Idun Industrier AB (publ) (IDUNB) Earnings Call Transcript & Summary

Hello, and welcome to the conference call. My name is Carl Korsheden, and I work as an equity research analyst here at DNB Carnegie, focusing on acquisition-driven compounders, with Idun being one of the companies I have the pleasure of following. With me in the studio, I'm joined here by Idun's CEO and CFO, Henrik Mella; and Oskar Samuelsson, who will walk us through the quarter, which will be followed by a Q&A session. [Operator Instructions] So with that said, I'll leave the word over to you and the second quarter.

Thank you, and welcome to this Q2 call for Idun Industrier. A few quick words about Idun Industrier, yes? We are a growing group of industrial companies, 22 companies in total, with a total net sales of SEK 2.5 billion and EBITDA of rolling 12 months, SEK 336 million. We have those 2 business unit, manufacturing and service and maintenance. And we -- in terms of being an investor, we invest in market-leading companies. And for us, the pilot school is very important to our business model. We are a primarily Nordic group of companies and more than 90% of our sales is generated in the Nordics. With that introduction, let's go to this quarter. So second quarter 2026, net sales growth of 12.7% to SEK 668 million. EBITA growth to SEK 96 million or up 7.4%. The organic sales growth was rather slow at about 1%. And -- however, we had a negative organic EBITA growth this quarter of 7.7% or SEK 7 million. That is not something we were very happy with and due to, basically, a couple of companies performing worse than expected in this quarter. We had a solid cash flow of SEK 74 million, slightly more than last year, and also good growing profit per share. In the quarter, we made 2 acquisitions. One of a company called AGB Service based in Kalmar. What they do is the service and calibration of press tools for technicians. What is -- what we call in Swedish BVS technicians. And the second one is a trading company in Nordbergs Tekniska here in Vallentuna north of Stockholm, and they provide highly technical-specialized polymer materials and also make some conversion of them to very profitable and well-run good companies that we are happy to welcome to Idun. One more thing that is worth mentioning on this summary slide is that we made an early redemption of our last outstanding bond loan of SEK 220 million. And this we did end of June. And in the coming 12 months, this should save us almost SEK 8 million in interest. Just to give the overview, the growth is continuing. We used to say that we make 2 to 4 acquisitions of companies per year, and this is exactly what we do and the journey is continuing. If we take a look at quarter per quarter, here, we see the illustration to the right, where we see that we had 12.7% growth, but the absolute majority of this growth comes from the newly acquired companies. And if we take the same look and look at EBITA, we actually see that we had a nice development of the acquired growth, but the organic growth in the period was actually negative. And I mentioned this was due to a couple of company-specific factors. One of them is -- or was Stegaforetagen, our car washing business. They had a quite strong 2025 and are meeting challenging comparison figures. Then we have the LMI Group of companies where we have the company, Interagro Skog selling, products to protect the forest for damages. And here, we were actually affected by the spring storms, and we sold less of the quite profitable product, and that actually had an impact on that quarter because the second quarter is a very important one for that company. Finally, we had EKAB, our business in -- with service technician in high-voltage electricity in the Greater Stockholm area. This is a normal company with a very stable profit levels. But as you say, in Swedish, even the sun has spots. And this was a quarter where EKAB had did not earn as much money as they did in the Q2 2025. I should say that for none of these 3 companies, we have no worries in terms of the long-term development and not even when it comes to the development in the fall. With that, yes, I will show this slide as well with rolling 12 months figures for sales, gross profit, EBITDA, and also the gross profit and EBITA in percent. And we like to show this because it really gives a sign of the stability of the Idun business model because as you can see here, it's -- the growth -- we keep growing and the margins are very, very stable over time, and we intend to continue with that development. And I should say that the recently acquired companies, MEAB, the add-on acquisitions to Wiberger and also Trikaby, AGB, and Nordbergs, they will contribute positively in the next quarters. And if we add those in the rolling 12 months with -- or the coming months, those recently acquired companies will contribute another almost SEK 50 million EBITDA on a yearly basis. So with that, over to you, Oskar.

