Alligo AB (publ) (ALLIGOB) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Alligo Interim Report Third Quarter 2025 Conference Call and webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Clein Johansson Ullenvik. Please go ahead, sir.

Thank you, Nadia. Welcome to Alligo Q3 Report 2025. Presenters today as since quite a while back is our CFO, Irene Wisenborn Bellander; and myself, Clein Ullenvik, CEO. It's always -- it feels a very report busy day when we report. So we will keep it swift as always. We focus on highlights and we'll not go through too many details that everybody can read on their own. So this is Alligo, a quick, quick flyover, SEK 9.5 billion turnover approximately. Sweden is the biggest country by far and even bigger in -- if you consider the earnings. It's actually 2 or 3 shops less compared to last time. We have co-located a couple of more stores, but the biggest uptick with some 26 stores from the beginning of the year was the acquisition of Batterilagret. So as of today, 239 shops. This is a busy slide, but it's to illustrate something we are quite happy with that we can run an integrated fully Nordic business and at the same time, see investment opportunities in adjacent or in actually the product assortments that we actually have in integrated businesses, but for different reasons, doesn't really make sense to integrate them. So we have our 13 very nice product media companies. We have our 6 welding companies, and we have Batterilagret, as you know, a nice acquisition we made. And then we have some other businesses. So those together amounts to 20% of our sales, but 80% of our turnover is, of course, in the integrated businesses with the 2 main brands, Swedol and TOOLS. And we are a true Nordic organization, as you will see on the next slide. So this is our organization with 3 sales organizations, one per country, Sweden, Norway and Finland, and then we have the Nordic functions supporting those sales organizations. And this is according to us, the most efficient way to run our business. And what is new since we have shown this picture earlier to you is on the top left corner, Nordic operations, where we have said that in our type of structure, in our type of businesses, many times, the Nordic operations are included in the Swedish operation. But to make this a true equal support to all countries, we have put the Nordic operations in a specific box, and I mean Nordic sales supporting operations. Like the segments, Industrial and Construction, those 2 segments are placed under Nordic operations, retail shop development, marketing, real estate and some other functions. So now all countries equally can have the same support and we can run a much better true Nordic sales organization. And having done that, we have also recruited a new country manager for Sweden in [ Daniel B, ] who will join at year-end around. Acquisitions, 3 completed acquisitions, 1 big and 2 small ones this year, 29 stores were added, Batterilagret is obvious, but also 2 acquisitions within the product media area, and they amount to around SEK 300 million in annual sales, and we got some 98 new employees into the group. Some highlights, Q3. Market situation, as we have written in the report is very much the same. We've said that quite a while. And I see all reporting companies say more or less the same thing. It's the same market conditions. There are some hesitance and cautiousness from the customers. But it's very much the same. But every day, every week, every month, every quarter we put behind us, takes us one step closer to hopefully a better market climate. We have done, we think, whatever is possible. We have been pushing for sale for quite some time that we have communicated many, many times, and it has not slowed down in any way. We have done the cost reductions very early on through this downturn. I think you can all agree that we were quite early on identifying the downturn and taking actions. And the highlight, if you can say that about cost savings, it's a terrible activity, but it was the first quarter of this year with a plan that, as you know, which we have delivered on to the decimal. We have been able to focus on acquisitions while downscaling costs. We are working very hard with reducing inventory levels, and that is a tricky thing that we are struggling with. We see good performance or better performance, I should say, but there's much more to be done. We need to reduce a number of owned brands, and we need to look over the partnership we have with our suppliers and not having -- even if we reduce by many, many thousands of supplies, we need to do much more, and we think we are able to do that going forward. And price adjustments, we -- after this high inflation period, there are some product areas where we could be perceived as expensive or more expensive and that we are addressing, and we are around halfway through that. Delivery capacity is good, West being the last -- or the last central warehouse we built. It's back on track, mainly some minor adjustments left, but it has a good delivery capacity. And macroeconomic factors, it is very much the same, but luckily, at least we can benefit from better exchange rates between SEK and the dollar. So some positive things with all these disasters. Then a slide with 6 boxes where we tick at least 5 of them. Revenue, we grew, thanks to acquisitions. Organically, we are still in minus, a little bit less minus, but we are still in minus. We improved the cash flow. The adjusted EBITDA is up, and the margin went up from 6.4% to 7.2%. We are super happy about that. And the gross margin, as you know, and we have communicated many, many times, we have been focusing on cost and contribution gross margin, and we continue to have that in mind because as you know, the gross margin that you arrive at in a slow market is many times the gross margin you are stuck with when things turn back. So the whole