Inwido AB (publ) (INWI) Earnings Call Transcript & Summary

Hello, and welcome to today's webcast with Inwido, where President and CEO, Fredrik Meuller; and Peter Welin, CFO and Deputy CEO, will present the report for the second quarter of 2026. [Operator Instructions] And with that said, I hand over to over to you guys.

Thank you very much. Good morning, and welcome, everyone, to today's webcast covering Inwido's Second Quarter of 2026. My name is Fredrik Meuller. I'm the President and CEO of Inwido. And next to me here at our Malmo, Sweden Inwido head office is Mr. Peter Welin, our Group CFO and Deputy CEO. And this is today's schedule. We will start off with a couple of key group messages, followed by a deep dive into our business areas and our financials. Towards the end, we will wrap up with an outlook and the Q&A. And of course, as always, this material is also available on our website. In the months of April through June, Inwido bounces back nicely from what was a challenging start to the year. step-by-step, month by month, we improve our performance, resulting in our highest operating EBITDA to date for the second quarter. I think to raise profitability to grow organically in both net sales and order intake and to make another 2 acquisitions in the period, I think that really underlines the fact that our model and our strategy work really, really well. Because let's not forget that our market generally remains far from normalized. The ongoing Middle East conflict is de facto a wet blanket, hampering both demand and supply. So while fighting off raw material surcharges and trying to pass on these costs to consumers, customers via price increases, we are, of course, benefiting from higher volumes. We have seen more operational efficiencies in our factories where we also leverage the investments that we've made before. And we retain still a very healthy cost control across the group. The record size project order for Sidey Solutions in Scotland, of course, boosted our order backlog, which is now at an all-time high. And I think importantly worth noting is the consumer order intake also grew by 3% in the quarter. Our M&A activities continued to bear fruit. In Q2, we added another 2 companies to the other 4 we did recently. This time in the U.K. and in Croatia, the latter being yet another new market for Inwido, making it 15 in total. Last but not least, cash flow was strong in the quarter, meaning gearing is at a good level, I think, 1.8x on a pro forma basis, providing us with a solid war chest for further acquisitions and investments. And staying on that topic. As you are aware, in anticipation of organic growth bouncing back, we are actively and successfully pursuing acquisitions in both existing and new markets. Now very pleased with our developments here, adding 6 fine companies across 2 new markets and with SEK 1.5 billion in additional top line, we -- without paying highly -- without paying too much in terms of multiples. I'm very pleased with that and glad that we -- that our activities over the last 12 months are bearing fruit. And at the moment, though, we still see -- and on the one hand, we see a healthy activity level across the markets that we're interested in. And we have a solid case pipeline as the industry consolidation continues to offer opportunities for us. Still with the prevailing market uncertainty, valuation gets kind of tricky because basically, everyone has faced a very challenging Q1 this year, and then a lot of the sellers are indicating some kind of hockey stick for the months to come, where we haven't seen the full impact of the Middle East conflict yet. So we are a little bit more selective than usual. And in the meantime, we, of course, also prioritize integration of the latest new family members that we have. And let's look at one of them, namely Marlex in Northern Croatia, which is geographically also very close to our AJM business unit in Slovenia, i.e., this offers collaboration opportunities for these 2 BUs. Marlex is a very fine company, ticking all the relevant boxes for us, being #1 in its field, having a broad offering, a strong brand, proven track record, good profitability and offering very solid synergy potential. In short, I think it's -- it's an exciting new acquisition. And I want to welcome them to the Inwido family. If we then go into the 4 business areas and we look at them in order of size, meaning we will start with Scandinavia. Well, it's a strong quarter by [ Mads ] and his team building on the momentum that we saw towards the end of the first quarter. Really improvements across the line, with Denmark and Sweden standing out, helped by volume, making, as I said, the factory wheels been a bit faster and where we can leverage previous investments. We haven't seen the full impact of this year, but so far so good, I would say. We have been fighting hard to balance the raw material energy transport surcharges linked to the Middle East conflict, balancing that with pricing, account by account, where very few, if any of our peers have been following us. This is far from over. We have yet to see the full impact of the Middle East conflict. At the same time, we have yet to see the full impact from our price increases. But what is clear is that we prioritize profitability here, meaning that we sometimes walk away from projects, bids, tenders where we see or feel that pricing is at a silly level. I think it's great to see that operating EBITA margin is above 15%. This organic growth and a solid order book that now offers cautious optimism for the second half. But it really stands and falls with consumer behavior, which is still a bit subdued. We've had some negative FX translation effects from Danish krone to SEK, but at the same time, it was a bit positive for Norwegian krone. So net-net, not that much. Then moving across the North Sea to BA West, which includes the U.K. and Ireland, as you will recall. A lot of positives also here for [ Jonna ] and her team. Strong top line growth, both organic and via new acquisitions, where we added Sovereign Group in the second quarter, another really nice company, fine acquisition. In absolute terms, we have a higher profit here, although the mix has been somewhat against us, taking down the margin a little, little bit. The icing on the cake, of course, in the quarter is Sidey Solution's GBP 50 million order, Inwido's largest to date, which provides a really nice base load for the factory up in Scotland over the coming 5 years, and where manufacturing and invoicing started now this month in the month of July. England offers a tough market still. There's lots of consolidation going on and lots of price pressure, particularly in the consumer segment. It's a lot of political turmoil, as you all will have seen and read about with a new Prime Minister at some stage coming into office. And I think a win tonight and a win then in the final in the World Cup would be a huge boost for the entire nation. I'm particularly pleased over the collaboration and the synergy pursuit across the BU boundaries here. We have some nice critical mass in this part of Europe at the moment and some really nice companies working together, which bodes really well for the future. Moving to BA East, which is now Finland, Poland, Slovenia and Croatia. All of the Croatia numbers are not in here yet. They will be consolidated on a P&L and balance sheet basis from the third quarter and onwards. [ Antti ] and his team are still fighting a bit of an uphill battle across the BA, primarily in Finland, where the main theme is lack of volume. There is immensely fierce competition and lots of price pressure still. Having said that, the cost alignment is rather impressive. And we are de facto still in the black with our figures, which I think is worth noting. So hats off to Antti and the team. We get a broader exposure now through the Marlex acquisition, meaning we also have less dependence on Finland, which I think is good. It mitigates our risk exposure a bit. So to conclude this BA run through, let's turn our focus on BA e-commerce, our online business, where [ Bo ] and his team continue on a very positive trajectory, again, raising profitability now actually for the fourth quarter in a row, making their margin trending up on a double-digit basis on a rolling 12-month basis, which I think is really impressive. And it's really a combination of pricing, increased efficiencies and cost downs, a lean mean machine that is doing really well. As an anecdote, I visited the Copenhagen marketing office of this business recently. It's really a high-tech think tank, lots of exciting and promising AI stuff cooking in their kitchen, not only within marketing. And yes, it made me feel like a true dinosaur, but I had a great time there. So well done, guys. Now for some more flavor on Inwido's consolidated Q2 financials, I will hand over to you, Peter, please.

