Alimak Group AB (publ) (ALIG) Earnings Call Transcript & Summary

Welcome to the Alimak Group Q3 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Ole Kristian Jødahl; and CFO, Sylvain Grange. Please go ahead.

Thank you, and welcome to this quarter 3 call 2026. And as always, I have Sylvain with me here. So turning page, Alimak Group, diversified global industrial company. We are a leading provider of sustainable access and working at height solutions. 3,100 FTEs now. We are present all around the world. And we have some fundamental drivers supporting our success. On the global trend side, health and safety is an important driver for us, of course, urbanization, the current regionalization that we see driven by geopolitics and also electrification to mention some. We do have a leading market position in the niches where we operate, which gives us a good base to drive business. We have a long history. We have machines installed all around the world, which also forms a fantastic base for our service and aftermarket business and a relatively light model, which gives us a strong balance sheet and good cash conversion. Turning page, our strategy. This is the New Heights that we launched back in 2020. We renewed 1.5 years ago, and it's also now what we are continuing up towards 2030. It has served us very well. And yes, we will continue to drive the same strategy going forward. Turning page, our financial and sustainability targets. You see here to mention a little bit on the financial side, 8% to 12% average annual revenue growth, to reach a 20% adjusted EBITA margin by 2028 and have a leverage of below 2.5x over time. And also this year, we also signed up and got approved our science-based targets. Turning page and diving into Q3. So we saw a solid order intake growth and also resilient profit in the quarter despite a still challenging construction-related market. We had order intake of 16% and 4% organic and four out of five divisions delivered organic growth. It's the construction piece, which is still struggling on the overall business, but it was -- and that's also affecting Facade Access, which again had a somewhat lower order intake. But Pro-Bel strengthened Facade Access and the group and provide a significant margin contribution to that business, but also a broader market exposure, making the business more diversified and resilient, which is an important strategic drive that we have had for some time to become less dependent on tall buildings, which is currently a very challenging market. We also have not delivered fully on our profitability ambitions over the last couple of quarters. That's why we also launched some cost efficiency and reduction activities in the quarter. So we have identified SEK 80 million in annual savings, which will then have a full impact from Q2 2027. And this involves four out of five divisions and also group functions. So the only division which is not part of it is wind, where we are so lean. So it's really hardly anything to do in that sense, at least as we see it now. Short term, also the leverage increased in the quarter due to Pro-Bel acquisition. So we are at 2.82x reported and 2.60x if we would include 12 months of Pro-Bel earnings. And with our good cash conversion, we should be below the 2.5x target by the end of the year. Turning page. Order intake was then SEK 1.789 billion, up 16% or 4% organically. Organic increase in Industrial, Wind, Construction, and HSPS. Revenue was SEK 1.783 billion, up 8% or down 2% organic, and we saw organic growth in Wind and Industrial. Adjusted EBITA at SEK 318 million, up from the SEK 287 million, giving a margin of 17.8% versus 17.3%, where then, as you understand, Pro-Bel contributed positively to the quarterly margin. And we still continue to see a very weak Construction margin also this quarter, which is, of course, disappointing, and we will come a little bit back to that later. While Facade Access and Wind improved operationally in the quarter and Industrial and HSPS remained stable. And we have now then four out of five divisions reporting around 18% or better in EBITA margin. Turning page, service side, a key component, of course, we had order intake of SEK 788 million in the quarter, 32% up or 24% organic. The increase came from Facade Access, Construction, HSPS, and Wind. Revenue was SEK 730 million, up 10% or 3% organic with positive contribution from Facade Access, HSPS, and Wind. And we also, as you see, we had a very strong book-to-bill in the quarter, and this is important for us, of course, that we are growing this piece of the business, which is a strategic focus in each division. Turning page Facade Access. Order intake, SEK 448 million, up 18% in the quarter or down 8% organically. The organic decline was primarily driven by project award delays in the Middle East and also North America. And while it's also partly offset by our focus on refurbishment, retrofit, and replacement where we saw nice growth in Europe, but also some new equipment orders in Southeast Asia. To be further said, on the order intake side, we have had no significant larger