trick is for us to get volume growth with this high gross margin, then we will have a super nice future. So the highlights from the Q3, continued extremely high sales focus. We are running our growth initiatives. We are working very much with sales efficiency, what targets to put on different sales roles we have and adapting the pricing system and the pricing levels. We do that constantly. We know how to do it. It takes some time, and it's necessary for us going forward. The acquisitions, I've said, we don't need to repeat that, but we have a good pipeline when we feel it's time to hit the throttle again. Operations, we are very much focusing on TOOLS Finland, and we will not stop that focus. We have even more focused on getting the gross margins up in Finland. It's normally the Finnish organizations, wherever I've been, has a decent cost structure, but we need to improve our gross margins in Finland. And we and the management team in Finland are extremely focused on that. Assortment management, we are reasonably new organism. And of course, when we establish assortment and things happen, you fine-tune that a bit, and we need to arrive at a position where we say this is now our assortment, and we can do a more structured way of developing the assortment. Capital efficiency, we have said we were at 24% and we are up at 28%, and we should come down to 24%. So that's in -- as a target, we will come back to. Turnaround Finland, as I said, gross margin is a super focus. The team is very dedicated. We are learning from each other within the group. Norway did in the Q3, some really good initiatives, bringing the gross margins up, and it's a hard work. It's not -- you don't -- it's intellectually no challenge, but it's super difficult to really make it happen in the everyday life. And we are all trying to help our Finnish colleagues to do the right things in turning the gross margin up in Finland. The financial targets are super clear. There's no changes there. The organic growth being 5%, as we've said, and we have always said that we have hoped to add another 5% in a normal environment with acquisitions. Our debt ratio is down at 3.1, and we don't see -- foresee any reason why we shouldn't be around last year's level at year-end because Q3 is our weakest quarter from a cash flow perspective and Q4 is our best. The EBITDA margin, we will start from where we are today, and we were close in 2023 before the market started turning sour, but it's still there as a target, clearer than ever. And the dividend, of course, we are in line with what we have said. And also the sustainability targets, they are all developing in the right direction, meeting the supply standards. Customer satisfaction index, we're actually above our target in all countries. Sick absence is at targeted level. CO2 levels, we have a good plan in order, and we are executing on it. And female in management positions are slowly, very terrifying slow development, but at least in the right direction. So an update on our portfolio. We say we go for growth, and we have very clear targets, and they are, of course, Nordic, and service is a very important area for us because there are parts of our assortment, which our competitors have, and then we need to differentiate in other ways than price and how to do that, then you add services, and we think we are pretty good at that. So the laundry service is developing nicely. You need first to win the contract and then you need to exchange the garment. So it takes some time before it ramps up. But from a process perspective, everything is in place, and it will continue to have this nice development. To develop our shops is also a very important thing. I think we have, I think, a great part of the organization in the group, we have a good way of running our shop sales, and it needs to be developed a little bit more. We have a very focused initiative on -- for the construction industry. We think we are well positioned. We have the right brands, and we have a strong position in Sweden, where we also need to develop that in Norway and Finland. And then own brands, and I think we can skip to the next page directly. So then we have our Bjornklader, probably the oldest workwear brand in the Nordics and Univern being the real premium from a price position. And then if you take the midrange from a quality perspective, it's actually premium, both Gesto and AmPro, but priced a little bit more attractively. For you who has been around for quite some time, you mean you remember when we launched Gesto in 2014, that was our affordable line in those days. But it has developed. It has become almost perhaps a little bit too good, but it's priced in a midrange. And the same thing with AmPro, super quality products in TOOLS, but priced at a very attractive price level. And then the affordable, the 1832, we launched to meet competition with lower-priced products. And since it's us putting our names under it, it is affordable in price, but in quality, very, very good. And then we have ProWell in TOOLS just to meet shop assortments from low-price competitors. So dear customers don't feel that they need to go somewhere else to buy that. So I think we have a very good set of own brands, potentially too wide assortments. We are focusing on scaling it down in a number of articles, but we'd like to increase the sales of own brands a lot. Market position, it's an analysis we do every year around these times when annual report has come out. And as it looks, it's a very mathematically advanced model behind it is that we are keeping -- from a Nordic perspective, we are keeping our market shares, potentially a little bit up in Sweden, flat in Norway, a little bit up in Finland. But if you look at profitability and market share development, we come out okay, to say the least, from -- especially from a profitability level, we are on a very good level. Financials, Irene Wisenborn Bellander.

