Investment AB Latour (publ) (LATOB) Earnings Call Transcript & Summary

Good morning, and welcome to the presentation of Investment AB Latour Interim Report for the Second Quarter 2026. [Operator Instructions]. And with that, I hand over to CEO, Johan Hjertonsson; and CFO, Mikael Albrektsson.

Thank you very much, Katarina. Welcome, everybody. This is Johan Hjertonsson, and welcome to our repetition of the Q2 report. I'm here together with our CFO, Mikael Albrektsson. So the presentation is divided into 2 sections. Firstly, we will walk you through the at Group's development in Q2, commenting on the development for the investment portfolio and the wholly owned operations and then we open up for questions together with Mike. And then we have a second part where we will make a deep dive into Nordmark groups, 1 of Latour 7 wholly owned operations. And there, we will invite Daniel Vesper, CEO of Nora Group for this section. And finally, we'll have a Q&A session altogether with Daniel on the Nonagro presentation. So if we go to the first slide, I would say, on commenting overall, solid second quarter performance, supported by positive market developments, especially toward the end of the quarter. Order intake grew organically by 13% and net sales by 4%. Adjusted EBIT amounted to SEK 999 million with a margin of 13.8%. The order backlog increased to just over SEK 8 billion, which provides a solid foundation for continued growth in net sales going forward for the remainder of the year. As you all know, geopolitical adversity remains with delays in some project start-ups as 1 effect. Our assessment is that no business has been lost, rather deliveries and revenues that has been postponed to upcoming quarters. The turmoil in the Middle East, unfortunately, continues However, Latour has limited exposure to the region and no material negative impact has been identified or recorded to date. I will comment more on the financial outcome in details later in this presentation. and the investment portfolio has seen some activities during the quarter. In May, we made a partial divestments of our holdings in ASA ABLOY and in cuts -- and this is something that we don't do often, and it's important to emphasize that we remain as the largest shareholder in both companies with full support for their respective long-term strategies. -- by realizing a small portion of the value created in AallonSecurites, we can continue to develop and expand our wholly owned operations as we communicated earlier. The acquisitions activity in the wholly owned operations has been high during the quarter with 5 completed acquisitions. And thereby, I'd like to hand over to Mike to comment on our net asset value development. So over to you, Mike.

Thank you very much, Johan. And when summarizing the first half of the year in figures, we can conclude that the net asset value decreased by 3.7% during the 6 months, and this is adjusted for dividend and amounted to SEK 203 per share to be compared to the 6 Rx that increased by 8.1%. And the share price at the end of June was SEK 193, which means that there was a discount of 5% compared to how we present the net asset value. And as of yesterday, the net asset value was SEK 204 per share, and the share price on the same day closed at SEK 188, which gives a discount to our way of describing the net asset value of about 8%. The consolidated net debt decreased during the quarter from SEK 15.3 billion to SEK 12.3 billion, and this is driven by proceeds from divestments in the investment portfolio and partly offset by dividend payments. And the net debt corresponds to about 9% of the market value of our investments, leaving headroom for further acquisition as we go forward. And with that, I hand over back to you, Johan.

