Balco Group AB ($BALCO)

Hello, and welcome to today's presentation with Balco Group. Our CEO, Camilla Ekdahl, and CFO, Viktor Arvidsson, will present the report for the first quarter of 2026. [Operator Instructions]. And with that said, I hand over the floor to you guys.

Thank you. Welcome to our quarter 1 report. And first of all, for our new listeners, we start with a very short snapshot of Balco Group. Parco Group consists of balcony and phased companies. The head office is in bike, and we have about 500 employees. We operate in 2 main segments: renovation and new build and our core expertise is to supply late Falcons and balcony solutions primarily on the renovation market and to tenant-owned associations. Balco Group is a market leader in the Nordics with the key markets being Sweden, Denmark, Nora and Finland. And we also have a strong challenger position on other European markets. So let us go over to the quarter 1 highlights. The order intake in the quarter was in line with the corresponding period last year and amounted to SEK 270 million versus SEK 275 million. And here, I want to point out that the order intake for Balco Group must be seen over a longer period than just a quarter since the larger projects can affect heavily in a specific quarter when we get it in. And during the first quarter, we didn't book any big projects, but we have some up for discussions. The order backlog increased with 21% by the end of quarter 1, 2026 versus 25 million -- we had a solid operating cash flow amounted to SEK 32 million. The net sales decreased by 5%, and here, we have a currency effect of minus 2%. And the net sales amounted to SEK 299 million. The profitability is below our target. And here, especially, we can see that the new bid segment had a negative result in the quarter, but also the renovation segment was affected by lower volumes in some companies and also downward revisions of contribution margins in individual projects. And here, it's also important to highlight that the project can still be profitable, but -- and when you have late revisions in a project and you're using the percentage of completion as we are doing. There is a hit on the result in the actual period. We have taken extensive actions during 2025 on cost savings. But even though we have done so, the result is not good enough. And we are, of course, not satisfied with the existing profit level that we now show in this quarter. And therefore, we also continue with our cost savings measures and also the structural measures onwards here for the -- we worked with it during the first quarter, and we continue to work for it also onwards. So let's go over to the market update. We start with the Nordic markets. And here, we can see that the trend of increased activity in the renovation segment in Sweden and Norway remains, but we are concerned that the investment decisions might be affected by increased macro uncertainty. However, we know that the underlying demand for renovation still remains. We can't see a clear market recovery for the Finnish market, and that's mainly linked to that, the new bid segment remains on a low level in Finland. The total order intake increased actually for Balco Group for the Renovation segment, if you look on quarter the first quarter 2026 versus 2025. The Danish market remains challenging for us. We can't see a clear market change in the market, even though actually also here, the order intake increased, but we can't see a clear change on the market yet. If you look outside the Nordic market, we see that the potential in the U.K. new build market remains substantial. We have strong competition on especially bigger projects in the London area, where we can see some price pressure following it. But we hear -- we actually focus on other projects and also focus now outside the London area. The renovation market in Germany continues to show good underlying demand, and we have a good result here that we implemented the recoating into the market for expanding our offering for the premium brand -- we have taken new orders with the recognizing during the first quarter, and there are more projects under discussion. Our view of the Maritime segment remains positive. The current order backlog at the shipyard indicates potential for additional orders to bulk go ahead. If you look on the newbuild segment, especially here in Sweden, we have seen some smaller positive signals, but that is from very low levels. So I hand over to you, Viktor, for the figures.

Thank you, Camilla. If we look at the quarter 1 and start with the net sales, it amounted to SEK 299 million versus SEK 36 million last year. Organic growth was minus 3% and currency effect was minus 2%. Adjusted operating result amounted to SEK 0 million versus minus SEK 3 million last year. and the year's figure corresponds to an adjusted EBITA margin of 0.1% versus minus 0.9% last year. Order intake amounted to SEK 270 million versus SEK 275 million last year. The order backlog increased by 21% to SEK 1.483 billion versus SEK 1.238 billion last year. Adjusted earnings per share amounted to SEK 0.01 versus minus SEK 0.24 million last year. Earnings per share amounted to minus SEK 0.03 versus minus SEK 1.31 last year. And the operating cash flow amounted to SEK 32 million versus SEK 1 million last year. And if we turn to the operating segments and start with the Renovation segment. The net sales in the quarter amounted to SEK 229 million versus SEK 236 million last year, corresponding to 77% of the total net sales versus 75% last year. Order intake in the quarter amounted to SEK 211 million versus SEK 208 million last year, corresponding to 78% versus 76% last year of the total order intake. Adjusted operation SEK 3 million versus minus SEK 5 million last year. That corresponds to an adjusted operating margin of 1.2% versus minus 1.9% last year. Order backlog amounted to SEK 1.48 billion versus SEK 991 million last year, corresponded to 70% of the total order backlog versus 80% last year. Turning to the new build segment. The net sales in the quarter amounted to SEK 70 million versus SEK 79 million last year, corresponding to 23% versus 25% to total net sales last year. Order intake in the quarter amounted to SEK 60 million, SEK 67 million, corresponding to 22% versus 24% last year. Adjusted operating result in the quarter amounted to minus SEK 2 million versus SEK 2 million last year, corresponding to an adjusted operating margin of minus 3% this year versus 2.8% last year. The order backlog amounted to SEK 445 million versus SEK 247 million the last year, corresponding to 30% of total order backlog versus 20% last year. look at some more financial figures. At the end of the quarter, the group's equity amounted to SEK 78 million versus SEK 757 million last year. The equity asset ratio was 44% versus 47% last year. The interest-bearing net debt, including leasing debt in relation to adjusted EBITDA amounted to 5.5x, down from 6.0x in the end of last year. And a reminder, in December 2025, a waiver was obtained together with an amendment to the existing credit agreement, and the covenants are within this agreement. Then I hand back to Camilla.

