NKT A/S (NKT) Earnings Call Transcript & Summary

Welcome to NKT's presentation of the interim report for the first half of 2025. [Operator Instructions] This call is being recorded. Today's speakers are President and CEO, Claes Westerlind; and CFO, Line Andrea Fandrup. Please begin your meeting.

Thank you. Good morning, everybody, and welcome to this conference call covering our interim report for the first half of 2025. My name is Claes Westerlind, and I'm the CEO. And as usual, I'm joined by our CFO, Line Fandrup, for today's call. In the first part of the presentation, I will cover the overall and business lines development, while Line afterwards will go through the financials for the first half of the year and the second quarter. Let's move on to Slide 3. Before going into the presentation, I will ask you all to pay close attention to this disclaimer as the presentation may contain forward-looking statements. Now let's move on to our key messages for the quarter. The positive development was maintained in the second quarter of 2025. The stringent focus on execution, both of our backlog and the investments to increase capacity across the businesses was maintained. Throughout the quarter, the activity was high across all 3 business lines. And again, here in Q2, we delivered double-digit organic growth. On the earnings side, for the first time in company history, our operational EBITDA exceeded EUR 100 million, which is up 22% compared to last year. This is a remarkable achievement, a notable milestone for us as a company, and it's also a testament to the hard work by all our employees. The improvement compared to Q2 in last year was primarily driven by the performance in Applications and Service and Accessories. We also had a high activity level on our capacity expansion programs, where the strong focus on executing with sufficient quality at cost and within the time frame continued. Across all investments, the progress was as planned during the quarter. The new high-voltage factory in Karlskrona, the second cable-lay vessel, NKT Eleonora and the capacity expansions at our application sites in Asnaes, Denmark and also in Esposcende in Portugal. Based on the solid financial performance so far in 2025 and the expectations for the rest of the year, we are updating our financial outlook. We now expect revenue in standard metal prices of approximately EUR 2.65 billion to EUR 2.75 billion compared to previously approximately EUR 2.33 billion to EUR 2.52 billion, and operational EBITDA of approximately EUR 360 million to EUR 390 million compared to previously EUR 330 million to EUR 380 million. Let's turn to Slide #6 to take a look at the overall financial performance for the second quarter. The solid financial performance was maintained in the second quarter of 2025, where the organic growth landed at 13% and operational EBITDA amounted to EUR 105 million. The high activity level across the business line was the driver behind the organic growth with positive contributions from all 3 business lines. From an operational EBITDA perspective, the improvement was driven by the Applications and Service and Accessories business lines. We also saw a margin improvement reaching 14.5% compared to 14.2% in the second quarter of 2024. In Q2, the high activity level in Solutions was maintained as the execution of the high-voltage order backlog continued. In addition, organic growth was supported by specific variation orders and operational execution was overall satisfactory. Operational EBITDA was largely unchanged compared to the same period last year. The high revenue and improved operational EBITDA in Applications were driven by the contribution from the acquisition of Solidal and the additional capacity coming online in Q1. Volumes in the Power Distribution Grid segment remained healthy with a robust demand for medium-voltage cables. The construction-related segment is still subdued, but we did see a slight improvement during the quarter, but volumes and prices remained below the second quarter of '24. Service and Accessories had a strong quarter. Activity level was high in both segments, leading to a positive organic growth and with satisfactory execution, operational EBITDA more than doubled. Margins improved in both Service and Accessories. Let's turn to the next slide for a deeper look at each of the business lines, starting with Solutions. Solutions revenue amounted to EUR 450 million in the second quarter of 2025, up from EUR 379 million in the same quarter last year. This corresponded to an organic growth of 18%. The positive development was driven by a continued high activity level as we progressed on our high-voltage order backlog with overall satisfactory product execution. In the quarter, we also had a positive revenue contribution from specific variation orders. Again, in this quarter, installation activities were high and our installation vessel, NKT Victoria was well utilized. Operational EBITDA was EUR 66 million and thereby basically unchanged compared to the same quarter last year. The margin for the quarter was 14.7%, unchanged from the first quarter, but a reduction compared to last year. This was due to a less favorable product mix and the margin dilution from certain variation orders executed at lower margins. We wish to remind you that in a product