ES Group AB (publ) (ESGRB) Earnings Call Transcript & Summary

Welcome to Energy Save Q2 2026 Conference Call. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Yibo Zhao; and CFO, Helena Wachtmeister. Please go ahead.

Thank you very much, and welcome to this interim report covering the period of the 1st of January to the 30th of June 2026. I will begin with some short figures. As previously communicated in the quarter, we see a low net revenue in the second quarter of the year. Compared to last year, revenue increased by 30% to SEK 20 million. But compared to the previous quarter, we see a total decrease of 60%. This pattern is mainly the same as the corresponding quarter of last year, where we also had a seasonal downturn and a large effect from ODM/white label customers balancing their stock levels. On the positive side, we are seeing improved turnover on a rolling 12-month basis by 7%. This is indicating a momentum for us moving into the heating season that we consider to be a very positive sign, leaving this low season and this quarter behind us. Sales on our own product brand, ES Energy Save increased by 23% in the quarter, reaching SEK 13.8 million. And the ODM/white label sales increased by 46% to SEK 6.2 million. Both areas decreased compared to the previous quarter, but we saw the largest decrease in the ODM/white label sales segment. Cost levels are still balanced and are still also decreasing. We saw in the quarter an OpEx decrease of 7% approximately compared to last year. The low seasonal revenue in this quarter resulted in a negative EBIT of minus SEK 13.4 million. This corresponds to an EBIT margin of approximately minus 57%. We are currently now in a shift of refrigerants. So we are switching to propane across all our product lines. Worth to mention in this quarter is that even though we have low levels of sales, we do have the highest levels of sales so far in the R290 segment in our own brand ES Energy Save sales. So this is also something indicating a momentum for us moving into the heating season.

Thank you very much, Helena. We, as Helena has said that we do see that both sales and demand for our own ES Energy Save branded units are growing the market in both residential and commercial, we are also growing in our ODM/white label sales. During quarter 2, we initiated a spare part partnership together with JS Energi in Sweden. This is as we are increasing our population in Sweden, we're getting prepared for a long-term collaboration when it comes to spare part distribution within the Nordic countries. We'll come back a little bit more on this later when we go through the numbers on the region. Also on the second quarter, we changed the name of our company name from ES Energy Save Holding AB to ES Group AB. This is to clarify in part of our strategy when we go to market with both ES Group, we have the capabilities, competency, product platform to do within white label, meanwhile differentiate our own product brand of ES Energy Save. This enables us to be able to go to the market on the path and more clear in our communication also toward the investors. After the end of the quarter, we secured a financing of SEK 17.8 million gross capital to strategic investors. And with the money, we aim to continue to accelerate our growth in the ODM/white label segment and also the commercial business segment.

Okay. And with that summarized, we are looking in a bit more specifically on the numbers here. Net revenue and operating income here, you can see clearly the pattern is the same as the second quarter of last year. We saw an increase from low levels in net revenue by 30%, reaching SEK 20 million and an increase in operating income by 42%, reaching SEK 23.6 million in the quarter. This is also where we can find that we have on a rolling 12 months an increase in net revenue by 7%. So this is the momentum I mentioned earlier. Looking into the business area split of -- in the quarter. We see an increase here both on the residential property side and on the commercial property side. Residential property sales increased by 30%, reaching SEK 17.3 million in the quarter. And on the commercial property side, an increase by 36% to SEK 2.4 million in the quarter, approximately. This increase on both segments is increased sales of R290 units. So this is a very positive indication. The increase in the commercial property is actually big enough that the sales on the commercial property this quarter is approximately 50% propane units now. So that's very a good number for -- looking forward.

Well we can also add here to this is that by end of quarter 1, we launched -- formally introduced our R290 for commercial units to our distributor to the market. So the units that we distributed over the second quarter are mainly first installations where we supported and trained our distribution network with training programs to secure that they have confident and good start-ups. So we -- with all the good things we have done in the second quarter, we expect that we can accelerate later on the second half of this year.

On the brand sales split, we see. I mentioned on the first slide -- first slide, an increase on our white label sales by 46% in the quarter. This is from low levels and Energy Save, our own brand sales by 23%, reaching SEK 13.8 million in the quarter. This was also an increase on both sides to the comparison quarter, but a decrease to the previous quarter. I move on to the geographical split of sales. Here, we can see an increase on the Scandinavian market by 208%. This is also from low levels, but still a significant increase, reaching SEK 4.8 million compared to SEK 1.6 million in the comparison quarter of last year. Europe, except from Scandinavia, increased by 10%, reaching SEK 15.2 million compared to SEK 13.9 million in the comparison quarter. The increase here on the Scandinavian market has mainly 2 reasons. First off, we have seen an increase really throughout the year, but especially in this quarter in sales activities, promoting older refrigerant units, mainly on the Swedish market, but we also see a positive increase overall to sales on the Danish market. So this is also a very positive sign.