Thank you, Viktor. Thank you. So then some concluding remarks and also the outlook for the coming year. We see -- estimate the continued improvements in the renovation activities in Sweden and Norway, and we continue to be cautiously optimistic about these markets here ahead. And we believe in gradual recovery in Finnish renovation segment and we have also seen some signals of that [indiscernible] and at the same time, we estimate the Danish market to remain challenging during the year even though that we had a higher order intake in the start of this year versus last year. And overall, in the Renovation segment, we will say that the geopholatical uncertainty is creating a more cautious and uncertain outlook, but as we said several times before, the underlying demand remains within -- in the Nordic newbuild segment, we expect a slower recovery, and this is actually particularly for the balcony companies. For the passage companies, we have seen a better improvement than for the balconic companies. We see also potential for further growth, both in Germany and the U.K. And we also have a positive outlook for the Maritime segment. And here is supported by the strong shipyard order intake. And also then we have a broader product portfolio now where we have also the sliding doors to offer to the shipyards. The profitability is much below our targets even though we're taking all the actions during 2025. And therefore, we continue to focus on profitability improvement measures I will also continue to work with our capital structure. And that was all from us.

Thank you so much for the presentation here, and we will now carry on with the Q&A. [Operator Instructions]. We have a first question here. Sofia Sörling from Carnegie.

Do you hear me now?

Yes, we do -- great.

So my first question is related to the newbuild segment. I was curious if you could give some more color on the losses in the new build segment during the quarter because I can see that in terms of the revenue levels, you have similar as Q3 last year, but still we had a profit. So what's the reason for losses in this quarter? And is it something that we should take into account ahead? due to perhaps higher cost or perhaps cost related to the marine orders or yes.

Just as you point out, Sofia, in the new build segment, we have 2 different kind of orders. We have the balconies orders and we also have the maritime orders. And -- in the first quarter here, the Maritime business was performing as it should, but we have some challenges within the bank on companies on the profitability level in the newbuild segment during the first quarter. And that is mainly to the specific projects and volumes.

Okay. So not related to the Marine orders.

No, not to the marine order. No.

Okay. And -- is that something that you see will continue into Q2.

That is why we are taking additional actions on the cost saving structure, and this is mainly linked to the Finnish newbuild segment. So the volume of new build segment in Finland has been on a lower level than expected. And as I said, we don't see any recovery there, and we have taken actions, and we have reduced people manning and we continue to do so during the next coming quarters.

Yes. And when we're talking about Finland, you mentioned that also Finland is a challenging market, both renovation and new build as I understood it, but you also mentioned that Denmark is a challenging market and you don't see a clear recovery soon. Why is that the case for Denmark compared to Sweden and Norway, for example?

In Denmark, we are mainly working with putting on balcony on an old building, but with buildings without balconies today. So there is, say, a new balcony -- you don't have a balcony today, and then you add on something you don't have. And therefore, the investment step is higher than if you already have a balcony and you want to replace it. So therefore, it is a bigger challenge on sort of the recovery for the Danish market, depending on the kind of projects we are working on, on this market. Both the cost-wise, it's a higher investment, but also you don't -- it's easier to postpone something you don't have than to refurbish something you have.

Yes. Understand. So what do you expect need to happen for the Danish market to recover?

I -- what we see is that we don't see any big market. We see, so to say, that it will be -- it will not be worse, for sure, but we don't believe. We maybe so it's a slight recovery, but it's also like that on the Danish market, even though that you have -- with -- as I said, the order intake increased during the first quarter versus the last the first quarter last year. But it takes nearly between 6 months to 9 months before these projects can be a revenue on depending on the very long building permission time and things like that on the Danish market. So that's why I say it takes some while before we can see a real recovery on the Danish market.

Okay. understand. And given kind of a challenging market, how do you experience the competitive landscape at the moment? And what do you expect from competitors during 2026?

EBIT Denmark?

Yes, in the mark in all the other Nordic countries.

In the northern countries in general, Okay. What we have seen in the Nordic countries in general, so to say that we -- the competitors that are there are still there. We -- we don't -- we have not seen, so to say, lately that any of our competitors has left the market. So the competitors are still there. In the Swedish market, I can see that it starts to be a more healthy competition, I would say, even if it's still a hard competition, but a little bit more healthy competition. In the Danish market is still very high capacity versus the underlying demand right now.