orders in this business this year because that market is very, very slow. That also is a very, very price pressured market currently. So we will not take business which is not supporting our margins. But as part of our strategy, we have talked about for long, we want to go into lower and medium high type of buildings. And this is also then what we are doing and also what we are doing with the acquisition of Pro-Bel. Revenue was SEK 554 million, up 13%, down 10% organically. Organic decrease was due to the lower backlog. EBITA, SEK 101 million, up from SEK 64 million. Margin, 18.3% versus 13%. We continue to see improvement in the operational margin, but also, of course, a significant contribution from Pro-Bel in the quarter. Turning page. We continue to drive strategy and our growth initiatives. So the compact BMU solution that you see on the picture here for more medium height buildings is something we have been reviving and have had success with in the Benelux, and we are now also creating more European opportunities across Europe. IVS, we have been focusing for a long time, continue to serve us well, and we also signed some nice contracts in Dubai and Saudi Arabia in the quarter, which is nice because the bigger things or main product projects in that region has been more or less full standstill for the last six months, which is also affecting the business. But we also continue to focus on infrastructure, as you know, and we have now also established a dedicated team in U.S. for this. The Pro-Bel integration started off very well. And the business is continuing like it were prior to acquisition, which is, of course, important. I just want to highlight also there is some seasonality to this business, where typically Q2 and Q3 are the stronger quarters and due to winter normally, then Q4 and Q1 are slightly lower, but nothing really fundamental, but some seasonality to it. We continue to also drive the operational improvements. And in this group project, we also identified more savings potential in Facade Access, and that amounts to SEK 20 million of annual savings effective from Q2 next year. Turning page to Industrial. Order intake was SEK 410 million, up 15% or 11% organically. New equipment order intake was up against last year, supported by mining ports and also power projects in North America. While we also see that several large equipment opportunities that we have been working on, they remain in pipe, nothing really fundamentally closed lately. The service business came down also somewhat in the quarter due to timing of refurbishment projects. Revenue was SEK 400 million, up 7% or 2% organic, driven by revenue growth in previous -- or new equipment in previous quarters. EBITA at SEK 99 million, up from SEK 92 million, giving a margin of 24.6% versus 24.5%. And the positive gross margin development that we saw allows us to also continue to invest in sales and product development. Turning page. The market still remains relatively strong, even though we also have some weaker pockets that we have seen throughout the year. Strong equipment growth in Americas and Asia Pacific, especially in power, mining and heavy industries. While on the oil & gas side, we have as you understand, due to the war, seen nothing happening over the last six months. And also another effect is that we see in the oil & gas segment is that the aftermarket is negatively affected because the sites that are up and running, they run full speed, which means that they don't take the time to do bigger overhauls or services. So it's something which we are sure is due to come. We continue also to focus on product development, and we are launching now a new competitive SE range, which is a more cost-effective machine. It's more flexible and also easier to install with lower CO2 footprint, et cetera. So product development remains, of course, a very important piece. Turning page to Construction. Order intake was SEK 398 million, up 10% or 6% organic. We saw strong order intake in India and Australia. Australia is where we run our own rental operations. So that gives us a strong connection directly with customers. And India, it's an important country, of course, which is supported by our Chinese factory. While the demand for new equipment in Europe continue to remain very, very slow, while we see good momentum for parts and service. Revenue was SEK 318 million, down 4% or 9% organic. And this is also due to some delay in project start-ups in the quarter that we were expecting to come. So these are projects in the order book. EBITA at disappointing SEK 22 million, down from SEK 44 million, giving a margin of 6.9% versus 13.3%. And it comes down due to lower revenue, but also some operational inefficiencies. And we are working on a lot of things to improve. Turning page. The market remains challenging, as I was saying, and we also continue to see rising interest rates. So we expect a short-term change in the market is not there. While at the same time, we have seen now two quarters in a row where we have order intake growth and also three quarters where we have had a positive