Welcome to the VBG Group Q3 Report 2025 presentation. 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 the speakers, CEO Anders Erkén and CFO Fredrik Jignéus. Please go ahead.
Very welcome to the quarter three presentation of VBG Group. I will try to give you a short summary on quarter three, and Fredrik will later on give you all the details about the numbers. I will come back with a few words after his presentation. Overall, revenue continued to grow, and we have four consecutive quarters with growth despite currency rate headwinds. Revenue increased by 7.5% compared to the third quarter of 2024 and adjusted for currency and acquired volume. Sales increased with 6.3%. As many exporting companies, of course, we had a negative impact of the currency rate differences of approximately 7.2%. What's important here is that all divisions showed growth within all three geographic areas, like North America, Europe, and the rest of the world.
Interesting is that the most important segment within Mobile Thermal Solutions, what we call the side-by-side segment, increased by 30% in local currency, and the school bus segment with 13%. On top of that, the defense segment within Truck and Trailer Equipment increased with 35% compared to the third quarter of last year. We managed to maintain our gross margin, and the group delivered a solid EBITDA margin of 12.5%. The operating result should have been better, and it was burdened by SEK 11 million by warranty cost of one-time character and ramp-up effects within the division Mobile Thermal Solutions. Operational cash flow reached SEK 136 million, which creates a good platform for future growth. I think one of the most important things in the quarter that is looking forward, our order intake increased by 10% in the quarter compared to quarter three 2024, where all three divisions contributed positively.
During the quarter, a new sustainability target was decided, which means that we will reduce CO2 emissions within Scope 3 with 62% until 2040, with 2024 as a base year. As we have communicated already in the quarter two call, on the 1st of July, we acquired the German company Malmedie , one of the worldwide leading manufacturers of specialized mechanical coupling technology for niche industrial segments and applications, and especially in port crane and steel mill segments. That was a short summary, and now Fredrik will give you all the details. Please, Fredrik.
Thank you, Anders. Coming back, the third quarter sales increased by 7.5% and adjusted for currency and acquired sales. The organic growth rate was 6.3% in the quarter. FX headwind is about 7% still for the group due to the strengthening of the SEK. EBITDA amounted to SEK 171 million in the quarter and in line with last year. The EBITDA margin declined from 13.5% in the third quarter of 2024 to 12.5% in the third quarter of 2025. During the third quarter, we received retroactive pandemic support in the U.S. of a total of SEK 2.6 million that affected EBITDA positively. At the same time, we made reservations for advisory costs for SEK 2.8 million relating to the Malmedie acquisition.
The operating result or the EBITDA should have been better, as Anders said, as it was burdened by SEK 11 million by warranty cost of one-time character and ramp-up effects in division MT S. Operating cash flow amounted to SEK 136 million in the third quarter compared to SEK 153 million in the third quarter of 2024. Higher working capital tied up, especially in accounts receivables, is the main reason for that, but also lower underlying results. Earnings per share amounted to SEK 3.87 compared to SEK 4.49 last year. We'll now go through the third quarter with some touchdowns on each division. We start with Truck and Trailer Equipment. Sales for the quarter increased by 8.6% compared to the previous year and amounted to SEK 370 million compared to SEK 341 million. Adjusted for FX and acquired sales volumes, organic growth amounted to 4%.
Demand for coupling products has continued to be high. Defense segment has grown by 35% in the quarter, and the market for trailer components in Europe moved sideways on a low level during the third quarter. EBITDA for Truck and Trailer Equipment increased in the third quarter compared to the previous year to SEK 66 million compared to SEK 52 million the previous year, with an EBITDA margin of 17.9%. The result in the quarter was positively affected by SEK 2.6 million relating to retroactive COVID support in the U.S. Mobile Thermal Solutions. Sales for the third quarter increased by 1.7% compared to the previous year and amounted to SEK 718 million, with Italytec contributing with a larger part of the increase. Adjusted for FX and acquired volumes, organic growth increased by 5.8% in the quarter.