business like NKT, quarterly margins will vary between quarters depending on the phasing of projects and execution, but the larger trajectory leading towards '28 and beyond is confirmed by the performance in the second quarter. We saw progress on several projects in the backlog being at different stages of execution during the quarter. Main contribution came from Champlain, Hornsea 3, East Anglia 3, SuedLink and SuedOstLink. In July, we shipped the last segment of the offshore cables from Karlskrona to the Champlain Hudson project, and focus is now on continued installation of both the onshore and offshore parts. At the site, both in Karlskrona and Cologne, the investment programs to expand high-voltage capacity progress as planned. The same goes for our second cable-lay vessel, NKT Eleonora. I will later in the presentation reflect on the status of the individual projects, but the main point is that all are on track to become operational from 2027. Please go to Slide 8 for an update on the high-voltage market and our backlog. In the first half of 2025, the estimated project award across our addressable market amounted to around EUR 3 billion. Like the last couple of years, the awards were mainly driven by the DC technology. This is lower than what we saw in the first half of the year -- of last year, but it's still a high figure in a historical context, and we continue to see healthy tender activity. As the individual projects are getting larger in size and the investment process are affected by governance processes, permits and other political decisions, the short-term numbers could easily vary. Our high-voltage order backlog ended the quarter at EUR 10.1 billion. This is slightly lower than the level from the previous couple of quarters as we have executed on the orders in the backlog. Unchanged since at the end of 2024, we, on the top of the order backlog have booking commitments from our customers of more than EUR 3.5 billion. We expect these bookings commitments to be converted to firm orders over the next couple of years. The composition of the backlog has changed slightly, and now more than 90% of the orders are within -- are with European TSOs. With regards to use applications, the view is unchanged with around 55% being interconnected projects and around 40% offshore wind. Together with the booking commitments, the backlog gives us good visibility for the coming years and thereby also into our medium-term financial ambitions for 2028, which gives us the opportunity to focus on the long-term development of the company. We remain highly active in commercial pursuits, abiding to our disciplined approach to optimize utilization, risk and profitability across our production installation assets. On an ongoing basis, we are also assessing the expected market development. Our view is unchanged and for the period of '24 to 2030, where we expect our addressable market to remain on average more than EUR 10 billion annually. As also seen here in the first half, the short-term development always comes with some uncertainty, but with that being said, we remain confident in the expectation of a healthy supply-demand balance throughout this decade. Our view of the market appearing to move into more balanced territory when looking into the 2030s also remains unchanged. Please turn to Slide #9 for a look at the Applications business line. Revenue in the Applications business line increased to EUR 234 million in the second quarter of '25. This was driven by the contribution from the acquisition of Solidal and 11% organic growth. The additional medium voltage capacity that we have added in the Czech Republic and Sweden were fully operational in the quarter. The Construction exposed segment continued to be subdued with both volumes and prices below last year, although a slight incremental improvement compared to Q1 was observed during the quarter. Operational EBITDA increased to EUR 31 million compared to EUR 21 million in the same quarter last year, driven by the Solidal acquisition and the additional medium voltage revenue. The margin improved to 13% from 11.8%. This positive development was driven by Solidal and also the increased revenue in the Power Distribution Grid segment. From a market perspective, we observed a slight incremental improvement during the quarter. The demand for medium voltage cables remained robust, especially driven by European DSOs, upgrading and strengthening the Power Distribution Grids. With our increased capacity, we were able to meet this demand. And during the quarter, we saw a slight easing of the increased competitive environment in selected markets that we mentioned in Q1. As said, also the Construction-related segment remained subdued, but during the quarter, we saw a slight improvement due to a modest increase in construction activity. Please go to Slide 10 for Service and Accessories. Service and Accessories continued a strong development. Revenue of EUR 70 million was EUR 6 million higher than last year, and organic growth was 7%. The growth came from Accessories segment as organic growth in Service was slightly negative due to the high comparison base from the second quarter in '24, where we executed large offshore repair work. Both segments enjoyed a high activity level in the quarter. Service benefited from a variety of different