Thank you so much, Fredrik. I'll start with this page. This page is showing the income statement. To the left, you can see the Q2; in the middle, year-to-date; and to the right, the last 12 months as well as last year. Starting with the quarter, sales is plus 16% compared to last year, organically, it's plus 4%. We have a material price inflations in the quarter, but that has been compensated by growth efficiency as well as sales price increases. Thereby, the operating EBITDA margin is plus 0.1% during compared to last year, and operating EBITA is plus 0.2% compared to last year. For the first time ever, the operating EBITA in the second quarter is above SEK 300 million. Between operating EBITDA and EBITA, we have nonrecurring items of SEK 11 million, whereof SEK 8 million are acquisition costs. Profit after tax is plus 27% compared to last year, and the EPS is plus 26% compared to last year, ending up to SEK 3.40 per share. Looking then at the year-to-date. We had a -- the year started slower compared to last year with a slower performance in Q1. But then thanks to the organic growth of 4% in Q2, we have now an organic growth year-to-date of 1% compared to last year. The operating EBITDA margin as well as operating EBITA margin is below last year, but in SEK is above last year. And not only the operating [ EBITDA ] and also the EPS has been approved and is now above last year also on year-to-date. Looking at latest 12 months, the sales is now on SEK 9.5 billion. The operating EBITA is SEK 970 million and a minus 10.2%, and we have an EPS of SEK 9.11. This page is showing the development in sales as well as operating EBITA compared to last year for Q2 divided between the business areas. Organic -- we have organic growth in Scandinavia and West and e-commerce, whereas we still have a decline in East. East and the main Finland is still challenging. But worth noting and also Fredrik noted, as said, that the result or the profit or operating EBITA for East is positive in the quarter as well as year-to-date. In West, the consumer market in U.K. is still challenging. But nevertheless, West has improved the result by SEK 22 million compared to last year. And we have added 2 acquisitions in West when compared to last year, Victorian as well as Sovereign Group. And then e-commerce is continuing to improve the profitability. Sales is plus SEK 9 million and the operating EBITA is plus SEK 11 million compared to last year. If you then look at the more long-term trend for the second quarter. This page is showing sales as well as the operating EBITA margin for the second quarter from 2020 until 2026. We have the highest result in SEK this year with -- the first time it's above SEK 300 million when it comes to operating EBITA, but it's not the highest margin. We had higher margins in the second quarter during the pandemic due to higher degree of consumer sales during these years. However, the margin this year is above last year and is also the highest -- for the latest 3 years with 11.5%. Pricing, efficiency improvements and cost control had a positive margin impact in the quarter compared to last year and has compensated the material inflation in the quarter compared to last year. This page is showing the cash flow and the cash flow generations. To the left, you can see the cash flow generations. And to the right, you can see the CapEx as well as the CapEx in relation to sales. The cash flow has been improved in the quarter, thanks to higher operating -- thanks to cash flow from operating activities, meaning better result compared to last year. But we have also positive impact when comparing to last year's related to working capital. And that's mainly due to less increase in operating receivables in the quarter compared to Q2 last year. Looking at CapEx level. The CapEx level has been increased. It's now on a late 12-month basis, 3.4% of sales and a year-to-date on 3.2% of sales. So we are investing more in our facilities, in our -- in operations to improve efficiency as well as in some cases, also when it comes to capacity. Then looking at the balance sheet and then specifically looking at the net debt. This page is showing the net debt including IFRS 16 and also net debt in relation to operating EBITDA. Net debt has been increased during the last quarters and mainly due to acquisitions. And then, of course, we also paid a dividend now in the second quarter of this year. The net debt includes IFRS 16 debt of about SEK 475 million. Looking at net debt in relation to operating EBITDA. We are on 2.2 including IFRS 16 and 2.1 excluding IFRS 16. If we then recalculate the running 12 months operating EBITDA and include the latest acquisitions, we have a pro forma. Then we are on 1.8 excluding IFRS 16, meaning, we have comfortable headroom to the target of maximum 2.5. When it comes to our financial target on return on operating capital. We have a target of 15%. Operating capital has been increased during the last quarters, mainly due to acquisitions. And now in the second quarter, we have also improved the return on operating capital by 0.1% units, from 11.7% to 11.8%, mainly thanks to improved results in the quarter compared to last year. Then looking at the order intake and the backlog. Starting to the right, the order intake. The order take is -- has been increased by 23% organically in the quarter compared to last year. And glad we can see that consumer is plus 3% and then product is plus 58%. Of course, we have a positive impact from the record order in Scotland of GBP 15 million. And thanks to the higher order intake in the quarter compared to last year, we have also a record high order backlog of SEK 3.3 billion. Product is plus 90% compared to last year and consumer is plus 12% compared to last year. If we then dig a little bit deeper into the order intake and we start with the consumer. This page is showing the order intake -- organic order intake growth in consumer for latest 4 quarters, from Q2 2025 until Q2 2026. We start to the left, we can see the group development. So in Q2 '25, we have minus 4%, then was minus 2% in Q3, it was plus 2% in Q4, it was minus 2% in Q1. And then now in the second quarter this year is plus 3%. And then you can see that the positive development in this quarter is mainly due to Denmark as well as in Sweden. The consumer intake is still negative -- still declining in U.K. and in Finland. However, the decline has eased compared to recent quarters. So the driver of the consumer market and the positive order intake is then related to Denmark and Sweden, which is also the largest market -- consumer markets of Inwido. So in total, plus 3% in the quarter compared to last year. If we then do the same thing and we look at the product orders. And first thing I would like you to notice is the scale of this diagram. The scale is now plus -- up to plus 300% and the consumer is plus -- it was plus 20%. So the volatility is so much higher on the product markets compared to the consumer markets, and thereby, we divide the order intake between product and consumer. And looking at this quarter, we have, of course, the high order intake in U.K. connected to the order of Scotland, and they are then driving the total order intake. We have the highest product sales in most prices in Finland. It was a slight decline. U.K., big growth due to -- thanks to the big order in Scotland. Sweden will have also a slightly growth compared to last year. And the other markets, they only consists of about 30% of the total product sales within Inwido. And there, we have a little bit decline in Denmark. We have a growth in Ireland and also some growth in Norway. Now I then hand over back to Fredrik for the conclusions and summary.