book-to-bill. So there are signs that we might have seen the worst when it comes to order intake. We also see that the infrastructure projects, they are quite a bit happening still, of course, as you know, in the construction sector. And that was particularly good for us in Australia. And again, there, we have our own rental setup, which gives us the possibility to be close and get that business. So some pluses in our business currently is our own rental that holds up well, even though we also face a tough price pressure in that business. The aftermarket is important and good for us. What we have done on light machinery over the last years to develop that range is providing us sales these days. Special machines for special bigger projects, that's something we are good at and we get. And of course, the China setup that we have servicing APAC, Eastern Europe, Latin America, Asia Pacific, et cetera, is good for us and also the used -- it is the new sales in Europe and U.S., which is on very low levels. So yes, we are doing cost reduction activities. Karin has also been here now for around six months, lots of focus on making the organization more efficient and performance driven. So we have done quite a lot of -- or she has done quite a lot of changes to the organization. And also, we are reviewing business models to see how we can actually get even closer to customers and more in control of the market. We continue to invest, of course. So that's still a fundamental piece, something we do not stop because the market will also come back one day, and we work on improving the position. So we work with the product portfolio. We work with the digital, we work with safety, et cetera. Turning page, High Safety & Productivity Solutions. Order intake was SEK 359 million, up 18% or 5% organic. We saw good momentum continuing with the elevator customers and also Middle East, India. Significant orders with lifting solutions for the energy sector and also the construction market is affecting this business, and that continues to be soft and especially affecting some European and U.S. parts. Revenue was SEK 318 million, up 3% or down 2% organic. And the strong deliveries to elevator customers was offset by some weaker performance in North America. EBITA, SEK 57 million, same as last year, giving a margin of 18% versus 18.5% last year. And positive gross margin development also here, which we are also using to invest in selling and R&D to ensure profitable growth. And turning page and our profitable growth plan and the transformation continues. We invest in product development. We are launching a new self-retracting lifeline, as you can see here. Also continuing on organizational changes. We have done some streamlining in France and in the U.S. We continue to build on our service capability because one fundamental piece of this business is that we try to do more direct also get more in control. We will continue the distribution business, but also more direct and then service is an essential piece that we can grow and need to develop connected to that. But also to leveraging on our special application competence, and we have had some very nice wins in the energy sector in Europe last quarter. Turning page to Wind. Order intake was SEK 179 million, up 14% or 10% organic. We saw a growth in the new equipment in Northern Europe and the U.S., while China was somewhat softer compared to previous quarter, but also we need to note that China was extremely strong in 2025. Revenue was SEK 202 million, 26% up or 23% organic and driven by, of course, a strong backlog. EBITA reached SEK 39 million, up from SEK 30 million, giving a margin of 19.2% versus 18.6%. Higher sales volumes and good performance, I would say, almost always offset by a slightly unfavorable product mix in the quarter. Turning page. The Western OEMs had a strong order intake in Q3, which also points to more business for us on turbine installations from 2027. So that's good. Offshore, it was unchanged in the quarter, but still look very strong medium to long term for both Asia and Europe. We see some skill shortages in this industry, which is giving us a nice opportunity to train more people, good for our training business and also the repowering, which I mentioned last time that there are also now turbines that starts to be rebuilt, which cause that they redo everything inside and also driving new lifts and a good business for us. We continue to drive our strategy. India, we have expanded with a new facility. We start to get the first business there, and we have also established a new training center in U.K. From an innovation and product side, we have launched a new fall arrester device, which has kicked off very well. And we are also launching or we are getting into the service because when we designed the first lifts, which is now around 20 years ago, they were having a defined life of 20 years, which means that if you want to go further, they need a full overhaul by us. So that's also a nice aftermarket business, which is coming up. Then we are with more financials, and I leave the floor for Sylvain.