Thank you. As Clein mentioned, after 6 quarters of weaker results, we now have a quarter with improved profitability across all countries despite the continued weak market. Revenue increased by 2.1% in the quarter, driven by a 6.3% growth from acquisitions, but contracted by negative organic growth of 2.7% and adverse FX effects. The organic sales growth was weakest in Sweden, but it was significantly impacted by large project orders to the defense industry last year and also the loss of Northvolt volumes this year. Adjusted for this, the group's organic growth was flat. Sales within the manufacturing sector in Finland recovered, although from low levels. And Norway continued to benefit from a strong oil and gas sector in the quarter. EBITA reached SEK 158 million, representing an improvement of SEK 21 million or 15% and this increase was driven by improved results across all countries following stronger gross margins in Sweden and in Norway, cost reductions and contributions from acquired businesses. The enhanced gross margins are due to positive customer mix effects, better sales and assortment management, as Clein mentioned, and to some extent, reduced purchase costs in U.S. dollars. The impact from stronger margins, cost reductions and contributions from acquired businesses is illustrated in the EBITDA bridge. And we have SEK 100 million cost saving program implemented in Q1 has further reduced the cost base in Q3. And as you can see in the chart, the cost reductions have offset the annual salary increases and inflation effects on other expenses. Sweden has the highest share of SMEs and own brands, followed by Norway, while Finland has the lowest. And this directly correlates with profitability in each market. The higher the shares, the greater the profitability. And the market downturn has primarily affected small and midsized customers. However, the decline related to SMEs is now less significant, and their share has increased from 68% to 73% in the integrated Swedish business. Additionally, the share of own brands in Sweden has increased from 26% to 30% as sales of our own brands primarily derived from the store channel. And as you can see in the graph, there is also a slight positive development in the share of SMEs and own brands in Norway and Finland. Moving on to some highlights of each market development. Starting with Sweden. The Swedish market remained weak with organic growth declining by about 6% However, if adjusted for the large project orders to the defense industry, the growth was slightly positive. The improvement in EBITDA is due to better gross margin resulting from more favorable customer mix as well as cost savings and contributions from acquisitions. Moving on to Norway. The oil and gas market in Norway has remained strong, but the growth in this segment was lower compared to the first half 2025. EBITA was slightly better than last year, driven by cost reductions and a higher gross margin resulting from positive customer mix effects, but also improved sales and assortment management. Moving to Finland. There was a sales recovery in Finland, but from low levels last year. And while our recent acquisitions have had a positive impact on the results, the old TOOLS business remains challenging. And as Clein mentioned, the main focus is on improving trading gross margin in the direct sales channel. Moving on to cash flow. You can see that we had an improvement when it comes to our operating cash flow, driven by improved EBITDA and the repayment of preliminary tax. We have an ongoing capital efficiency project, and we have reduced the inventory levels of external brands, but the investments in our own brands counteract this progress. And net working capital as a percentage of sales is about 29%, and we aim for 24%, which was the level in 2022. Investing activities in the quarter, it's mainly related to the add-on acquisitions within Product Media and the organic investments are lower than last year and the CapEx to depreciation ratio was 0.5. The net debt at the end of the period was SEK 2.1 billion, an increase from previous year, primarily due to higher acquisition pace and lower operating cash flow. And the ratio of net debt to EBITDA was a multiple of 3.1, and the ratio is higher than last year due to a combination of lower EBITDA and increased net debt. And typically, the debt ratio increases from the second quarter to the third quarter since Q3 is the weakest cash flow quarter. However, the debt ratio has actually decreased slightly from Q2 and is expected to continue to decline. Our covenants relate to interest coverage and equity asset ratios, and they are fulfilled at the end of the period, and there is still good headroom before reaching the threshold. So in summary, despite the temporary increase in leverage, we maintain a solid financial position and expect leverage to be well below the financial target level by year-end. Handing it over to you, Clein.