Thank you very much, Peter. Yes, it's time to round things off. So let me reiterate today's key messages. Market-wise, first of all, it really is a mixed bag. Some markets are improving. Scandinavia is, of course, one of them, most notably, while some markets remain at record low levels, Finland included. We have not yet seen the full effects of the ongoing Middle East conflict. We have not seen the full impact of the EPBD, the Energy Performance for Buildings Directive that was recently implemented across the EU and should provide, of course, some tailwind in due course. But where there are challenges overall, there are also opportunities. And again, whatever is facing us, I feel that we are ready, we have a strategy, we have a business model, a governance model that works really, really well, as evidenced in this past quarter. So we built a Ferrari. It's beginning to drive a little bit faster, which is making both the driver and the car smile a little bit more than in the first quarter. Outlook, yes, it's -- there is low visibility in the crystal ball. It's, I think, necessary to be quite open about that. We continue to stick to our game plan. We executed step by step in a really good way. The near-term priorities include, first of all, to secure the supply chain, both in terms of negotiating cost increases from the surcharges and make sure that we get the raw material that we need, i.e., security availability of key input. And of course, to work with the value-based pricing to counteract the negative effects from the Middle East conflict. Generally continue also with cost containment and then continue to pursue our M&A strategy in a good way, although we are a little bit more selective at the moment. So we are also reviewing the business unit portfolio. We have some companies still on our red list. Thankfully, a lot of them are improving their performance, but I'm also not excluding any minor restructurings at this stage, but so far, so good, I'd say. And as shown in Q2, we are really ready to embrace whatever the future has in store for us. So with that said, Peter and I would now be delighted to answer any of the questions that you may have, please.