activities, including repair jobs, maintenance projects and also installation works. Execution was satisfactory and thereby also positively benefiting profitability. The demand for accessories continued to increase, driven by both medium and high-voltage accessories. The projects in our high-voltage order backlog also contributed positively to the development and execution in the quarter was satisfactory. To support the positive development, the construction of a new test hall in Alingsas in Sweden was, as expected, completing during the quarter and the facility is undergoing a gradual ramp-up. Operational EBITDA more than doubled to EUR 14 million in the quarter compared to EUR 5 million in the second quarter of '24 with the margin landing at a satisfactory 20.2% compared to 7.1%. Profitability in both segments improved and the positive development was driven by higher revenue and improved operational performance. Please turn to the next slide, where I will give a status of our investment projects. We made solid progress on our investment programs, and they all followed their individual plans. This also means that the expectation of an accumulated CapEx of around EUR 2 billion for the period of '25 to '28 is unchanged. In Karlskrona, Q2 was characterized by a lot of construction activities going on simultaneously at many different locations. Within the tower, we have progressed with installing both ancillary and machine equipment and across the site, installation of machinery progressed. The first building was completed as we inaugurated the new logistics center and took it into operation. All necessary permits for the expansion of the harbor has been granted and construction started in early August. Following a public competition, the 200-meter extrusion tower was named NKT Crown alongside its sister Lighthouse and Anchor. We are following the plans and the factory is still expected to be operational from 2027, the latest. The construction of our second cable-lay vessel, NKT Eleonora, is also progressing according to plan. The completion of the individual sections of the hull are progressing, as you can tell from the illustration on the slide. The final outfitting of the vessel will be done in Norway during next year, and the planning of this part of the construction was initiated also during the second quarter. In parallel with the factory, NKT Eleonora will also be operational from 2027. In Cologne, where we also add additional high-voltage capacity, the progress was also in line with plan. We initiated the installation of the new extrusion line and installation of additional equipment progressed. The additional capacity in Cologne is also expected to be operational from 2027. Lastly, in Applications, the construction in Asnaes progressed with the completion of civil work, including foundation cast and construction of the new extrusion tower. The installation of equipment has been initiated and the new capacity is still expected to come online from 2026. At our Esposcende site in Portugal, we are seeing clear progress in the construction as illustrated on the picture to the bottom right. The additional capacity is still expected to be operational in 2027. This, ladies and gentlemen, concludes my part of the presentation, and I will hand the word over to Line to take a look at the financials. Please turn to Slide 12.

Thank you, Claes, and good morning from me as well. Let's start by going into the income statement for NKT's financial highlights of Q2. Revenue in Q2 amounted to EUR 723 million, up from EUR 605 million in the same period last year. Organic growth of 13% was driven by positive contributions from all 3 business lines, which saw also high activity levels. In addition, the Solidal acquisition contributed to the revenue. And as we now have owned the company for 12 months, this business will contribute to the organic development going forward. Operational EBITDA for the quarter was EUR 105 million, an increase of 22% compared to last year. The first time in the company history, EBITDA exceeds the EUR 100 million mark. The margin was 14.5%, a slight improvement compared to 14.2% reported in the second quarter of 2024. As Claes went through in his presentation, Applications and Services and Accessories contributed positively to the improvement, while the EBITDA in Solutions was on par with last year, mainly due to a less favorable project mix. Depreciations and amortizations are up by EUR 10 million to EUR 34 million, driven by our investments and the Solidal acquisition. EBIT, thereby amounted to EUR 71 million compared to EUR 61 million last year. Financial items net was a cost of EUR 1 million as interest income on our cash position was more than offset by costs related to fluctuations of foreign exchange rate. In Q2 2024, the income of EUR 16 million was a result of income from both interest and FX fluctuations. Tax for the quarter amounted to EUR 16 million, equal to an effective tax rate of 23%. The low tax cost of EUR 2 million in Q2 2024 was impacted by regulation of German tax assets. All in all, this leaves us with a net result of EUR 54 million compared to EUR 75 million from continuing operations last year. The net result in Q2 2024 was positively affected by EUR 104 million related to the divestment of NKT Photonics. Our employee headcount