Aktieselskabet Schouw & Co. (SCHO) Earnings Call Transcript & Summary

[Audio Gap] Positive outlook in all our companies. Revenue is now expected to be DKK 34.8 billion to DKK 37.1 billion. EBITDA raised in a spread of DKK 3.15 billion to DKK 3.35 billion. Looking into each of our portfolio companies, we -- I'll start with BioMar. BioMar came out, as I said, with the Q2 report 2 days ago. So of course, a lot of information has been given there. But let me just elaborate a little bit on BioMar anyhow. They had a record high Q2 feed volumes. Total volumes increased 3% to 395,000 tonnes mainly growing in Ecuador and Australia. The revenue increased 5% to DKK 4.2 billion in the quarter based on higher volumes and also effect from raw material prices, seeing a very solid development in the feed for shrimps, as I alluded to earlier on, also in Ecuador. EBITDA increased 2% to DKK 357 million. The Feed segment delivered, however, 9% EBITDA growth. Profitability was hampered by IPO costs and also a transition of our tech solutions into a new business model in the market. We still see a strong -- very strong underlying momentum. We have secured new contracts in Norway. There's a strong and continued focus on formulation optimization and use of alternative raw materials to offset effects from El Nino. There's also positive expectations for volumes in second half. And that means also that BioMar already 2 days ago raised their guidance, now expecting revenue between DKK 17 billion to DKK 18 billion and then EBITDA in the spread of DKK 1.62 billion to DKK 1.72 billion, also an increase by DKK 100 million. From that on -- moving on to GPV, our second largest company in our portfolio. They have seen increased demand and also profitability. Revenue stable at DKK 2.2 billion. However, activity level developed an uplift, 5%, compared to Q1 '26. EBITDA increased 20% to DKK 187 million. Here, we also experienced continued productivity improvements. We see really positive impact now from all the footprint optimizations that GPV has been doing over the years. EBITDA margin increased to 8.3%, trailing towards our 10% target. So a good momentum. There's also a very strong visibility on future activities. We have a very high order intake and a strong book-to-bill. In fact, got very big orders from new customers coming in. Our commercial pipeline is really supported by these new customers, but also by higher activities from existing customers in the GPV portfolio. There's still a concern on the supply chain, especially on selected components as memory chips and semiconductors, difficult supply situation on that. GPV has many years' experience in handling such a situation, but we could expect that our inventory may increase to secure customer deliveries. Also, GPV made a small uplift on their guidance. Revenue narrowed, DKK 8.6 billion to DKK 9 billion expected now, and the EBITDA span also narrowed. We are lifting the bottom of the previous guidance. So expecting now EBITDA of DKK 710 million to DKK 750 million. From GPV, moving on to HydraSpecma, where we really see a strong growth across all key divisions. HydraSpecma really continues the very solid development they have been delivering over the last years. Revenue increased 12% to DKK 925 million. And especially this increase is coming from the Renewables and Global OEM segments. EBITDA, however, increased 30% to DKK 125 million, really reflecting strong operational leverage from higher activity, but also effect from ongoing supply chain optimizations and automation throughout the company. We see also continued production footprint improvements here. We have moved products around the different factories within the group. HydraSpecma continues to invest for further growth. They just opened a new facility in China in Tianjin, a 20,000 square meter new factory we really expect to benefit a lot from in the future. Also made a small acquisition in Norway to strengthen the position, a company called Hyco, small company, but still just also underlining that we are looking a lot to expand our Nordic base. There's a very strong commercial momentum in Hydra, and we see a very solid order intake in Renewables and Global OEM also here. We experienced growth opportunities within new segments. We are in marine, but defense and construction of data centers really knocking on the door and trying -- and want to do business together with HydraSpecma. Guidance also here, raised revenue now expected to be between DKK 3.4 billion to DKK 3.6 billion and EBITDA in the span or the level of DKK 430 million to DKK 460 million. Then moving on to Borg Automotive. Borg has, over the last year, had a difficult period, but now we see profitability improvement even in a soft market. However, revenue decreased as expected, 5%, to DKK 461 million, and it was mainly within the Reman segment that demand remained soft and competition continued to be both intense and fierce. However, EBITDA increased to DKK 38 million for the quarter. And here, we really now see strong benefits from the, what we call, Refine 4 Future program. And it's a strong action plan or game plan that Borg initiated a year ago. We have seen very solid execution on very difficult projects. Productivity improvements and cost optimizations throughout Borg is really materializing now. What we -- the other segment we named Newman segment, that's new products imported into Europe now coming out with a positive EBITDA, very positive. We have done a lot on pricing and cost initiatives that supports that turnaround. The transformation within Borg is progressing. And as I mentioned earlier, we are really seeing very solid execution throughout the company and the organization. Production has been relocated. It's completed. We closed down the entire U.K. facility. We have implemented a new commercial organization and a new go-to-market strategy. Working capital reduced by 26%, which is very positive. Guidance also here upgraded. However, revenue maintained in the spread of DKK 1.6 billion to DKK 1.9 billion, but EBITDA now raised to be between DKK 90 million and DKK 110 million. So moving on to Fibertex Personal Care. We really see a company with resilient performance in very volatile markets. Fibertex Personal Care really depend on one raw material, polypropylene, oil-based, a lot of that supplied out of the Middle East. So that has been a tough period, but they have been able to pass on raw material prices through the sales price. EBITDA in this difficult period increased 23% to DKK 59 million. Here, we saw strong performance in our Malaysian setup and also continued positive momentum in our Print division. I think it's also positive that Fibertex Personal improved their ability to manage volatility. They have implemented a faster and more frequent customer price adjustment model. They have a very strong focus on PP, or polypropylene, sourcing and availability, looking into new alternatives. And as usual, always has a focus on margin protection. The commercial development continues, trying to offset challenging overcapacity and market conditions in Asia by being innovative, now introduced a new elasticated product line, which shows good interest in the market. Guidance also raised here. Revenue now DKK 1.7 billion to DKK 1.9 billion and EBITDA expected to be DKK 160 million to DKK 180 million. Then moving on to the last company -- not the least, but the last company in our portfolio, Fibertex Nonwovens. Here, we saw a very positive solid momentum with growth and profitability uplift. Finally, we are really harvesting on all the investments we have made over the years. Revenue here increased 20% to DKK 700 million. Sales volume increased 12% in difficult market conditions. EBITDA increased 47% to DKK 84 million. And here, we really saw continued improvement in the U.S. business, which had been struggling over some years, but now really starts to deliver as expected. We saw positive contribution across all major sites and segments. There's also a very broad-based commercial momentum within Fibertex Nonwovens. We see good growth in the U.S. wipes and hygiene segment. We are recovering in Europe on the automotive and construction segments, and we experienced strong demand for our lightweight and specialized products. And here, we really see that FN has a benefit in the market because we are solid and strong in producing these specialized products. We're also looking into capacity supporting future growth. We have had a new line in the Czech Republic underway for quite a long time, and it's now finalizing the installation start-up expected in Ultimo this year. Guidance also with the Fibertex Nonwovens raised, revenue in the spread of DKK 2.5 billion to DKK 2.7 billion for the year and EBITDA now expected to be between DKK 230 million and DKK 260 million. So just concluding on Schouw & Co.'s outlook for 2026. As mentioned, overall guidance for the group, revenue raised to DKK 34.8 billion to DKK 37.1 billion. EBITDA now expected to be DKK 3.15 billion to DKK 3.35 billion. It's a development and expectations that we are very positive on. Guidance uplift supported by very strong market positions, also a solid order book in nearly all companies and continued operational efficiency across our portfolio companies expected. We will also -- as I mentioned, we have acquired a new company, Spectre. It's expected to be closed in Ultimo Q3, start Q4. Spectre is expected to add DKK 300 million to DKK 400 million of revenue in 2026, but no material EBITDA contribution after acquisition-related effects. So with that uplift in mind, then I will open up for questions.