Thank you, Irene. So Q3 in summary, improved profitability in all countries. That is, of course, extremely nice to say. High sales activities even if we don't really get the benefits of all the hard work, but there will come a period when we can harvest the fruits of our hard work, but everybody is struggling and our lovely colleagues are fighting every day. And we hear more positive signals. There are more quotations. We're even getting answers to quotations and we're winning quotations. So that's -- we feel there is a little bit of a different market feeling. We empower them with a better sales concepts and services, and we think we have a market offers, which is quite strong and a little bit different from several others and continued cost cautiousness. We are always ready to take actions when we see that needed. So outlook for '25 and beginning '26, and you've all probably seen the latest statistics, and it's -- in Sweden, at least a revised upwards construction market for '26. Unfortunately, a little bit revised it downwards at the end of '25, but at least the longer outlook looks good. We are well positioned to leverage on this. We have built a very efficient and financially sound company. So if you add a few percent of organic growth on top of this, this should be a very nice journey going forward. So for 2026, very much focused on sales, marketing and continued focus on acquisitions. And one last thing before we open up for questions. You've seen the news, me leaving during 2026 is the least dramatic thing in history and should be seen as a signal that we are in a very, very good position. We are getting closer and closer to a market upturn. When and how strong, nobody really knows. And it's also a signal that the group -- it will never be finished. It will never be 100% ready built, but we are in a very, very good position. We're taking all the largest strategic grips and building this platform. And looking at the time frame down there, I hope you all can agree on that. It has been a decent amount of time, and it has not been just leaning back, it has been some dramatic grip we have taken over the years. So yes, that's that. So handing back to you, Nadia, for Q&A.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Emanuel Jansson from Danske Bank.

A couple of questions from my side then. I mean, looking at the market development and how you're performing, we can see now that the Swedish market is declining around 6% organic. And I know that you for quite some time had quite tough comparable figures versus last year. And we also have the struggling account with Northvolt, so to say. How much of the decline is related to this, you would say? And how -- and i.e., how is the underlying development going? And also, can you maybe shed some light on the underlying demand from the SME customers, which we know are very important for your business?

Yes, very good. You are extremely well informed, as always, Emanuel, and you know that the -- it's -- we sincerely dislike bringing up excuses. But of course, the defense orders and Northvolt, if you adjust for them, we would have had a positive organic growth...

In Sweden.

Sweden with a couple of percent and even affecting the group so much. So it would have been at least flat from that perspective. When it comes to the SME customers, I heard on this lovely pod, quality pod yesterday, they mentioned that it was the worst SME market in over 40 years. And I feel that we have felt that. We think we have a good grip of that customer category and we know them very well, and we know their behavior very, very well. But we see that we have just been -- some of you know about our Swedol days, if you take Sweden and TOOLS days in Norway and Finland. And it's -- we still attract the same amount of customers or even more to the shops. but we can still see that the average purchase is still lower than it used to be, but at least we see stability and we also know which accounts we win. So just as you said, the comparables going forward from Q4 and onwards, those 2 excuses are on a much lower level, but the potential is still there. If you take the defense, for example, we are well positioned with sales to the defense, Northvolt has gone forever, but the defense, it's an opportunity for us going forward. But we are pushing for the small and medium-sized customer. And hence, those price adjustments we also are making so they can get the feeling again that they don't need to go to any low cost, lower quality competitors of ours.