[Operator Instructions] The first caller here is Jonny Jin from SEB. You have the word.

Yes. Fredrik and Peter, I hope you can hear me. I have a couple of questions. Good. Starting off with the gross margin. It looks very strong here despite these higher raw material costs. And I think that you said the last time that you were expecting some, yes, quarterly lag before it's fully compensated in Q3. So now you're actually performing better than I thought. So I suppose this is mainly a reflection of you driving higher volumes of beneficial mix. Is that a correct interpretation? And if not, is it possible to split the sort of price effect on organic growth in this quarter?

So if we look at what we define as gross margin [ 1 ], meaning we take sales minus material costs, then the margin has declined. Then we'll be able to compensate that when we look at gross margin [ 2 ] to or gross margin as in the public report. We have been able to improve the gross margins, thanks to higher efficiency in the productions, meaning we have been able to increase the volume in the factories without increasing the cost so much. So we have been able to compensate the material price inflation, which has been negative in general for the group, by higher efficiency and a better cost control, mainly in the factories.

Understood. So one should read this, maybe that -- yes, this is volume organic growth mainly in this quarter then and it's high utilization rates in that profitability.

Yes. And also in some markets and some production units, we have made some investments, and we see that we also have been able to bear fruit from those investments. So we have improved efficiency. Inwido has, during the last year, even though the market has been quite challenging, we have been investing quite a lot of money into our factories to improve efficiency. In some countries, we have been able -- or some production units, we've been able to see improvement in efficiency, thanks to all investments. So yes, it is volume and efficiency improvements. So if you just take sales prices and material price inflation, then there's a negative impact in the quarter.