Thank you, Mikael, and then we would like to continue by commenting on the investment portfolio. As I said in the beginning of this presentation, we made a partial divestments of our holdings and Hassalo and Securitas in May. Following the divestment, we hold 29% of the voting rights in ASA are growing and 27.6% of the voting rights in Securitas and remain, as I said, the principal owner of both companies. The stock market improved slightly in Q2, while volatility remained elevated due to the geopolitical tensions and trade uncertainty. Adjusted for dividends and portfolio changes, the value development of our portfolio of listed and holdings amounted to minus 8.8% during the first half of the year, whereas 6 Rx was plus 8.1%. Some of our holdings have shown weaker stock market performance, while others have been better. Until yesterday, August 18, the portfolio value was SEK 75 billion, the total return amounted to minus 7.9% so far this year, whereas the 6 is plus 10.6%. And if we go to the next slide, the holdings to comment on the holdings results that are reported are mixed, but the majority of the companies continue to show positive underlying performance and are adapting well to the changing market conditions. As in the wholly owned operations, market conditions improved towards the end of the quarter and several companies reported strong demand in their key segments during their Q2 reports. Over the past decade, our holdings have demonstrated strong underlying growth and earnings development despite a more challenging market conditions in recent years. We believe we own high-quality companies and continue to act as active principal owners in all our holdings, providing strong support for their long-term strategies. And then we go to comments on the wholly old operations. Market conditions continue to improve, although the picture remains mixed across regions and sectors. Within the construction industry, demand is particularly strong within the building renovation, energy efficiency in industrial and infrastructure sectors, which benefit from several -- which benefits to several of our companies. Most of our holdings report solid underlying demand with healthy order intake and growing order books. And as I said, some projects start-ups have been delayed which has somewhat impacted net sales during the quarter. However, we expect revenues to be recognized in the coming quarters and do not believe any significant orders have been lost. During the quarter, order increase organically by a strong 13% and net sales increased organically by a healthy 4%. Currency headwinds continued to give negative effects compared to last year. However, somewhat lower effects now than in the beginning of the year. The adjusted operating result for the quarter amounted to SEK 999 million with an operating margin of 13.8%. The profit development reflects good cost control and efficiency improvements in the operations. Overall, I'm pleased with the quarter, strong organic growth, especially in order intake, but also in net sales, as I said, and improving market positions and the impact of implemented measures provide a solid platform for the second half of the year to come. Then if we continue to comment on the acquisitions and divestitures. We have had a high pace within the acquisition area. During the quarter, we completed 5 acquisitions across our wholly owned operations. Swegon accounted for 3 of these through the acquisitions of Western air condition in the Netherlands, Laminar in Switzerland and the residential ventilation business of downturn in Denmark. Calian acquired Vico in the U.S., enhancing its service offering and market presence in North America. Bemsiq acquired U.K.-based Sea things, strengthening its presence in the energy metering market. Two acquisitions was made in the first quarter. Latour Industries completed the acquisition of ASTar and then see with Latour industries acquired Scandinavian Sealing. Both companies are based in Sweden. And finally, as mentioned in the last quarter, we go also streamlines its operation and have divested noncore holdings transactions, the transactions will have a positive impact Oswego's margins. All in all, we have added net sales of SEK 700 million on an annualized basis so far this year. and I'm looking forward to seeing what the upcoming quarters can bring. Then I hand back to Mike to comment on the performance of respective wholly owned holdings. So over to you, Mike.

Thank you very much, Johan. And we start with Bemsiq Group. And Bemsiq had a continued positive and stable performance in the quarter. Good growth in order intake amounted to 14%, driven by organic growth and partly offset by negative currency effects. The total organic growth in net sales was 6% with a strong development on the North American market and within the Building Automation business. The metering business is somewhat slower, and this is driven by a weaker demand in the Nordics. The adjusted operating profit amounted to SEK 124 million with a good margin of 21.3%. And as Johan just mentioned, Bemsiq acquired siting in the U.K. during the quarter and end-to-end hardware and software solution provider, primarily focused on energy usage. The company has an annual turnover of GBP 2.5 million with a profitability level well above Latour financial targets. And with that, we shift page and take a look at Calian where we could see that the positive momentum continues during the quarter with the strong demand from the large customers. Order intake more than doubled compared to the same quarter last year and driven by larger project orders within loading and unloading. Net sales grew organically by 3% % and the order backlog is at solid levels for coming quarters. The gross margin remains at a healthy level. However, adjusted operating profit for the quarter was adversely affected by approximately SEK 20 million on a net basis. This is reflecting a provision for a previously underpaid Section 232 steel tariffs in the U.S. and the impact of refunded IEPA tariffs also in the U.S. As mentioned just before, Calian acquired Wiko in the US during the quarter and Wikis a premium provider of maintenance and installation services within the material handling sector. Wilco has an annual turnover of USD 23 million with a profitability level above Latour financial targets. We then continue with Hultafors Group where we saw that the net sales grew organically by 4%, reflecting strategic investments in product development, sustainability and digitalization. Strong performance in the personal protective equipment with 6% year-on-year growth, while the hardware division continues to face a more challenging market. Gross margin remained at a high level, which combined with good cost control, supported an increase in adjusted operating profit to SEK 252 million, corresponding to a margin of 15.2%. The adjusted operating profit was positively impacted in the quarter by SEK 13 million following the repayment of U.S. IEEPA tariffs that was implemented during 2025. We then turn page again and take a look at Inova. And order intake is in line with last year despite challenging markets in the Middle East and Asia. We see stable net development with positive growth when adjusted for currency effects. The gross margin continues to improve step by step, and this is driven by good price management and cost control. Adjusted operating profit amounted to SEK 98 million, corresponding to a margin of 11.4% and demonstrating resilience in the challenging market conditions and continued currency headwinds. We then continue with Latour Industries. And Latour Industries order intake grew by 14%, of which 5% was organic growth. Riaan Alto continues to see a good underlying demand while the other business units operate in a more challenging market. Net sales increased by 9% during the quarter, driven by acquisitions, while the organic growth decreased by 1% in the quarter. The adjusted operating profit was driven by strong performance in Riaan -- also and the margin increased to 10.3% in the quarter. And as the heading of the slide states, Latour Industries remains focused on developing its existing holders while continuing to identify new platform investments opportunities for the future. We turn page and take a look at Nordlock. And Nordlock continues to deliver a very strong performance. Underlying demand remains solid, although order intake was below last year's level, but this is primarily due to a SEK 100 million project order received in the corresponding quarter last year. Net sales grew organically by 8%, and all regions contributed to the growth and the order backlog remains at a healthy level. The adjusted operating profit increased to SEK 162 million in the quarter, corresponding to a strong operating margin of 28%. And you will all get the opportunity to learn more about the NOL Group late in this presentation as we welcome CEO, Daniel Vesper to the call in just a few minutes. But before that, we turn the page, and we take a look at go Boswegan order intake continued to develop positively during the quarter, with organic growth of healthy 20%, supported by strong demand in the Netherlands, North America and India. Net sales was in line with last year's level, negatively affected by divestment and currency headwinds, and organic growth amounted to 5% where North America and Sweden performed well, delivering solid growth. The adjusted operating profit came in at SEK 268 million with a margin of 10.4%. And as Johan mentioned earlier, Swegon completed 3 acquisitions during the quarter, -- we had Western air conditioning, a supplier of high-quality HVAC solutions in the Netherlands. Lamona, a Swiss distributor of room unit products for air distribution and downturns Danish residential ventilation business, strengthening Swegon's position in the residential indoor climate segment in Denmark. And Singen has also completed 3 strategic divestments since December 2025, and this is as part of its efforts to stream down the core business and strengthen long-term competitiveness. While these divestments have impacted growth figures compared to last year, they are expected to contribute positively to the margins going forward. And that wraps up the run through of the business areas, and we change slide to our financial targets, and I hand over back to you, Ivan.