Perfect. That's very, very clear. And on the defense exposure that you have and have built up the last couple of years, how big do you think this could potentially be in the future for this business?

It's -- I don't know if we -- I'm looking at Irene, if we communicated that. But we have -- in all our countries, Norway, we are in the middle of a huge tendering process. Nobody knows the outcome. We know we are prequalified. We came out best of all the bidders from a sustainability perspective and all other vitals around it. So price will be the determinating factor. The HTP [indiscernible], we acquired in Finland is a super important partner with Patria. I've been there seeing what they build. And it's not just product they develop. They actually assemble parts for the vehicles they have there. And in Sweden, we know both from workwear, TOOLS, we are in so many different product areas. So the potential is big. It's a number of hundreds of millions over time. You also know that we've communicated that 2024 was the last of the budget cycle and '25 is the first. But '26 and '27, the purchases from the defense will go up. I don't say that we will win all the orders. It's tough competition, and it's also attracting international players from countries -- your questioning, how can they quote to a Swedish defense. But yes, so the -- we have a strong position. We are very involved in their planning, but it's tough competition.

And that's really interesting. And of course, what's the potential there for you to deliver even high growth within your private labels within the defense sector? Is that possible? Or how is that working?

Absolutely. And we are -- we can take that at a different time perhaps, but we are delivering some very interesting products, both high tech and down to garment for the kitchens. So it's a whole spread, and we are in pens and we are in backpacks, and we are in shoe soles, but very technically advanced shoes. So it's across the line, and we are strong, especially since our connections to Far East suppliers. And we've been successful in winning these separate tenders. So absolutely. We have a specific team we have set up to deal with this. So this is not in the normal sales organization, so to speak. We have a specific team set up since a year or 2 back to benefit the most from this.

And did you have this opportunity during the old Swedol days within this defense sector, you would say? You would have this exposure then?

Not really. I mean it has been -- the investments now being pumped into defense from different perspectives is, of course, much, much higher. But the TOOLS part of the Alligo Group had on the work -- on the TOOLS side, hand TOOL side had an agreement since many years back. So we have been able to capitalize on that. So with the good relationships from the previous TOOLS business and add with assortments that Swedol came to the table with it should be a match made in heaven.

Really, really exciting. I'll not stick to this subject for too long, but really interesting. But given now that perhaps the comparison base is now behind us regarding Northvolt and probably defense order, do you think that the following quarters now will show more clearly on how well you are performing versus the market as you showed in your presentation?

Yes, it's a very good question, and we anticipated that, that would come. And we don't dare to say anything. We are a bit too nervous on the market outlook. Nobody dares to say anything. And I think all the reporting companies have said the same thing that it's some hesitance and cautiousness from the customers. But at least, as you say, the comparables are -- we have nothing to blame anymore or to excuse. So that excuse is gone for sure. So our true performance will be more visible. That is for sure.

Perfect. And jumping on to Finland, which shows organic growth. That's, of course, really positive. What is driving the improvement there? And also, it appears that you're also growing on a store basis. Have you started to see results from the transformation of your physical stores there? Or what's driving the growth at Col?

We are always very open and transparent. We have a couple of larger customers that have had a good development, and we need to do much, much more in order to transform the Finnish organization to be more successful with smaller customers. Having said that, we -- for the transformed shops, as you say, we have seen good development over the last...

Sales are picking up.

Sales are picking up. That's typically us. We expect that it should be booming from day 1, and it never is. But we see that the new shops are developing most of them, not all, most of them are developing nicely. But it's -- the figure you see and you relate to is -- if I'm downgrading ourselves, it's mainly because of a couple of larger customers have had a good development.

And where are you now at the transformation of all the store network in Finland?

We've stopped after the shops we did, and we said, let's see if we -- if this is the right way. So we did it. So potentially, we should have done less. I think was it 6 we did.