Understood. So I suppose that the price effect will be more visible forward in Q3 and onwards than maybe. Is it possible to say something how much you have increased prices on average?

We can take -- it's a relevant question, of course. We can take Elitfönster in Sweden as an example. And that is, of course, a positive example. But it's been a lot of blood, sweat and tears and still is actually, to a large extent, as we negotiate contract by contract. But they have, as most of our business units and sort of an annual price increase. I'm not talking primarily on -- yes, linked to price list, et cetera, which is roughly 3.5% for 2026. And then on top of that, they have been out, again, balancing these surcharges initially, also, of course, trying to negotiate them down and being quite successful with that. But then on top of that, added -- yes, it varies a bit. But let's say, 3.5% to 4% in additional price increases. We do not exclude further price increases either if this conflict continues, and at the moment, it looks as it will. Then, of course, we will do our best to cover addition -- any additional price increases on the raw material or energy or transportation side. That's not easy. It hasn't been easy yet, but it's something that we're, in a way, forced to do and committed to do. So that's Sweden Elitfönster example that I think is rather relevant for at least the Scandinavian BA to some extent, the e-commerce BA. When it comes to the U.K., when it comes to BA East, it's been much more tricky because of the -- yes, the market conditions and the fierce competition.

Okay. Understood. And just one more on the raw material. When you talk to your suppliers now, are you feeling that raw material prices are still climbing? That's -- so that you're sort of [ chasing ] prices? Or have they sort of took a leg up and then settle at a higher level from here? What's your feeling there?

No, I feel that it's still moving material to be honest, Jonny. It's -- we've had a first wave of increases or attempted increases. And then as I mentioned, we've sat down account by account and being rather successful so far in negotiations. In some cases, even totally avoiding surcharges or at least mitigating them, decreasing them a bit, which offers comfort. But we haven't seen the end of this, particularly if the conflict continues, so it's still a top priority for us. And at the same time, I think it goes to show that Inwido, we have the economies of scale. We are big and important customers for these suppliers, and we don't stand and fall with one supplier. We have a rather healthy exposure that is balanced across several suppliers, particularly for the critical input goods. So I think we are probably faring better than many of the others in our industry, but it is a tough battle.

Understood. Then I want to move to demand a little bit because I think, yes, in the last quarter in Q1, you said a stronger exit into Q2 here, and it seems like it's materialized as well. What is all of your gut feeling when you look at your momentum here entering the second half of this year? Is it sort of -- yes, this organic growth rates, are they to continue to expect in Q3, what you're seeing now? Or elaborate a little bit further.

I mean you're right in saying that we did capture a lot of the positive momentum and primarily in Scandinavia from the end of Q1. And then, of course, the weather improved quite substantially, and that's made a difference. And then Q2 is always going to be a stronger quarter than Q1, but we've seen a gradual improvement from April to May and from May to June. So that's, of course, promising. But it varies a lot still from one market to another. Denmark, stable at a good level. Sweden gradually improving, but so far more on the project side actually than the consumer side, where if you read the sort of war-linked headlines in the newspapers of course, of inflation potentially going up, implicitly then indicating that also your interest rates on your mortgages will go up, then, of course, the households become a bit more sidelined again and the whole Middle East conflict becomes a wet blanket still on consumer purchases. Norway bottomed out, but not really taking off either. Finland, super tricky. Slovenia, Croatia, Poland rather, cautiously optimistic about those, as well as Ireland. And then U.K. is really patchy. Scotland, perhaps a bit better than England, but the difference is really between consumer and project where consumer is still really pressed, I would say. But of course, the -- I mean, to answer your question, the order intake that we saw now and the organic growth gives us some comfort. And the order backlog is, as Peter mentioned, at the record high level. But it, of course, also includes this Sidey Solutions order in Scotland. So yes, cautious optimism, I think, both in terms of volume and in terms of profitability. But the pattern over the last 6 to 12 months has been extremely bumpy. It's literally been from one top month to one all-time low month and then back up again. So it will be a bumpy ride also going forward. And I think that's -- it's quite important that we keep our eye on the ball, and we execute on our plan. It will not be a walk in the park. We work with scenarios rather than anything else. And of course, in a positive scenario, the Middle East conflict fades out in some kind of fashion and hopefully, also the Ukraine war, of course, not to be forgotten. And that will be, I think, quite a nice boost to demand across both projects and consumers, meaning, as Peter said before, we will have a very nice leverage from the investments that we made in the past few quarters where we really stepped on the gas pedal. And I think we've done a good job holding back costs, holding back additional resources already now in the second quarter. It's very easy when you see demand going up all of a sudden that you start adding back resources again, but that's not really been the case for us so far. And so that's a priority to really leverage the efficiency-enhancing investments that we've made in the past.