Thanks. We will start with manufacturing that covers 2/3 of our sales and EBITA roughly. Net sales is up 15.3% to SEK 435 million. And the margin came out at a similar level as last Q2, 16.8% compared to 16.7%. As Henrik already mentioned, we had lower sales within the sister company of LME, Interagro Skog. And on the positive end, we see that Wiberger and Fredahl Rydens continued to deliver strong performance. Trikaby, the technical textile acquired in December, continued to add a good contribution to EBITA and EBITA margin, though, on a lower gross margin than the group. And I can also mention in service and maintenance, we had a small decline in organic sales. But here in manufacturing, we had a positive organic sales and EBITA were down just a few percent. So in line with last year and continue to develop in a good way. Service and maintenance, we had a setback. Sales is up 8.1%, and it's driven by the 2 new group companies, Mouldex acquired in January and AGB acquired in May. And they will help us to improve margins and EBITA going ahead. Sadly, we had both a decline in sales and EBITA organic and around 3% down in sales and then double digits on EBITA declining. And the main drivers for this, as mentioned, was Stegaforetagen that has hard comparable in 2025 due to good volumes in car washes with good gross profit and EBITA margin and also EKAB that had a somewhat weaker Q2 compared to a strong Q1. And if you look at the figures going back even to 2024, we can see that we have increased sales from the period, but at the same time, lowered EBITA with more than SEK 10 million. And what can be added that in 2024, we had really a good economic environment for Stathoga MA Teknik, heavy maintenance for Swedish industry. The same were for P&L Nordic, learning system for both school, but the process industry here in Sweden. And also ILEMA Miljoanalys had a great 2024, where they had a lot of assignments with going in 2024. So we see a decline from the peak in 2024. I think in that year, we had an EBITA margin in service and maintenance of around 16.5%. And now on a rolling 12-month basis, we are on 14.1%. And of course, we want to improve on this level. And hopefully, we will see that customers will continue and improve their investment level from where we stand today. Going to cash conversion and leverage. We have a cash conversion of 58%, SEK 225 million, rolling 12 months or SEK 74 million. We have increased our net debt to SEK 1.070 billion from Q1, that's an increase with SEK 131 million, and it comes from the acquisitions made in the quarter. But on the other hand, we have the full balance sheet in place, but then we will be able to, in the next 12 months, add just under SEK 50 million in EBITA. So we will go from a leverage of 2.8 down to 2.4. We had a bit increased interest cost in the quarter due to the early redemption of the bond. But going ahead, we will be able to save another SEK 8 million with the new bank financing in place. Just quickly on our financial targets. Nothing has changed. We want to increase EBITDA growth by 15% over a period of time, where we see the 5% should come from organic growth, where -- which we have succeeded during the last 5 or even longer period of times, and we feel comfortable of achieving even we are not there today. Net debt divided by EBITDA, less than 3.5, and where we today on a pro forma basis are at 2.8 and then the dividend should be at a maximum of 10% of the yearly profit.

So last slide and to summarize some key takeaways from the second quarter. Net sales growth, almost 13% EBITA up 7.4% to SEK 96 million, earnings per share increasing from SEK 4.2 to SEK 4.4. We made 2 investments in the quarter, AGB Service and Nordbergs Tekniska. Also, we made -- we increased the ownership in one of our subsidiaries, Norotec, from 65% to 77.5%, also another investment. If we look ahead, we do see continued uncertainties. We are not completely out of the woods and perhaps especially for those of our group companies, which sell to the heavy industry in Sweden. But we do see some positive indications from group companies, and we believe that the operating margins should be able to increase in 2026. And we are quite confident with our strong and well-positioned group companies that they will be able to adapt to the market conditions going forward.