Yes. I think that we have 6 or 7 concept store.

So we said let's not roll that out further until we see that this is the successful way of doing it. And we would be in a very good group of many other businesses thinking that you can copy a concept from other countries into a country and it doesn't work. So we said, let's be cautious. Let's really look into how has this developed now in Finland. Is this the way for Finland or not? Or do we need to make an adjustment. So we are not rolling out any new -- we're not converting any new shops as it is.

That's very clear. And on the gross margin, obviously, good improvement there, and you're mentioning the mix effect driving the gross margin. And if we now start to potentially see the market in 2026 at least to turn in your favor, I assume you have both country mix, customer mix and also you're mentioning FX tailwind on purchasing on your side. Where do you think the gross margin could be in the future or in the near-term future, 1 year?

We got that question many times in the old Swedol case when the gross margins were very, very healthy, but we -- it's not a gross margin maximizing case. When we see stability in gross margin, then we could push more for sales. And I think that would create the best shareholder value to say that we are not intending to get to 50% gross margin because then we are losing out on a lot of businesses. So to find a good solid base, and as you said, the currency is helping, more and more professional purchasing is helping.

increased share of own brands.

Share of own brands, increased share of small and medium-sized customers, all that will help, but it will also give us, if we refer back to the defense discussion, a better ammunition for the sales organization to actually be able to grow a little bit more.

That sounds fair, absolutely. And last 2 questions from my side before letting someone else jump into this call. But on this then, what do you think we should expect in terms of leverage and profit development if you start to achieve volume growth in the next year, given that you're already now growing profits with not giving -- have been given any specifically help from volumes at the moment.

Exactly. It's -- mathematically, you could simulate -- I'm not going to say a figure, but with a healthy gross margin, our cost-efficient platform and base. And then if you start adding a few percent on actual organic growth, and if we also conclude that we do not ruin the nice acquisitions we've done, of course, you get a good leverage. We've had this leverage against us a couple of years when the market has turned down. I mean, with our structure with SEK 0.5 billion in rent cost per year, it's difficult to scale this business downwards. But if you add volume on top, we don't need to scale much cost in proportion. So I can't give you a figure, but sometimes we meet people who has been calculated, and it should be okay.

Yes. We have to wait and see then. And last but not least, we are sorry, of course, to hear that you are leaving, Clein. What do you see as the most important task here for your successor? And what will he or she needs to focus on to drive Alligo to the next level, do you think?

I think everything is in place. I said to some people who have called, I mean, the largest disappointment for me, and that's what -- nobody should open the champagne bottles yet. I'm not leaving in a couple of months. But my first focus is for nobody to be able to come in and say, now I've cleaned up after Clein and the existing management team. That should not be possible, hopefully. And the financial targets are solid. They are there. The strategies we have in place to take us there, they are there. So from my perspective, we are in a very good place to execute on the strategy we have. So that should be my -- as they do in the White House with the new President comes in, they leave a note on the desk, and don't change too much potentially.

Yes. Well, that sounds like a good plan. And I think that was my question for now, and we might speak again during the Q4 call as well.

Now we're going to take our next question. And the question comes from the line of Karl-Johan Bonnevier from DNB Carnegie.

A lot of good color and answers already. So I'll be just having a couple of smaller ones for you. Looking at the gross margin development, would you say that we have seen anything of the benefit of the U.S. dollar coming through yet? Or is that more of a question for, say, the coming quarters?

Yes. It's more of a question of the coming quarters, but we do have some minor effects in Q3.

And looking at the biggest opportunity there to -- I guess it's on your own brands where you probably have the least of what you would call market pricing of it. So you should be able to keep most of it yourself. Is that a good assumption?

Yes. And also, let's not forget that we have suppliers who they themselves buy their products in dollars. So of course, this is the quickest way, of course, when we purchase something in dollars and it suddenly is at SEK 9.4 instead of SEK 10.3. That is, of course, good. But we also need to take the negotiations with our suppliers who, of course, were arguing for higher prices when the SEK went down. Now the SEK has gone up, and we need to call for new meetings and negotiate that. So it's both our own brands, of course, that is more -- it just happens, but also negotiation-wise with our suppliers.