What I can add on this topic is that we are increasing our population of heat pumps, ES Energy Save brand heat pump in the Scandinavian market. For this reason, we do see that, okay, in order to deliver a good customer satisfaction throughout the lifetime of heat pump, we needed to collaborate with JS Energi. So we enter alliance and partnership together with them where they can help -- they are very skilled in [ distributing ] spare parts throughout the Nordic market. So we enter an alliance partnership together with JS Energi in order to save -- say to secure a future high service level to the customers that has -- or to the end customer that has acquired ES Energy Save brand [indiscernible].

Exactly. Heat pumps sold, we have sold 405 heat pumps in the quarter. This is to be compared with the second quarter of last year, where we sold 247 heat pumps. Yes, I think I'll be moving on from that to the OpEx slide. No, sorry. So the OpEx, and I mentioned it on the first slide, a 7% decrease in overall costs. The split here is a decrease of other external costs by 13% from the comparison quarter, reaching SEK 8.4 million in the quarter. In the comparison quarter, OpEx -- other external costs was SEK 9.7 million. Personnel expenses slight decreased by 1%, reaching SEK 10.4 million in the quarter. All in all, OpEx for the quarter reached 18.8%. And this is a sign, we believe, both to our now stabilized costs, but that we are still having a continued cost awareness and decreasing costs where possible. Moving on to the EBIT and margins. As we expected, we have a low EBIT margin for the second quarter. This was negative by minus 57%, following a similar pattern as last year's second quarter with season and ODM/white label customers balancing their stock. Gross margin, also worth to look at decreased to 25% in the quarter compared to 29% last year. This is affected a lot by the increased sales activity on the Nordic market and overall promoting older refrigerants. And with the rest of the quarter having an otherwise low revenue, the effect is larger than it would be a normal quarter. I also want to say on this slide that we do expect to improve margins moving into the heating season. Looking at the balance sheet. We noticed a continued decrease here in our stock levels. This is as in previous quarters during the year and also last year due to a continued sales activities, promoting the older stock units and with the older refrigerants, really, we are in a shift there moving into propane over time. So at the same time as we are promoting these older units, we are also stocking up on R290 on propane units. All in all, we do have a very healthy stock level, and we will continue this work to phase out phase in propane products to phase out the older refrigerants. Yes. About the cash flow, Total cash flow in this quarter was minus SEK 4.2 million. This is to be compared to cash flow in the comparison quarter last year, minus SEK 8.6 million. All in all, cash decreased by 13% and cash at the end of the quarter was SEK 18.4 million compared to SEK 20.7 million in the comparison quarter last year. Very good. Okay. So summarizing a bit about the specific achievements and milestones that have been reached in the period. We did increase net revenue for both our own brand and the ODM/white label sales, but we did that from very low levels for the quarter, and we do expect better revenue levels moving on. If you look at the rolling 12 months, you can see that net revenue has increased by 7%, which is a very good sign for us and showing momentum moving into the high season and leaving this low revenue quarter behind us. Even though we did have a seasonal low net revenue, we did achieve the highest quarterly net revenue for our propane unit, our R290 units than we have before on our ES Energy Save brand, that is. And here, we saw increased sales both on the residential side and on the commercial property side. On the commercial property side, of course, we haven't had an updated refrigerant in a long time. So this is a particular success on the sales side. During the quarter also, we did change the company name to ES Group, which is the name of the company now. Yibo mentioned a bit about the reasons for that before. We want to specify ES Energy Save as our own markets, own brand and separate it from other customer brands. And during the quarter, we also started a spare part partnership with JS Energi to cover the Nordic regions and to increase our market and sales availability in the Nordic market.