EBITDA for Mobile Thermal Solutions amounted to SEK 17.6 million, and the EBITDA margin decreased to 10.6% from 13.6% in 2024. The result in the quarter was negatively affected by SEK 11 million relating to warranty cost of one-time character and ramp-up effects in North America. Ringfeder Power Transmission sales in the quarter increased by 23.7% compared to the previous year and amounted to SEK 280 million. Newly acquired Malmedie contributes according to plan. Adjusted for FX, organic growth was 11.4%. EBITDA for Ringfeder Power Transmission increased to SEK 36 million, and the EBITDA margin amounted to 12.7%. Ringfeder Power Transmission, excluding Malmedie , is primarily affected by product mix variation between quarters. During the third quarter, cost in connection with the acquisition of Malmedie affected the P&L with SEK 2.8 million.
The acquisition was completed the 1st of July in 2025 and has a positive effect on both sales and operating margin. Given the market development in North America for our products, the proportion of North American sales has decreased over the last four quarters but has now started to stabilize and increase and amount to 52%. Sales outside Europe and North America increased by 21% in the quarter. The acquisition of Italytec in Brazil is a large portion of this growth. For the first nine months of 2025, the cash flow came in lower than comparable last year. The result is the main reason for that, but also higher working capital tied up, especially in accounts receivables. After the third quarter, we have a net debt position if we adjust for pension liabilities and leasing commitments of SEK 591 million.
During the first nine months, we have acquired Italytec, Ledson , and Malmedie , which explains most of the changing cash position. VBG Group has still a strong financial position that can be used to develop the group going forward. ROCE amounts to 30.1%. The decrease in the last quarters is related to the acquisition of the land in Toronto and the three acquisitions, together with somewhat lower EBITDA compared to 2024. This KPI is not a performer, which means that Italytec, Ledson , and Malmedie contributes only with 8, 6, and 3 out of 12 months in the rolling 12-month EBITDA. Thank you, and over to you, Anders.
Thank you, Fredrik. Just to finalize this, looking ahead, I do anticipate continued market volatility and geopolitical tension, but we have an organization that is agile and responsive to changing conditions. Overall, while tariffs remain a challenge, their net impact on our operation is marginal. The organization has made a fantastic achievement compensating for cost increases due to tariffs with price adjustments, and we will continue to do so. Unfortunately, the situation continues to be unpredictable, and as many people say, it ain't over until the fat lady sings. A good example of the unpredictability was on the 18th of August when another 407 HS codes were added to the steel and aluminum tariffs. That is for us an administrative burden to really push that forward in the chain. As you all know, the U.S. administration announced an additional 100% tariffs on Chinese goods from the 1st of November.
Let's see what will happen at the end of the week, but this is what we work with every day. On the other hand, we are committed to capitalizing on the strong order book going forward. As I mentioned, order intake increased by 10% during the quarter, and as mentioned in the quarter two call, the three acquisitions made in the first six months will contribute with another SEK 100 million of revenues in quarter four to margin levels above group targets. With our financial strength and decentralized organization, we are really prepared for what lies ahead. Through our cash-generating divisions, we are committed to complementary acquisitions as well as investing in organic growth. This will lead long-term to continued sustainable profitability. Thank you very much for listening. Now we are open for Q&A.
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. The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Yes, good morning. It's Gustav here from Nordea. Good morning, good morning. Maybe just to start off here a bit on a high level to get a bit more sense of the organic growth. Is it possible to just split out the 6% here in terms of how much is price versus how much is volume or some sort of ballpark figure?
Good morning, Gustav. Yes, if you look at the 6.3%, I would say roughly 2%- 2.5% is related to price adjustments, and the rest is volume going forward.
That's perfect. If we go more into the side by side, if I heard you correctly, you said it's increasing 30% year over year. Is it possible to say how much is organically there? Can you also elaborate a bit more on the market, why it is turning so positively?
