases. The raw material market is up in the U.S. and that has taken a little bit longer time than we first expected. I do think the actions are being made, but before they hit the books, there is a bit of a delay or a cycle in that. I do think we will gradually see that coming down in Q4. In the U.S., as you know, we have a pretty old facility up in Chicago and we're now investing for a new facility in Tennessee.
The fact is that the equipment in Chicago is getting old, which means that we have more breakdown, we have more maintenance, and in order for us to satisfy our customers, we also need to partly do some more costly outsourcing. I'd say both of these are of temporary nature before we're up and running in Tennessee again.
Okay. Just thinking of some other costs relating to the move in Europe, could that be seen in Q4 as well, or are you very sure that you have done all of these, taken all of these costs already in Q3 now?
Yeah. There are two parts of the costs in Europe. There is the costs that are related to the transfer and the move. They are part of the provision that we took in the second quarter, what we're now living through in Q3. We will have a little bit of that, not as much as in Q3 we think, but there will be also an impact in the fourth quarter given the fact that we're ramping down our delivery step by step and hence our invoicing, and we are not able to take all the costs out in a linear way, which means that you could say the revenues disappear a little bit ahead of the costs before we're completely out of Poland. There was definitely an impact now here in the third quarter.
Parts of that impact will also have some impact in Q4, but it's going to gradually come down before we're completely out of Poland, up and running by the end of the year.
Okay, great. That's very clear. My last question is on Asia because it looks very, very strong on the orders that you talked about, and it seems you've talked about broadly in every country, and it seems all of the end segments are progressing very well. Is there a specific country and market that is standing out even as it's very strong in general?
I'd say all the countries have developed very well for us. I do think, not to single something out, but I do think China has performed really well this year, and I think we've gotten all the pieces together when it comes to also supplying and getting the cost structure right and getting the right team on board. I do think China's performed really well this year. I think we're making really good progress in Korea as well, and to an extent also done very good progress in Australia. If we look back, we already have a pretty solid and stable business in Japan. From a growth point of view, Japan is very good, but perhaps a little bit more stable from a year-on-year point of view.
Great, thank you. I'll get back in line.
Thanks. Anna and I would like to open the mic for Gustav Berneblad .
Yes, good afternoon, it's Gustav here from Nordea .
Good afternoon.
Good afternoon. I thought maybe just to come back to the financial targets there and sort of the profitability target because when I look at your website it basically says that you aim to have an operating margin that exceeds 20% and I mean you started reported EBITA first in Q2, 2023. I guess that refers to reported EBIT then. When you sort of come out with an adjusted EBITA, a margin target of 20% above, it sounds like you're almost lowering it. What's your expectation?
No, that's not how you should read it, Gustav. I think you should read it as the previous level, with the aim to increase over time. You should not read this as any type of lowering the ambition.
Yeah, okay, that's fair. I mean, given all the things you are doing now with sort of the consolidation of the footprint, you are also increasing the automation in the U.S. etc. It feels like, you know, if we see a normalization, you should be sort of way above 20%. Is that also what you're thinking when you're reasoning?
Yeah, I think now we talk about the 20%, 20% EBITDA as an over the cycle target. Now we're pretty much what we consider to be rock bottom in the cycle with all the activities and all the actions that we now put in place, and also a bit of help from demand from the market. I do think it's possible to go at peak, certainly above, but I do think that before we even hit the 20% number, I do think over the cycle being at least at 20% over the cycle, I think that's a good first step for the group.
Okay, that's fair. I thought maybe just on your comment there on LagerMix as well, I mean it was acquisition did a long time ago and it's possible to just give some sort of indication where sales are today and also the rationale behind the divestment here.
Yeah, I think first of all LagerMix was acquired quite many years back and it's been a relatively small business in the group. I think we've done a strategic review and, as you know, we're also looking at a strategic review of the portfolio. When you look at the products and the customer base and the commonality with the rest of the group, I think it's fair to say that the LagerMix business does not really fit the mold when it comes to where we want to put our focus and where we have our core, so to speak.
I do think, in line with increasing the focus on core and of course also then related to strengthening, even though very marginally, the profitability, it makes good logical sense to divest LagerMix since it's not core and we do believe that it's a good business, but we don't think that Troax is the right owner for that business.
Is it possible to say anything about what the sales is today?
Yeah, it will be. Anders, help me out here. On the LagerMix side, is it a million? A million a year? Roughly. Gustav?
Euro?
Yeah, euro. Correct.
Just on the warehouse side, that's the positive there on your arrows in Europe at least. It sounds in the wording in the report like it's more tilted towards 2026. Just wondering, are you really seeing automated warehouse orders coming through right now or is the arrow more forward looking?
Yeah, no, I'd say this, that we've talked about a gradual comeback of the warehousing segment in Europe and we've talked about that for a few quarters. I think we've seen for a couple of quarters now that there has been a lot of pre-sales activity going into the warehousing segment. Previously I've been cautious to say, okay, when will this activity turn into orders? From our point of view now I think we did in fact see some of that activity turning into orders in the third quarter and I do think now we are cautiously optimistic that more and more of that activity will come and turn into orders. Whether that will now start to continue in Q4 or whether more of this will come into 2026, I think that's a bit more uncertain.
Overall, I think as a segment trend, I think we're seeing some positive signs which we haven't seen in a long time in this space. That being said, I do think, and perhaps a reminder, we had a significant and huge growth going back to 2021 and 2022. I don't think the warehousing segment will grow at those 30% numbers year on year going into 2026. I do think that we're most likely past the bottom in this market. That's what I think we see after Q3. I do think it will be more of a gradual get back than a big ketchup bottle that we saw in 2021, 2022.
Oh, that's very clear. Thank you. Just one very quick one, last one. Sorry. Just on your price adjustments here in North America. What can we expect in terms of, you know, numbers for that? Is it like mid single digits, you're raising prices or is it more.
It's high single digit on average.
Is that visible in the order intake today?
It will be in the fourth quarter? Most likely, yeah.
Perfect. Thank you very much for taking my questions.
Thanks, Gustav. Let's see if we have more questions coming from someone.
Then.
I got a question in the chat here saying what underlying market assumptions do you have until 2030, what expectations do you have for 2026, and when you say you're cautiously optimistic. When it comes to the market assumptions and so forth, we'll have more of a deep dive in the Capital Markets Day next week, where we go a bit segment by segment, what we're anticipating. I'd say it's fair to say that we have some of the segments growing more GDP-like, such as our automotive and construction. We do think it's over average with a few points when it comes to the warehousing segment as well as the process segment. We'll walk you through that in our Capital Markets Day in a bit more detail.
Now, when it comes to 2026 specifically and when I'm saying I'm cautiously optimistic, that comment relates specifically to the warehousing segment comparing to 2025. All right, good. Are there more questions from the call? There's one more. Is the warehousing growth expected to be e-commerce? I'd say it's both e-commerce as well as conventional warehousing. It's a bit of both, even though they have different characteristics, but parts of that is assumed to come from the e-commerce space. Yes. All right. That concludes the interim report for the third quarter. I'd like to thank all of you for calling in and hopefully I'll see some of you in person next week at the Capital Markets Day, and if not, I'll see you in a quarter's time. Thank you and bye bye.