Thank you very much for that. So let's continue with the Q&A session. [Operator Instructions] We received a couple of questions already. Starting off here maybe on a question a little bit on acquisition pace and the current debt levels. What would you say is your priority during the upcoming quarters? Is it to reduce your debt level or to continue acquiring companies?

So we have made, in the last 9, 10 months, for Idun quite a few investments in the new group companies, and we are very happy with those investments. As a consequence, our debt level is slightly higher. So I understand the question. And we will continue to look for investment opportunities. We are an investment company always looking for investments. And if we find really good and interesting companies, we will find a way to handle that. But having said that, we are probably in a period in the coming quarters where the acquisition pace will be slightly slower.

Great. And yes, another one question here on -- if you can elaborate a little bit on the cost reduction impact of earlier cost actions and also if -- yes, these are already sort of fully helping the P&L here in Q2 or if you see more impact from those cost initiatives going forward?

No, those, the cost initiatives that I mentioned, will have more impact in Q3, Q4 actually, and going forward. So we are -- the way Idun is run 22 group companies, and they are quite different. So when we talk about cost reducing initiatives, they are really company-specific. So for example, none of the 3 companies I mentioned, where the Q3 results were not as good, they are not in a situation where it would be -- make sense to look into cost reductions. But we do have some other group companies where we have made those and the majority of those cost reductions will come going forward.

That's clear. And another question here, if you would mind helping us understand the one-off type of impacts here -- impacts in here in Q2, allowing you to continue expecting margin expansion during the second half of the year?

Well, there was -- I think I mentioned already with the -- in the LME group with the company Interagro Skog, where we did have a weather-related situation, which impacted actually quite substantially that company and there's not so much to do about that. Maybe a part of it, we will be able to capture going forward, but the bulk not. So that's one thing. If you look at Stegaforetagen, it's also the case in the car washing industry. They are changing the type of machines to a new machine from the supplier WashTec. And of course, what happens when you introduce new machines? There are a little bit more teething problems where you need to maybe -- because this is a service organization, right? And we charge for technicians going out there making service. And if X percent of those service visits are on a guaranteed level or because there's a new machine, you have that impact. So -- and that is what we partly also could see in Q2. More that we have some companies -- in one company, we had to make -- we changed the Managing Director and of course, with that, you have a recruiting, you have an interim solution, and we have additional costs impacting -- this was Sjobergs, I can mention. So we had a couple of those one-off costs that actually impacted this quarter.

Will it be possible to put any numbers into that? I mean, how -- if you take the full quarter itself, if you can say anything in terms of either the sort of organic top line growth or organic EBITA growth maybe even better that was, yes, I guess due to this more one-off kind of factors, how that would look like if we would try to strip out those sort of items from that number?

Well, I can at least say if we would strip out what we call the one-offs, we would have had a positive organic growth. I can say that without giving a specific number.

And that's on the EBITA level.

Only talking EBITA level.

Yes, that's clear. Yes. Also a question here on EKAB. If you could elaborate a little bit more on that. What has occurred this quarter and what one might expect for the upcoming quarters? Were there something specific here in terms of project mix or similar that made this quarter a little bit messy from...

I would say that EKAB continued to deliver strong results year-on-year and has done so since we acquired the company in 2015, I think. So if you look on the long trend, you will see that it continued to develop in a very nice way. In the beginning of the year, in Q1, we had a better sales and EBITA in the company. And now we had a bit lower here in Q2. But if you look on the half year's figures, it's still a decline, but I would say that it's mix of assignments that has been carried out and time when you invoice the customers and so on. So I wouldn't accept EKABs to have a decline going ahead, rather increasing.

That's clear. And yes, I think you touched upon this a little bit already, but as for the net debt coming up a little bit, what would you say is a good level for you or a more normalized level where you aim to be?

Well, we have our financial objectives, which is below 3.5. So I guess we shouldn't communicate any new targets. But I think on that question, both of us have said before that we do think that we will probably try to keep below 3 where we are at 2.8 now. So -- but we are not changing our financial targets.