Thank you, Mike. The financial targets. Let's comment on those and where we are. Summary of our financial targets. During the last 12 months, we have had growth of 3.8%, EBIT margin of 14% and return on operating capital of 14%. This is an outcome that we're very pleased with. And keep in mind that the targets are to be seen over a business cycle. Growth is driven both by acquisitions and organic growth, but with currency headwind -- adjusted for currency, the growth amounts to 8%. EBIT margin is on a good level and return on operating capital is satisfying. If we comment a bit on our long-term perspective on the next slide. Overall, we're pleased with the quarter and the progress made across the group. A strong order backlog provides a solid foundation, as I said, for revenue growth in the coming quarters, and our organizations are well positioned to capitalize on the improving market conditions. As a long-term principal owner, we remain committed to supporting our holdings for both opportunities and challenges. Our focus continues to be on the long-term sustainable value creation and we remain dedicated to creating attractive returns for our shareholders over time. With strong market positions, committed teams and a long-term perspective, we are confident in our ability to continue creating sustainable value for our shareholders. Thank you. That was the presentation so far from Michael and myself, and then we open up for the first Q&A session here to answer questions on the overall results, and then we will go into the Nordax presentation. So open for Q&A.

[Operator Instructions] The next question comes from Linus Segerson from DNB Carnegie.

So starting off, could you give some color on these comments about postponed project starts? Like what kinds of extended time lines are we talking about? And which parts of the business would you say are mainly expected?

Mike, would you like to start?

Yes, I can do that. In terms of timing, I mean we are not talking about very lengthy postponements. So we're -- but rather, I mean, possibly push forward into the coming quarter or so. And in terms of what type of business that these are reflecting to is where you see a bit of a more project orientation for elements, certain aspects of the Swegon business. And you can also see some elements of it in, for example, the Calian business. But in terms of timing, it's not an extensive time line extension that we are looking, but more pushed from quarter to quarter or so.

Yes. And I can just add to that, that you have dynamic effects. I mean, I would argue that 30% order income growth organically is very strong in the quarter. But I would also argue that actually 4% organic growth in net sales in quite halt in the quarter. However, there is a material difference between order income and net sales -- and I think this effect. And the lion effect of the difference is the cause of the order income is recorded in the quarter. Normally, we have an average delay of 60 to 90 days from order income to sales. So that's the main effect. I think the minor effect is this postponed projects that we have seen. Correct. So was probably correct.

And then moving to Sian, positive to see the organic momentum picking up. Just a question on the margin development. I mean given the organic growth and that these divested businesses were margin dilutive, if I'm not mistaken. What's driving this lower margin year-over-year? Is it just as simple as cost inflate?

Yes, I can start by commenting and then please you add, Mikael, I think on the divestment businesses, it was kind of nonstrategic businesses. And you're correct. -- liners, they were margin dilutive. So just by investing those businesses, we look forward to improve margins just by that effect. And in the same case on the margin, I mean, it is quite volume-dependent, Segovia manufacturer and factories and quite a lot of fixed assets in that sense. However, I think they defended the margins fairly well even though lower volumes in earlier quarters. And with increased volume, and the market coming back and Sweden continuing to take market share with a good healthy gross margin development. We look forward to a quite strong drop-through coming in the coming quarters. Sealand, that's what we expect. Mike, would you like to add to that?