As you remember, Gustav, we had really a slowdown in quarter three 2024, and it continued in quarter four 2024. The reason for that was the destocking operations in the distribution of, I would say, all manufacturers of side-by-side in the North American market. I mean, we can say it's the U.S. market. It's somewhere between 90% and 95% sold in the U.S. market. This process continued in quarter one and the beginning of quarter two 2025, and we can see now ramp-up effects or an increased demand. It's related to, I would say, two things. Of course, the destocking, but also for us that the take rate of HVAC systems in the side-by-side is growing. That is the base for the strong demand in the side-by-side. If you look on a high level, interest rates have come down in the U.S. now. There is a private sector in this as well.
Still, inflation, even though it has picked up in the U.S., is still on a marginal level, I would say. Those are the main reasons behind the excellent pickup.
That's very clear. Is Italytec also included in these 30%?
No, Italytec is not included in the side-by-side. It's more Italytec is really related to the Brazilian market, and it's mainly agriculture and construction applications for Italytec.
That's perfect. If we turn to the bus side and comment a bit more on that market, it sounds like it's growing 13% year over year. Can you give a little bit more color on this market and also the development or the dynamics between transit bus versus school bus, how those are performing?
To make it clear, it's the school bus segment that is growing 13% in the quarter compared to quarter three 2024. We can see a continued growing demand on the school bus side. It's relating to more HVAC and also to still the electrification part where we have higher revenues per system. As we mentioned, the transit bus segment for us, we have a slower pace within that based on that we are phasing out with the Nova contracts in the U.S. markets. They have moved into Canada. We still have them as a customer. For us, the transit bus segment is slower compared to the other segments.
That's very clear. Sorry, just the last one here, and then I'll get back in line. Just regarding Truck & Trailer , I mean, we've commented or you commented on the trailer market bottoming out here for quite a while. Now it sounds you are incrementally more positive that it's actually seeing some growth. If we then turn to the truck part of the business, it sounds like, Fredrik, that you are a bit positive towards that market as well. Of course, you have three to four months visibility. Can you just comment a bit on where we are in the truck market?
I think it's important to understand the truck market and especially the European market. I mean, we are not into the tractor segment, which is probably 60%- 65% of the volumes in Europe. We are more in the Arctic trucks, and this is driven mainly by the infrastructure projects. We have a really good order on hand. We have extended our range in the last year, so we sell a higher proportion per system to each truck in this segment, so to say. As I mentioned in the summary, we can see a good trend in the defense segment, which has grown by 35% in the quarter compared to last year. We all know that the order books are really nice going forward in this. Infrastructure and the military segment is driving the demand in this sector in Europe.
As we mentioned before, the Australian market has been very, very good for us, and we see a good visibility going forward in the Australian market.
Perfect. That's very clear. Thank you very much.
Thank you.
The next question comes from Jonny Jin from SEB. Please go ahead.
Hi, good morning, Anders and Fredrik. I think I will start with a question on MTS. Good to see back organic growth there. I follow up on the bus segment. I think you mentioned in the previous quarter that you had a larger customer that is winding down the operation, affecting volume negatively. We touched upon this a little bit, could you say something how much the drag was in this quarter if we try to pinpoint the underlying growth in MTS, so to say?
It's hard to say, Jonny. Good morning. It's probably around SEK 20 million in this quarter, roughly. My guess. I'm not 100%, but in that range, I would say.
Yeah, that's perfect. Given this stronger demand you see now on the compact side by side, could we expect a stronger mix and margin as well going forward? Is that a fair assumption?
I would say that it's a similar mix. It shouldn't have an impact on the gross margins with the product mix in this case going into quarter four. That's my view on the situation at the moment.
Okay. I mean, looking at the margins in MTS, it has been a little bit volatile the last couple of years. I mean, going forward, what kind of margin can we expect in this segment? Can we expect that once you fill the utilization and such, that we can get back to the sort of 13.5% we did in 2024 coming years, or what is our fair level, would you say?
I would say, as we have communicated before, Jonny, this division is driven a lot by volume. I think it will slowly, slowly come back. When the margins pick up, when the volumes pick up, the margins will come with it as well. The loss in margin is mainly related to the volume decrease.
