Balco Group AB (BALCO) Earnings Call Transcript & Summary

Hello and welcome to today's presentation. We have a Q&A and presentation. [Operator Instructions] And with that said, I hand it over to you guys, and I'll be back on time for the Q&A. Floor is yours.

Thank you. So welcome, everybody, to our report reporting of the Q3 period and also Balco Group up to today's date. Thank you for taking your time. And for those who haven't been with us before, very briefly, Balco was found in 1987. We have our head office in Vend we operate mainly in 2 segments, renovation and new build within Balcones. I think we're not going into all those details, as you probably know, but I can say that we have a very strong position with the Board offering throughout different entities in the Nordics, primarily in Sweden and Norway. And we really don't see any signs of that position weakening on the contrary, actually. Contributing part to our focus on our core business and our core markets has been that we, during this quarter is continued our local operations in the Netherlands. And we also consolidated our operations in Sweden, while we see good growth opportunities in Germany and U.K. as well in the maritime business as we are quite small in U.K. and Germany and a very strong position in maritime. So that's actually a snapshot of the Balco Group, where we are right now. So from that, I'd like to jump on to Q3 highlights. We see -- we feel the order intake remains satisfactory, on satisfactory levels, and we do have a strong order book. So again, as I said last quarter, the market is there, that's not our challenge at this point. We are trying to define further steps we can take to decrease time between order and revenue and we have come a little bit on that path. We have which you can see actually in the net sales, even though it's very early to say anything, taking big conclusion on that. What I think it's important to mention here is that we do have items affecting comparisons versus last Q3 of minus SEK 88 million, where write-downs of assets are SEK 79 million of those. Also I think it's very interesting and good to announce that Charlotte Mattsson, now has been appointed as a new CEO, and she will start sometime in Q1 '27. We have, as you've seen, taken extensive measures reducing -- we reduced our workforce with about 60 people, about 10% of our total employment rate. We have integrated TBO-Haglinds in RK Teknik, and we also integrated Stora Fasad into Balco AB. And as I mentioned, discontinued our low corporations in the Netherlands. And the property that previously owned by TBO has now been sold. And we'll see that in the figures in November. I think that's mainly what I would like to mention on the Q3 highlights. I don't know if you want to take us on victory in the quarterly results and walk us through those.

Yes, absolutely. Thanks. Let's look at the financials for the Q3. Net sales, as mentioned, amounted to SEK 295 million versus SEK 277 million same period last year. We had an organic growth of 6% and a currency effect of 1%. The adjusted operating result EBITA amounted to SEK 1 million versus SEK 3 million last year and corresponding to an adjusted EBITA margin of 0.5% versus 1.1% last year. The order intake, as mentioned, amounted to SEK 220 million versus SEK 222 million last year. The order backlog was SEK 1.571 billion versus SEK 1.377 billion the year before. The adjusted earnings per share amounted to minus SEK 0.21 versus minus SEK 0.23 last year. Earnings per share amounted to minus SEK 3.23 versus minus SEK 0.23 last year. And the operating cash flow amounted to minus SEK 12 million this year versus SEK 3 million last year. If we turn to our segments and looking first on the renovation segment. In the quarter, the net sales was SEK 226 million versus SEK 206 million last year, corresponds to 77% of the total net sales versus SEK 75 million last year. The order intake in the quarter amounted to SEK 165 million versus SEK 188 million last year, that corresponds to 75% of the total order intake versus SEK 85 million last year. The adjusted operating profit in the quarter amounted to SEK 4 million versus SEK 2 million last year, corresponding to adjusted operating margin of 1.7% versus 1.2% last year. The order backlog amounted to SEK 1.19 billion versus SEK 1.07 billion last year, that corresponds to 71% of the total order backlog versus 80% last year. On the new build segment, the net sales in the quarter was SEK 68 million versus SEK 70 million last year, corresponding to 23% of the total net sales. Order intake in the quarter amounted to SEK 55 million versus SEK 33 million last year, corresponding to 25% of total order intake. And the adjusted operating profit in the quarter was minus SEK 3 million versus SEK 1 million last year. That corresponds to an adjusted operating margin of minus 3.9% versus 1% last year. The order backlog amounted to SEK 462 million versus SEK 269 million last year. If we turn to the financial position. At the end of the quarter, our equity amounted to SEK 668 million versus SEK 744 million last year. The equity asset ratio was 43% this year versus about 44% last year. The interest-bearing net debt, including leasing debt in relation to adjusted EBITDA amounted to 7 -- sorry, 6.7x versus 6.8 last year. And as we reported before, we have a supplement agreement with our principal bank which entails time limited leasing of our loan terms. And I hand back to you, Johan.

Thank you. So a quick report here. If I summarize this, I mean, we do remain confident that we have a strong position. We have a strong order backlog, and we're supporting that with a sufficient order take that is pretty much in line with what has been for a while. And as we continue to focus really now on higher margins, increase efficiency and to reduce restricted capital, tied up capital. That's our main focus is right now. The market is there, so we can focus on that. And also, we're simplifying the group structure really getting back to more core, which frees up resources for us to focus on the core business in the prioritized markets we have. And as you've seen, we initiated that work. We've done quite a lot in that line -- in line with that during Q3. And we expect a gradual improvement keeps going here. in the operational and financial result has impact from these measures we've taken the structural measures evolve. And that's really -- yes, that's where we're at. And Yes, I think that's pretty much it. And then of course, we're open to answer any questions you have regarding this.

Yes. Thank you so much for this presentation. We'll now open up for a short Q&A session. [Operator Instructions] The first question we have received is, please remind us of the timing of execution of the maritime orders. Well, some of the revenue generating already start in Q4 this year.