All right. Look at the future moving forward now. EU published the EU electrification Action plan that proves electrification will continue to have a very high importance for the European future. It basically said that EU is being very dependent on the fossil fuels today and you need to build more internal resilience toward the dependency on the external factors. Especially during quarter 2, we had a very turbulent situation in the global world with the Iranian war that fueled up the different energy prices. And by the electrification plan, it addresses the importance to electrify Europe and being self-dependent to create resilience. And what is interesting here is the position of heat pump industry and ES Energy Save's position in that industry. What the plan says is by 2030, EU has identified 2 main -- 3 main bottlenecks when it comes to further develop the heat pump to build up the resilience. Number one is the primary initial installation and purchase cost for the heat pumps. Secondly, is the running cost of heat pumps. Thirdly is the installation lack of installers. So all the 3 topics are being handled in the EU electrification action plan. Number one, installation cost EU is promoting and currently these membership -- member countries to reduce the taxes or increase subsidies for the initial purchases of deploying more heat pumps. The plan is to grow from 2.5 million heat pumps to 4 million heat pump per year. The second when it comes to running costs, the ratio between the gas prices toward electricity prices is going to be kept within 2.5. And what does that mean the price of the -- if we convert the prices into heating efficiency, so to say, 1 kilowatt hour of fossil fuel cost 1 unit of currency. Meanwhile, 1 kilowatt when it comes from electricity, 1 kilowatt hour will cost 2.5 kilowatt hour unit of currency. And this means that if we add also the heat pump industry's efficiency to that, that means we converting 4 kilo for ES Energy Save branded heat pumps, the efficiencies -- the COP value is top level at 4.0, meaning getting 4 kilowatt hour of heating will cost 2 unit of currency. Getting 4 kilowatt hour of heating power in fossil fuel will cost 4. This year, we have a gap of 1.5, which means that this creates the possibility for the heat pumps to be more cost efficient only also on the running costs. And the last part is the installation bottleneck that is going to create more installs when it comes to heat pump competence. Everything will also be cleared out later when the EU published the different subsegments on this action plans, but we welcome the plan for electrification action plan as a part of important role for the rolling out even more heat pumps to the European market and build the resilience. We also had the capital markets on director share, as I said before, and we will further promote and develop our business here in the white label segment as well as our commercial business segment. During second quarter, we accelerated our training programs toward the different distributors in our network and the installers. So we had good training on them, both on the hardware and also on the digital solutions. And we are eliminating or we're mitigating the different bottlenecks of deploying more heat pumps in the market. Number one is the cost of project management more quickly to address the different scenarios when it comes to that and the different products needed for the different heating needs. And secondly, it's also that we have trained the distributors and installers to -- with ES heat pumps to quicken the installation. By quickening the installation, we actually mean that it will go -- the same installer has more time to deploy more heat pumps on the market rather than compared to the competitors' efficiency when it comes to efficient installations. And this strengthens our position in the value chain. So now as we are moving into the heating season, if the orders materialize, we target to approach breakeven for the full year of 2026.

Very good. Okay. And with that, Yibo, we will now end the presentation and move into the Q&A part of the presentation.

[Operator Instructions] The next question comes from Lara M. from ABG Sundal Collier.

I hope I'm audible. just a couple of questions from me. Well, you said that you expect your margins to improve and commercial is already around 50% of propane. The old refrigerant stock is basically cleared. You have -- can you give any sort of indication of where the gross margin could land? And does the propane range carry a higher margin than the units it replacing? Just maybe give us some flavor on that.

I think the largest variation we will see on the gross margins is between the Commercial segment and the residential segment. The residential segment will likely remain similar margins to the margins that we have had historically on [ Villa ] units. But on the commercial side, we can see higher margins likely. This is the historical pattern at least, and we believe that will continue. But as always, our -- I would say the margins that we have had before around 30% is a reasonable level. But we are affected, of course, if there is a lot of sales within -- that we have direct deliveries for that usually lower gross margins, but increased overall turnover. Therefore, it's hard to guide towards this will be -- we will be around 30% because we will always choose higher turnover, and that might affect margins a bit, but of course, contribute more to EBIT. So I hope that's not an answer, not crystal clear, but that's our aim.

Yes. That was very clear. And in your report, you guided for to reach breakeven for the full year. And if we just look at the first half of the year, EBIT is around minus SEK 17 million. So that's quite a large swing into H2. Could you maybe help us on the bridge how much is maybe from postponed white label volume versus maybe cost improvement and well, yes, just give us some more flavor on this.

Both will contribute increased revenue and cost cuts, but mainly, it will come from revenue in the heating season. So that will be the main contributor to us approaching breakeven for the full year.

I think over the past 8 months, the -- we can see stronger and stronger tendencies that our traditional seasonality is coming back. And this will, of course, affect our planning. And we are seeing that with our business model, the bigger volume will come on the heating season after the summer period where people are entering the winter. Let us remember that 2026, we started with a record low temperature, record long winter in Europe. And now when people are coming back, people need to secure their homes and facilities up in those with the heat pumps. And especially now with the electrification action plans published, I think more and more -- there are more and more, how to say, incentive to switch to a heat pump from traditional fossil fuels.