At an just said, we have had a rather long stint of positive book to bill with Swegon where order income has been coming in. So which means, of course, that we feel confident this will be funneling through to revenue over time. And of course, when you build a company, you need to take on some costs. It's very hard to do that exactly 1 on 1 with how the net is developed. But that, as Johan said, we -- as those volumes funnel through, there is no reason to believe that the fundamental profitability of the company has reduced.

That's fair. And then on Hultafors, mean same there post see good momentum in PPE in particular. I mean is there any kind of project or type of customer, especially that's driving the improvement there in PPE?

Mikael, would you let start?

Yes. I mean I think I would say more that Hultafors is doing a good job and moving towards the end customer. I mean, that has been a very strong I mean the underlying organic growth in that industry of construction have been a bit subdued, but I would say that Total has done a great job in stepping forward, working toward the end customer, being more active in the market, driving campaigns -- so I think as we see it, it's a receipt of well-done market activities and being close to the customers more than any specific big projects. They have a really good portfolio of products. but I think they have been serving the market and being out there in a good way, which we now see the fruits of.

Yes. And I'd like to add, I think the lion's share of other sales is to the business-to-business sector, other professionals. But there is a fairly large share also of the Hultafors sales that is more exposed to private consumption and that has been more subdued during the last couple of years. And I think maybe we see some early signs of that coming back as well.

And then just finally on Hot the reorganizing of the segment structure, is there anything we should be aware of there? What's the rationale behind that?

Mikael.

Yes. No, I mean, to be -- that's, I would say, just a way of presenting. It's the figures for you guys in the market really doesn't mean that there is a significant underlying difference in how they operate. So it makes more sense from a business content perspective to bucket it in this way for -- I know it's also a closer way of how the operate in Hultafors. So there is no significant change underlying that has landed in that segmentation.

Yes. I think that's the important part what the latter thing you said there, Mike, it's more correct way of describing the business in the quarter, how it's operated actually.

The next question comes from Derek Laliberte from ABG Sundal Collier.

I wanted to follow up on the order intake which was fairly strong while the sales and particularly EBIT growth were more muted. How much would you say of this is this gap is timing and how much reflects any slower conversion mix or margin pressure?

Thank you, Derek, for the question. Sorry, I dropped you in the beginning. Was it on the overall group results?

Yes. Yes, on the overall industrial operations.

On the overall industrial operations. Mikael, would you like to take the.

Yes. I mean, we see them primarily as a timing effect rather than that there is a different in more increased margin pressure on the businesses overall. -- as Johan commented earlier, as that the order intake funds through the systems revenue we feel confident that, that will funnel through with a good drop-through. So that's why we see it more as a timing effect rather than anything else really.

And just to underline, again, which Mikael says we have had for many quarters, positive book-to-bill. So we have -- and as -- yes, I think I said in the beginning, we have an order stock of over SEK 8 billion orders on hand, which is a record high for us.

Okay. Great. And that SEK 8 billion, I think you alluded to it a bit, but we should see then, I suppose, most of that to be converted into revenue at least during the second half, I would presume.

Yes, absolutely. I cannot promise everything will be converted in Q3, but in Q3 and Q4 together absolutely, it should be converted.

Perfect. And then in the report, you described this gradual market recovery, but also the sort of the construction trends looking at it overall here, which -- and the markets are actually improving and where would you say that demand is still weak, if you could give some more flavor on that.

Yes, very good question, Derek. I mean, as you know, since you follow Latour, we are very heavily exposed to the building construction industry at large, right? -- but that's a huge industry in most economies around the world, right? And I think it's important to look deeper down into the different segments of that industry. And you see segments like air quality, air handling, the air climate, the indoor air climate is -- there is a strong demand there. And then we're well positioned with Segon and with Ben. For instance, you see big investments coming into infrastructure development, defense and defense is, of course, not only weapon and weaposystem, but it's also a lot of buildings and roads and things to be construction. You see a segment as data centers with extremely high growth in that area. So it's -- I think it's important to look at the building industry in its different segments. And then you have segments like residential building. I would argue strongly that it's very, very subdued in most markets, both in the U.S. and in Europe. So there, you have some examples of good, strong expanding segments but also an example of a subdued segment in the residential construction area.

All right. I appreciate the clarity there. I wanted to ask on Swegon also, I'm not sure exactly how to look at this. So you mentioned it benefiting from data center and industry-related projects here sort of -- I mean, can we view this as this now been sort of enough to offset any, say, remaining weakness in the commercial and residential construction areas.

Yes, Derek, I think you can. It's important to remember, Swegon is exposed to the residential segment, but that's a small part of the Sweco business that the absolute lion's share of the Saber business is on business-to-business to commercial buildings and infrastructure and so on. So I would say the short answer is yes to your question.