Yeah, okay. I suppose the 13.5% you did last year is a reasonable level if you can come back to volume growth ahead as well.
Absolutely. This is the most interesting thing with going to work or flying around, that you have so much opportunity and potential in this company. We will work every day and every week to improve our margins.
That's clear. Speaking of volumes and growth in that segment, you also come from a very high level, and it has been a little bit of stocking, and now you seem to be back in growth again. What sort of normal growth levels ahead is assumed in this segment, would you say, your best guess?
I think if you look at the long-term perspective, we think we will grow by somewhere between 4%- 5% compound average growth rate over the next four to five years. That is also driven by a higher HVAC proportion in the side-by-side segment. Somewhere between 4%- 5% compound average growth rate.
Thank you. That's clear. Just one final from my side. I mean, coming back to your order outlook comment and the positive order development, which sounds to me is broad-driven here, and you sound a little bit upbeat in the near term. Given that the comparables are roughly similar here as well, is it fair to assume that we can expect an acceleration in organic growth ahead? Is that fair to say, would you say?
I think we are positive about the future. If we look with our visibility three to four months, we can see that we will have a growth in quarter four, as we see it in the beginning of October now. All of us are experienced. You never know what will happen in December. It's a short month, but October and November looks good.
Okay, sounds promising. Thank you. That was all for me.
Thank you, Jonny.
The next question comes from Lucas Mattsson from Inderes. Please go ahead.
Provide some color on aftermarket sales performance this quarter and perhaps outline your strategy a bit for driving aftermarket growth going forward.
Can you repeat the question? We lost you in the beginning there.
Sorry, can you hear me now? Good.
Absolutely.
Great. I was wondering if you could provide some color on aftermarket sales performance this quarter and perhaps outline your strategy for driving aftermarket growth going forward.
I mean, we had a solid performance when it comes to aftermarket sales, especially in the Truck and Trailer Equipment part, also on the bus business in the U.S. on the M T S side. We called the aftermarket business MRO in Ringfeder Power Transmission, and that was solid. We are ranging somewhere between 23%- 25% in aftermarket business. We see opportunities in certain segments to improve that, and that is mainly availability and, of course, part of the product range too. Availability is the driving force in the aftermarket sale for us.
Thank you. That's very clear. I was also wondering, have you noticed any notable changes in customer sentiment or customer behavior since the end of this quarter, either positive or negative?
No, we haven't seen, I mean, in the last few weeks, no, we haven't seen any big changes. It's running smooth, I would say, in the start of October.
Okay. Lastly, you mentioned an ongoing recovery in order bookings. What capacity or supply chain constraints, if any, could limit your ability to sustain growth going forward?
Yeah, I mean, as you know, it's a supply chain here, and I think we have ramped up our internal capacity at the moment so we can deliver. Of course, when you ramp up 20%, 25%, 30%, you have issues with some suppliers. We are working intensively with that. With these hockey stick improvements, which is positive, there will be one or two suppliers which will not be able to manage. We don't see that we lose any orders by this. I think we will take a few weeks before we are really ramped up in the whole chain. I don't see it as a main issue at the moment.
All right. Thank you for very good answers, and I wish you a continued good day.
Thank you very much.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
We have some written questions. We have one question here if we can elaborate a little bit about the new factory in Canada. I can take a part of that. The new site in Toronto that will consolidate three existing production sites in Toronto develops according to plan. We are now having the foundation ready. We will start raising the building within the coming next three months. The plan is for the production site to be clear and done for us to move in in the beginning of September in 2026. Hopefully, during summer 2027, the production will be up and running in the production site. As we have a question regarding the organic growth, how much of the price increases are relating to tariffs? We spoke about that the price increases and the split are some, what, 2% - 2.5%, and the rest is volumes.
It's a little bit hard for us to break down the price increases, perhaps just relating to tariffs. What we have said before, the impact is marginal for VBG Group. I think we are done there.
I say thank you very much for attending this presentation. Thank you very much for the questions, and we stop by that. Thank you very much for today.