Thank you, Ole. Good morning to everybody on this call. And so we saw in the quarter that adjusted EBITA increased by 11%, whilst revenue increased by 8%. So that obviously implies an adjusted EBITA margin expansion, which is coming from the high margin of the Pro-Bel Group of companies. Excluding Pro-Bel, the margin was 16.8% in the quarter versus 17.3% in Q3 2025. The reduction, as explained by Ole, is mainly due to the Construction division. As always, I will provide more details regarding gross margin and SG&A on the next slide. Items affecting comparability amounted to SEK 18 million in the quarter and most of them related to the restructuring costs, SEK 15 million out of SEK 18 million. The total one-off cost of our cost program is expected to be around SEK 40 million, and most of the balance will be recognized in Q4 2026. As far as the quarterly amortization is concerned, the increase is due to the Pro-Bel acquisition. It is based on a preliminary purchase price allocation. And looking forward, we should see a quarterly amortization charge of slightly above SEK 50 million. Finance net in the quarter was close to our expectations at SEK 43 million and the increase is due to the higher borrowings implied by the Pro-Bel acquisition. Looking at the next few quarters, we should be around SEK 40 million per quarter. Tax rate was up in the quarter, 27.7% versus 24.9% in Q3 2025. That is due to country mix effects. This is consistent with what I communicated in July, and then we see the lower earnings in Sweden, and we see the growing share of the Canadian earnings in the total group earnings. With the current country mix, we should continue to be around 28% as far as the taxation rate is concerned. So overall, in the quarter, net earnings went up by 13%, and the main driver for that increase was the higher EBITA. Next, the gross margin increased in the quarter and excluding items affecting comparability, it expanded by 250 basis points with Pro-Bel contributing 60 basis points to that increase. All divisions expanded organically in the quarter with the exception of Construction affected in particular by the low revenue. So we see that we have been managing quite well the inflationary pressures implied by the war in the Middle East. That's a focus area and it will continue to be a focus area for us in the coming months and quarters. Regarding operating expenses, as a percentage of revenue, excluding items affecting comparability, they went up this quarter. This is partially driven by some investments in R&D, sales and marketing, primarily in Industrial and HSPS and those investments are gradually paying off. If you look at the organic growth of those two divisions, we see the impact. But beyond those investments, we have seen the cost base, which is too high, in particular in the Construction division, and that's led to the cost program mentioned by Ole. In Construction division, most cost activities have already taken place. Operating expenses will start to come down in Q4 2026 with the full annual effect from Q1 2027 onwards. And as you know, we have gains outside of Construction in other divisions and the total annual savings for the group will be SEK 80 million with full effect from Q2 2027 onwards. Facade Access will be the second largest contributor to those cost savings after Construction. Moving to the next page. The result for the period was SEK 150 million versus SEK 133 million in Q3 2025. This is a 13% increase. Excluding items affecting comparability, result for the period was SEK 167 million versus SEK 173 million. This is a 3% decrease. EPS was SEK 1.42 versus SEK 1.25 in Q3 '25. That's a 13% increase. Adjusted for IAC and acquisition-related amortization, EPS was SEK 1.88 versus SEK 1.78. This is a 5% increase. Moving to cash flow. Overall, I'm satisfied with the operating cash flows in the quarter. It's SEK 196 million, same as last year. If you look at the reported numbers, we increased working capital by SEK 57 million. But this increase is due to two very well identified effects. First, the Pro-Bel -- the impact of the mechanics of the Pro-Bel acquisition. We acquired Pro-Bel with a working capital below normative working capital. So it's affecting cash flow from operations, but it doesn't really reflect any operational issue. The second impact is the phasing of the revenue within the quarter, we had a strong September in terms of revenue with a higher share of the September revenue of the total quarter versus previous Q3. And of course, it is affected negatively. Outside of those two impacts, the working capital would have been stable, which is more where we want to see. So it's well understood where we are there, and we are positive for Q4, and we'll continue to focus highly on cash generation in Q4 in the coming quarters. Moving to the next slide. The net debt was SEK 3.8 billion at the end of Q3 versus SEK 2.6 billion end of Q2. And of course, the increase is primarily due to the financing of the Pro-Bel acquisition. More marginally, we had some adverse ForEx effects due to the weakening SEK. And this was, of course, partially compensated by our operational cash flows. Leverage was 2.82x reported, including 12 months of Pro-Bel earnings, it was 2.60x versus 2.00x at the end of Q2. It's, of course, a high priority for us to reduce debt and deleverage and it's our #1 capital allocation priority. Beyond that, we'll continue to invest in organic growth, particularly with R&D, sales and marketing expenses. I referred to what we are doing in particular in Industrial and HSPS divisions. We continue to be active on our potential acquisitions in a selective way. And of course, at the same time, we are mindful of the leverage target. And finally, we are committed to delivering our dividend according to the policy, knowing that, of course, in the end, it's a Board proposal and AGM decision. Finally, one comment regarding ROCE, which increased in the quarter, thanks to the impact of the Pro-Bel margin. It increased to 22.9% excluding goodwill and 9.3%, including goodwill versus 22.7% and 9.2%, respectively, in Q2 2026. On that, I will hand over to Ole.