All right. And a question on the order backlog or the order intake also during the quarter. Have you experienced any canceled orders or lost orders during the quarter?

No.

Okay.

The order backlog since end of last year, so to say, it has gone down a little bit from the end of December to now, but that is linked to that we had a higher revenue than the order intake. So nothing else.

Okay. Okay. Yes. And maybe my last question. The profitability in the current order backlog, is that more in line with what you want to achieve? Or is it more Yes. Is it in line with current profitability? Or is it in line with the higher level that you expect?

Sofia, Victor. Yes, what we see that there should be a healthy profitability in the order backlog we have -- and as Camilla mentioned here before, we have seen some deviations in the last quarter. So from what we can see now, the profitability in the order backlog is good.

Thank you for those questions. We will now carry on with some questions that have been sent in to us here. What are the key growth drivers for Balco Group in Q1 2020?

The key growth drivers, but we didn't have any growth. So a I'm not 100% sure I understand the question because the key growth drivers is, of course, the renovation, so to say, the renovation segment, if we look on a total general level, not quarter 1, but in general, I will say the key growth drivers is the renovation and the underlying demand for renovation in the Nordic countries. That's a key growth driver -- and then we also have a driver in the U.K. and Germany, and that is a new build market. So these are the headlines, I would say, in our growth ahead.

Thank you. Which alternative does Balco evaluate regarding strength in their financial situation, I mean.

The capital structure and that is, of course, something that is discussed within the Board -- and if there are options and if there comes from any authorities or what will -- that will end up, and then we will communicate that.

The geography other Europe has showed good growth for a while. Can you talk about longer-term potential here? How big share of the group revenue can it be in 3 to 5 years? And also, how is the profitability level versus the rest of the group there?

If we look on both U.K. and Germany, there is a big potential. And as I said, it's a big potential in the new build segment. And right now, in U.K., we are more or less, I would say, 100% within the new build segment. And here, we are still a very small player compared to the competitors on this market. So here, we have big potentials ahead. But as I also said here in the presentation, we have seen that in the London area, it's a very high competition because there you have the big projects and everybody wants to have the brake protests and you have price pressures. -- and we want to grow, but we want to have a profitable growth. So therefore, we are actually focusing on a little bit outside London area to make sure because there we can see that the profitability level are on the same level as we expect to have between 5% to 10% on the last row, so to say. So there is where we are going to focus in the U.K. area in the U.K. And in Germany, we have a potential in the new build. And also, Germany is a very fragmented market. There's a lot of players, but the players are quite local on the market. And here, we can see also here on the big projects, there are also some price pressure and a lot of competitors coming into those. And -- we are very selective also here, which kind of projects we take because we want to be on the profit level on the new build in these markets that we can deliver between 5% to 10% on the say, profit level, the lowest level. But there is a big potential on this one, and we still can see a growth in this one. When we come to renovation in Germany, that is very, very interesting actually because -- we made a strategic change 3.5 years ago, where we said that we are going to focus now on Bodega. We know that they have money. They are doing their renovation on a yearly basis, they take it, so to say, houses per houses. And there, you continuously have the same customer having a lot of different houses and we can continue to work with them during a longer period. And there, we have seen a good effect on this strategic decision as we took -- now we are mainly working in the Berlin area and around that one. And we are also increasing actually our resources now in Germany to take also other regions in Germany on this one. So we see a good potential ahead.

Thank you. Have you seen any positive development in project margins, both with respect to actual execution and prospective margins.

Well, as mentioned, we have had some lower deviations this quarter. So -- of course, it's a combination of different factors. So here and now in this quarter, we cannot say that we have had any positive development regarding this.

Do you see any unusual or significant risk to your project margins based on the price fluctuations for steel, aluminum, glass, et cetera? Or is the risk mitigated based on contract or clauses or the likes of it, so to speak?

Well, we do have clauses in our contract with the indices and so on. So of course, we are we do have some insurance in that part. But of course, there are always some risks when it comes to material price fluctuations and so on because these indices are not 100%. So of course, there are some risks, but we do have some mitigating costs in there as well. Could you tell us more about the cost cuts you're doing now? Which companies are affected and how many and what kind of employees.

Yes. What I can say is that we are doing -- I can take it on an overall level without too much details, but we are taking down the resources in Finland. And that's mainly within our Balco company there. We have already reduced a lot with a number of employees there, and we continue to do so. We are also changing, so to say, the location for some of the offices. We do the same in Denmark. We are taking away some people, and we are also relocating our office to reduce the costs. And then we have also a general cost reduction made by some of the other companies also in Sweden. And we have continuously some discussions ongoing, which I can't tell you about right now.

Thank you. That was all the questions we had for today. So thank you all for calling in and sending us questions. And I will now hand over to over to you, Camilla for concluding remarks.

Yes. As on concluding remarks, I would say that, yes, we remain cautiously optimistic, as I say, we have been a little bit -- so say we are a little bit more cautious now depending on the uncertainty we can see in our environment. But as I said several times [indiscernible] and by that, I would like to thank you so much for the interest for participating in our quarter 1 call.