Yes, I can answer that. Yes, it's already begun, so to say, generating revenues. So it will continue to do so for the coming years, but it has started this year. So that is something that we have already had revenue from.

Yes, thank you for that. The next question we have is, have you seen any green shoots as of late or during the year so far. For instance, do you see some renovation work, Fasad renovation or other smaller renovation work picking up faster than the more investment-heavy new [indiscernible] projects.

I think we -- I think we're staying -- I mean the market is pretty much -- we're living with the market as the market has been for quite a while. We don't expect any help in the market picking up right now, neither in new build or renovation, but we think we are quite well positioned in both of them corresponding to the market the way it is. We have seen maybe a slight little better market in primarily Sweden and Norway in the new build, but there's nothing we really calculated on. We just do everything we can to be as good as we can every day in the marketplace we're at. So we don't expect any fast upturns. We haven't seen that yet, no.

Yes, thank you. Do you see any significant difference in customer behavior between the countries? And if yes, what do you consider to be the underlying reasons?

Yes. I mean we are very different in different markets. And the customer base is very different in different markets. So that's kind of a [indiscernible] itself. I mean, behaviors between customers in U.K. and typical customers in Sweden is quite different. So -- but it's nothing that's changing now. It's still that way. We don't see any customer behavior changes in a specific market from what it was before. But that's one of the reasons for us to be in different markets because it even allows the risks and even us be up. So the different -- behaviors is very different. We take, for instance, we take Finland. We have a very dead new build. We see upturns in the renovation. In Sweden, we start seeing maybe a slight pickup in the new build, et cetera. So it's very different. And we also have different offers in different markets.

Yes. The next question that I have is, when will the new underlying cost level, so will Q4 this year already represent a clean quarter with the new ongoing cost level.

No, it will -- maybe you can help me, Viktor. But really, it's -- we start seeing -- it starts picking up the results or what we've done start showing in Q4, but then it will take some time for us to reach full effect, I would say, sometime in Q2, probably a full effect next year. But it starts showing now. I will start seeing it. But it's a gradual improvement. What you have to say there, Victor, anything to add there?

No, no, I agree.

Yes. How many employees do you reckon to be year-end compared to the current 515.

Well, we have -- the measures we've taken now we're roughly -- what we foresee right now it's -- we're roughly going to be pretty much the same as we are right now, end of Q4.

Yes. Thank you for that. With Charlotte Mattsson appointed as incoming CEO, could you walk us through the onboarding process and how you plan to ensure a smooth transition and rapid ramp-up in terms of operational and business understanding.

Yes, sure. No, Charlotte, she's going to join in Q1, but we already started that process. I communicate with Charlotte on a regular basis. And she's very much up to date with what we're doing and onboarding in that term has already started. So I foresee a very smooth process when she's getting on board. And I'm really happy to -- it feels very good to hand over to her. I mean we've done a lot of work, and I think it's going to be perfect for taking over and evolving building the company from where we are there. And we have a very open discussion about where to be then and how to do things. So she's very much -- she's getting on board already.

Yes. Thank you for that. Norway grew in Q3. Was that renovation or new build? And did it come from product catch-up, after the cold winter or from underlying demand. Our project margins there improving.

We have Norway. Norway is a very interesting -- still a very interesting market for us. There are good margins for us there. And we are -- do have done changes during Q3 in Norway to capture those opportunities we have there. We also have had some -- we had some projects during end of '26 beginning -- sorry, end of '25 beginning '26, where we didn't do in specific project for specific reasons. We have repaired that. And so Norway figures are not really representing the opportunities we see in Norway, without some screwups there, and we have taken measures not to do that. So we foresee a positive growth in Norway going forward.

I can also add that Q3 is, of course, the, so to say, shortest quarter as well. So specific projects can impact the sales on markets quite drastically. So it's also a bit of a timing effect, I would say, when you're looking at the net sales.

Yes, thank you for that. Next question is how do you see customer engagement development? Are customers withdrawn choosing other suppliers, shipper solutions? Or do they stay with you?

We foresee that they're staying with us in a very big portion. We think we have a very strong offer. And we -- the customers like us. So we don't see that customers don't choose us. We're actually the opposite. We have a very strong order intake, and we take that on value and by bringing our customers really high value. So we -- the customers like us very much.

Yes, thank you for that. Renovation order intake fell to SEK 165 million. and renovation backlog was flat. Our housing associations and property owners actually releasing deferred projects? Or are you being selective on margin?

Victor. I didn't really -- could you...

Can also there is the timing. I think we usually say that we shouldn't put too much emphasis on single quarters when you look at the order intake, and it's the same here that we have quite large projects. So if 1 project falls in 1 quarter or just the days in the next that can affect the order intake quite a lot. So as Johan mentioned before, there can be a little bit of a hesitation once we get an order until that project actually starts when it comes to getting building permits and so forth. But we don't see any big change in the customer behavior during the year so far.

Yes, thank you for that. Can you please quantify the annual savings from the restructuring? And when will it be fully visible in the P&L.

We have -- roughly we have taken our salary cost for SEK 45-plus million, out of that was about 50% white color, so about SEK 22 million. And then when it comes to SEK 22 million, SEK 25 million. And then when it comes to the other part, we are using other resources to help us to do a lot of the work on site. And it's really hard to calculate exactly how much. Because there's two parts of that. One is, of course, the pricing of our own personnel and the other one is the inefficiency or deficiency of our personnel. So we calculate on somewhere around SEK 25 million. And as I said before, we're going to have full effect on that Q2 at the end -- sorry, during Q2 '27, but we already start seeing effects of it.