And this is -- you can also add that this is very true for the residential segment, right? For the commercial segment, it's very possible that we won't see that kind of tendency to increase seasonal variations, but a more even pattern on that effect.

And these orders that you're expecting in the second half, can you tell us maybe how much is actually contracted versus maybe just forecast that you're leaning on? Essentially, I'm just asking how confident are you that H2 will pick up?

I understand. Yes, we expressed this in the way that it's planned orders. So we can't -- we don't really comment on our order stock and we don't comment on specific customers. But we do feel pretty confident that if the orders that we do have planned today materialize, then we will be able to approach breakeven for the full year.

[Operator Instructions] The next question comes from Karl Bokvist from ABG Sundal Collier.

My first one is more of a market dynamic question. We see quite large differences in how different countries in Europe are growing when it comes to heat pump volumes. So given the fact that the last couple of years, you've been both on your own, but especially with partnerships trying to establish a presence also outside the Nordics. I'm just curious to understand a little bit how you feel positioned in key markets such as Germany now, for example, which are growing very strongly when we look at overall volumes.

Yes. To answer that, we really need to separate the ODM/white label customers where we don't always have a full -- we know which markets those customers are present in, but it's not -- we can reach markets via those customers, but we don't have a full sight into their sales. But then on the ES Energy Save sales side, especially with the propane units now, we are noticing that we are entering markets that have previously been small for us or nonexisting even. So sales on that side are stronger than before on the Spanish market, for instance. On the German market, am I missing something?

Italian market? On the Italian market. So this is also part of the reason we're increasing our trainings to the customers and in those countries. We do see a strong momentum, also a strong interest for our brand. But as ES Energy Save is a smaller brand within the resource, we try to focus our resources where the trainings or where we get the maximum effect. So as a new brand -- new smaller brand to compete with the bigger brand, it will take us some more time to -- or it will take us longer time compared to already established brands to get the process. But when we do that, we are quite confident with our unique selling points, with our digital tools, with our very good heat pumps, we're very confident that we will see to develop those markets further.

Understood. And also just a follow-up on Lara's question before here about orders towards ODM and so on. And you briefly talked about this a little bit, Helena now, but is there any way you can kind of keep track of the performance either through distribution channels or kind of market data that you do have access or i.e., that you have a bit of a sense at least that your customers are selling a certain number of volumes and that you will, therefore, be prepared for an upcoming order, for example?

Yes. Of course, we have a very close collaboration with our customers and receive a lot of information from the -- from them that we don't can't really forward. But we know, of course, approximately what markets they are pressing. And those are also, I would say, overall, the same markets that we aim to grow in, that is Germany, the U.K. and Italy also.

And finally, just a bit of a reminder perhaps. But when it comes to the heat pumps just function, what we talked about now in some other cases during the summer with heat waves and so on, of course, also the European Heat Pump Association has tried to advocate for the heat pumps dual function use that it can also assess a cooling technology. So can you just remind us how you are positioned technology-wise in the dual functionality of a heat pump?

Yes. Our heat pumps are available. We have -- our heat pumps are available with our portfolio for also the cooling -- we have heat pump, we have [indiscernible], we have a competitive portfolio. And this is also where you can see an interest from, for example, the Italian market as we are delivering more and more heat pumps to those markets.

And that has been clear in product development for a long time that it will be a dual requirement in some countries even actual requirement, I think, for subsidies and so...

We are seeing an interest demand in those units. So we need to be better prepared also for the coming years to also be more communicated in this -- also in the cooling modes for heat pump products.

There are no more questions at this time. So I hand the conference back to the speakers for written questions. Any closing comments.

Thank you very much. And we do have a couple of written questions here. Let's see. Start here. Yes. This question, we have touched on, but it could be a good thing to clarify. So the question is, the report notes that second quarter revenue is low because people buy fewer heat pumps during warmer months. What are you doing to make your sales more stable during the spring and summer? And I think we mentioned this a bit regarding our different business segments that we have -- we have had a low revenue for a while now on the commercial side, which stems a lot from product updates. We haven't shifted the refrigerants as frequently for the commercial products. So therefore, just increasing that sales side, which we aim to and now have a great possibility to do, will stabilize sales throughout the year.

And also increasing on our commercial segment to balance that more because the commercial side is less volatile when it comes to seasonality.

Okay. Moving on. So the second question I have here is regarding the company name. The question is why did you change the company name from ES Energy Save Holding to ES Group? And then there is also how does this help you grow or find new business partners? And obviously, not the name change on its own, but the clarification has some form of value actually in the market.