Thank you, Sylvain, and we turn to the summary slide. So yes, solid order intake growth in the quarter and also resilient profitability. There are, as we have been into, two, I would highlight the main effects macro-wise, which is affecting the group currently, and it's the construction market, which has been slow for a long, long time now, driven by higher interest rates. And this is, of course, affecting our Construction division, but also partly our Facade Access and HSPS. Then you have the other bigger macro thing, and that's the war in the Middle East and how that affects investments there, which is also affecting most significantly our Facade Access and Industrial business, but also partly HSPS and Construction. But these are things which are out of our control. So the only thing we can do is, of course, to continue to drive our activities, and that's also why we are, like we did now in Q3, doing more on the cost side to compensate and to ensure that we continue to drive profitable growth in the group. And I also want to take this opportunity to thank all our great people inside the group for, I think, delivering a good quarter considering everything around and also making the group even stronger going forward. So we will continue to execute on the New Heights like we have done. With that, we turn page and take questions.

[Operator Instructions] The next question comes from Andreas Koski from BNP Paribas.

A couple of questions on Construction. First, can you just confirm that the order intake you report that is net? So it's including any cancellations you may have in a quarter or in a period?

Yes, absolutely.

Yes.

Good. So then if we look at the order intake in the last three quarters, I sum them up to like SEK 1.2 billion or close to SEK 1.2 billion. And at the same time, the sales in the last three quarters, they've been less than SEK 1 billion. So that would imply that sales will start to increase in the coming quarters. Do you disagree with that?

No, I don't.

No?

Absolutely.

Yes. And then if we look at the operating leverage that we have had, I mean, the flow-through down to the bottom line, it's been massive. Maybe you can explain why it's been like that. Is it just to understand that you are not able to cover your fixed costs? Is it also a lot of mix effects in there? And when sales start to increase again now, say, going into 2027, should we expect the same kind of operating leverage also on the way up that we should see like 40%, 50%, 60% drop-through rates? Or what to think about that?

Yes. It doesn't carry just a yes or no answer because the business contains a mix. And the rental business, which is -- and when I say rental, it's what we actually perform as our rental. It's not that we sell to rental customers, but our own rental activity. That's holding up well. That's also what has been really the main driver behind the order intake recently. So the main part or the pickup in the order book is rental order intake mostly, which carry a lower margin and also a little bit lower now also, I would say, than normal because the price pressure in that market is immense. So you have that effect. And then you have the effect that we have very little sales, record, I would say, low levels out of our Skellefteå factory, and that's driven by the European market and the North American market mostly, where we have seen very low sales. And this is because our rental customers, they don't reinvest in their machinery because they have enough. And for the time being, when the market is uncertain, they rather keep what they have and service it rather than changing it. And that's also what I alluded to regarding business model. It's something we need to look at a little bit. Sometimes they just keep our machines too long. They are too good. So but there, we have an enormous negative leverage and drop-through because there, we have the factory in Skellefteå, which we have done whatever we can, I feel to manage costs. But at the same time, that factory also supports mostly the Industrial business, which is going at a very good speed. So it's a balance there on what you can do, but it doesn't carry that full flexibility. So it's not that you can shift all that to Industrial and not -- so there is quite a lot of cost here also coming through on the Construction side. So there, when that volume come back, we will have a similar positive drop-through for sure. But it's difficult to say when that volume is coming back because we don't really see it much yet. And the order intake, as I say, is mostly driven by our rental business.

Yes. Okay. So in the near term, when sales pick up, we should not expect that kind of drop-through because the sales pickup will be driven by rental and rental is lower margin. So we will continue to see a margin under pressure in Construction for some time, even though it should improve from the levels that we've seen in Q3 maybe.

Exactly. Correct. But it's first when we start to see machines coming back in Europe and North America that we will start to get some positive -- that positive type of leverage.

And you mentioned that Karin has joined you and she has already some changes to the organization or the structure of Construction. Can you maybe share what the most important changes have been?

It's ownership and the overall structure. We have had a strong support and a structure driving mast climbing work platform and light equipment that we have now reorganized in how it's being managed. We have reorganized how we are managing rental versus direct sales to get more clarity, more type of clear ownership and focus on these pieces. And so that means also that we have simplified. We have taken out resources. So that also leads to cost reductions, but more to the point and more forward-leaning sales-oriented structure.