Understood. I understand. It's a very tricky market right now. But just on -- as you said, it's very bumpy between the quarters here. So I just want to make clear that the organic growth in this quarter, at least, it's a fair representation of what sort of the underlying demand was in this quarter because you also said you had some delays of deliveries from last quarter and stuff like that. So I mean, there's no unusual timing. We should read this as the actual demand in this quarter, this organic...

Just one other thing that, Jonny, is of course, that Q1 was very, very weak. We had a cold winter this Q1. So especially the consumer market, it's impacting consumer markets. So some consumers were then postponing both when it comes to sales as well as the order intake, not placing the orders, not taking sales in Q1, it was then postponed to Q2. So we had some extra Q2 related order intake as well as sales due to the lower Q1, so it was compensated in Q1. So it should not be -- it's very hard for us to exactly calculate how much. But still, we have a positive order intake as well as sales in the consumer market for the first 6 months. But some of the growth of Q2 should be related to Q1 if the winter has not been so cold on so long as it was.

I understand. So maybe it's more fair to look at them combined to see the underlying demand?

Yes, yes. That's a good point.

Good. Okay. Just one final on the profitability on the [ EBITA ] margin here, one on West and e-commerce because in West, [ EBITA ] margin looks to be down despite organic growth and better gross margin. So can you give us some comments on what's happening on the operating expense side there? And secondly, the e-commerce looks very strong [ EBITA ] margin here at 12.6% this quarter and over 10% on rolling 12-month basis. So do you think that these levels in e-commerce is sustainable? Or do you see any signs of increased competition or similar pushing down the e-commerce margins from here onwards?

Starting with East. So we still have a very challenging market when it comes to the consumer market. So the product market, especially as Scotland is doing well. The acquisitions are doing well as well, but the consumer market is very challenging. So due to the consumer market, the margin has then declined in the quarter compared to last year, even though it was a good sales growth, but the sales growth was mainly on the project markets. The second question you have when it comes to e-commerce. So before the pandemic, the e-commerce had an operating EBITA margin between 11% and 12% -- around 11%. And the target is, of course, to come back to that level now in the future. So we are on a good trend when it comes to e-commerce and profitability. We have taken down costs. Last year, we took some restructuring costs within e-commerce. We closed down some areas, and we were more focused on pricing instead of volume, and that has then been a positive impact. So yes, we continue to see improvement on the margins, and then the target is to come back to the same level as we were on pre-pandemic.

Maybe if I can just add to what Peter said on the last topic of e-commerce. For them, it is a rather tricky balancing act between top line growth and profitability because entering new markets, which is part of their ambition, and part of the group's ambition is at least in the short term, rather costly. It requires a lot of upfront marketing costs to just gain a foothold and to maintain that foothold. So that will be a balancing act also going forward. The good news is that right here, right now, we have a very lean and mean machine, all the way from operations and manufacturing to cost-efficient, high-tech marketing to value-based pricing. So -- and I still think that there is -- and I know Bo's ambition is to capture even more. And on top of that, they're doing a fantastic job with the working capital. So hats off for that team. It will be, of course, very exciting and quite promising to look at the performance ahead as well. Okay.

We will now go ahead with the next caller, which is Linus Alentun from Nordea. You have the word.

Perfect. Just starting with the follow-up question here on the raw material prices. Maybe you already answered it. But I mean, if the pure price cost effect was negative in Q2, should we expect that gap to narrow in H2 as pricing catches up here? Or do you still see a negative net effect here also in H2?