Wei from SEB. A couple of questions from my side, and I'll do one at a time. Firstly, on the GPV, can you break down the strong momentum here? And how much of it driven by volume and how much is driven by the pricing?

Thank you very much. Not so much is driven by volume, we were 5% up compared to Q1. But in general, a little bit flat, but -- and pricing, of course, a little bit, but mainly, and I would say, 80% driven by efficiency, by our footprint decisions made. So it is really an uplift on operational efficiency and better utilization of capacity and factories and so on as you know also, Wei, we have been investing over the years, and we really see strong benefit from that now.

Okay. And then the large order you mentioned from a customer, which sector it is, if you can indicate?

Yes, I can indicate. It's for the data center segment, and we have really been working hard on getting our feed into that segment and something we really have focused -- strong focus on throughout the entire group. So -- but that was the first really strong order we got, and we expect to see more from that side.

Okay. That sounds great. And then the second question here on the Spectre acquisition. You only own -- I mean, bought a part of it, a large part of it. Why not a 100% takeover?

That's a super good question. Because the owners -- the previous owners, they have a strong belief in the development of the company, and they would like to sit in for some years more to take part in that, and that's why we got the opportunity to buy 75% and then we did it because, of course, we have an opportunity to buy them out after some years. But I think it's very positive that they stay in because they believe strongly in the business case and the model. So that's why.

Is it possible to indicate then its current trading? We have seen a lot of, I mean, market volatility and consumer sentiment change amid the current macroeconomics.

I think to be fair, we have not closed the business yet. So we'll come back on that a little bit later. But I can say that -- as you also saw when we made the announcement, and expect a DKK 1 billion turnover and EBITDA between 15% to 17%. And I still think good momentum in that business because they are supplying high branded global companies that have good momentum. But we'll come back on that a little bit later, Wei.

Okay. But it is also up against some of the giant international peers. And if you're looking into the market, the end market, I mean, we have seen the Chinese, very large [ sporty ] companies, they are buying Western brands. And is it sort of -- this kind of industry consolidation, is it opportunity or threat? I mean, how do you view it?

I really see it as an opportunity. And you have to see also -- remember that we are a supplier. We don't design or have own brands or so on. We are really working with the largest branded companies globally. And I really see that as an opportunity because we are super efficient and one of the best companies in really making very advanced high-level outdoor garments. So I see it as a good opportunity to benefit on that, yes.