Clear, clear. And Clein, setting the agenda for your successors coming in, so to say, looking at what you talked about in Finland, getting the Finnish operation up to 6% to 8%. You have stated that target earlier on some stages. And obviously, with volumes coming back, that should be easier to get up there, but what kind of time frame would you say -- suggest would be a logic thing to deliver on that target?

The financial modeling we're doing is a couple of years out, 2 years out. But as I said earlier, we need to really show that we can turn up the gross margin. Wherever I've been in my working life, Finnish businesses has always been cost efficient. And the same thing goes for us in general. So it's not -- we cannot save ourselves to success for the TOOLS business in Finland. We have other businesses which are super profitable. The former growth is profitable. HTP, RTP and so forth are very nicely profitable. So it's the TOOLS business that is struggling. So we cannot save ourselves through cost. And I think it's also dangerous to at least plan for volume saving us. We need to prove that we can improve gross margins and quickly.

And when you look at Finland, is there a lot of pruning still to be done, looking at customer segments, looking at product offerings that I know has been historically challenging to get the margins out of, so to say. But are those still there getting to 6% to 8%.

Yes, absolutely. All above. Everything needs to be done. You saw Irene's slide on share of own brands. We need to work closely with our suppliers. Parts of our organization is very, very good at that and Finland perhaps needs to come back to that. I mean if you win a contract and the profitability is not good enough, then you partner up with your suppliers and say, you need to help us. We need a couple of percent in support to get this on a decent profitable level. So it's not intellectually challenging in any way, but the work has to be done. And that's what we ar,e, together with our Finnish team pushing for.

But as you see, there is nothing on the system side when you're looking at your setup in Finland that puts any limitation to it that there is anything that needs to be, say, invested in to get -- do that opportunity?

No, we are now following the development of the converted shops. And if that turns out to be the right way forward, then that should be the right way forward. But we don't need to take any strategical grips from a structure point of view, everything is there I think, but from a behavioral and execution point of view, we need to do more.

Excellent. I heard in your initial statement, Clein, that you talked about -- when you talked about the strong M&A pipeline to execute on when you are ready. When are you ready?

I think, Irene said that or perhaps it was me, I'm not quite sure. We will be down -- from a gearing perspective, we will be down to 2024 level in Q4. So then we feel confident again. When the interest rates were a bit higher, we said it's uncomfortable to be above 2.5. But we ended up at 3.2. We peaked at 2.1 or 2.2. So again, it's time now to start looking again.

And looking at the active -- the pipeline you have, you haven't missed any transactions during these times where you have now held back on the acquisition pace.

No. As we talked about before, you and I, I mean, previously, perhaps you could push things to become -- to do it earlier. But now for a while, we have not pushed, but we haven't lost any. We haven't said no to anybody. So we will continue to do acquisitions in the identified areas that we see potential for growth.

And hearing you mentioned Northvolt in the comparison numbers for last year. Do you have any exposure to talk about to Steger and their financial problems of late?

It's at 0.0, and they are a cash customer. If they want to buy something, they have to pay. So it's 0.0.

Sounds like a prudent way of doing it. And looking forward to talk to you again before you leave Clein.

[Operator Instructions] Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Clein Johansson Ullenvik, for any closing remarks.

Thank you, Nadia. And I think, Annica, we have covered everything that has come in mail-wise. We have covered in all the discussions we've had now. So it feels good. Very good, everybody. I think we can conclude that the quarter was decent despite no help from the market yet. I think we built a solid platform. We have a balance sheet in order, and we will come back at the end of the year with a net debt ratio, which is in line with last year, which is good. And we focus on sales that we have said quite some time. But -- we continue to focus and when that starts to kick in, this should be a little bit better. Yes, we continue with what we are doing. We see that we get effect from what we are doing. And as I always say at the end of these meetings, the journey continues. Thank you very much. Enjoy the weekend when that comes.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Thank you.