continued to increase, reflecting our growth journey and our investments to support this development. On average, more than 6,000 people were employed at NKT during the second quarter. Let us turn to the next slide to look at the cash flow development. Free cash flow for the second quarter was negative minus EUR 175 million, driven by a combination of a negative effect from changes in working capital and the investments conducted during the quarter. Changes in working capital was an outflow of EUR 82 million, and it reflected the phasing of specific milestone payments in the Solutions business line. This development offset the positive operational EBITDA. Investments in the second quarter amounted to EUR 174 million, reflecting the higher activity level across our investment programs, mainly in Solutions, but also in Applications. This level was almost a doubling compared to Q2 2024 and the high level is expected for the remainder of the year. Net cash flow for the quarter was negative EUR 198 million. Let's turn to Slide 15 for a look at the balance sheet. The working capital position stood at negative EUR 1.1 billion at the end of the second quarter. This reflects an increase of EUR 52 million compared to at the end of our first quarter and is unchanged relative to a year ago. These movements are due to the phasing of specific milestones in Solutions as described on the previous slide. Capital employed increased by EUR 163 million during the quarter due to investments and a less negative working capital position. Compared to a year ago, capital employed has more than doubled, but this effect has been offset by an increased earnings level, leaving RoCE unchanged at 30%. Over the coming years, RoCE will continue to vary between the quarters as it depends on earnings from operations, timing of payments from customers, and not least, a higher asset base from the ongoing investments, which will ramp up during the years. The net cash position was around EUR 750 million at the end of the first half, providing a robust financial position. This is a requirement both to fund our investments and also to continue progressing on the growth journey that lies ahead of us in the coming years. During the second quarter, we also refinanced our revolving credit facility. Let's go to the next slide for our outlook -- for update on the outlook for '25. So based on the financial performance so far in 2025 and our expectations for the rest of the year, we have updated the financial outlook for the full year. We now expect revenue at standard metal prices in the range of EUR 2.65 billion to EUR 2.75 billion compared to previously EUR 2.37 billion to EUR 2.52 billion. Operational EBITDA is now expected to be between EUR 360 million and EUR 390 million compared to our previous outlook of EUR 330 million to EUR 380 million. The update is driven by the Solutions and Services and Accessories business lines. In the first half of the year, we reported double-digit organic growth driven by the high activity level across the business, including specific variation orders and a high level of subcontracted revenue in Solutions. This is expected to be lower in the second half of the year, but we expect the revenue growth in Solutions business line to be slightly positive for the full year. Throughout the year, we continue to execute mainly on projects awarded in 2020 to 2022. Looking at the projects planned for execution in the second half of the year, the project mix appears to be slightly more favorable compared to the first half. Unchanged from previously, we have a higher cost base in Solutions as we support the ongoing investments and production ramp-up. The dilution on group margin in 2025 from these costs is still expected to be slightly higher than they're around 1 percentage point in 2024. We expect Service and Accessories to maintain a high activity level for the rest of the year, driven by the overall demand in the market and contribution from repair jobs. We, therefore, expect a higher contribution from Services and Accessories on both revenue and EBITDA compared to our initial outlook. Unchanged, we expect Applications to contribute positively to the revenue and EBITDA development in 2025. All other assumptions presented in the annual report 2024 are unchanged and listed on the right-hand side of the slide. Please turn to Slide 17. We have a strong foundation for the growth journey that lies ahead of us. With the results achieved and the execution on our capacity expansion investments in the first half of the year, we made clear progress towards our financial ambitions for 2028. At that point in time, we will have a significantly higher revenue base with more than 14% organic revenue growth CAGR from 2021 to 2028 and an operational EBITDA of more than EUR 700 million. And just as important, we expect to generate a RoCE of at least 20%, reflecting the improved earnings levels and a solid return on our investments. Now let me just recap the main highlights of the quarter on Slide 18. We maintained a positive development in the second quarter of 2025 with continued stringent focus on execution of our high-voltage order backlog and our investments to expand capacity. We delivered 13% organic growth with positive contributions from all 3 business lines. And our operational EBITDA amounted to EUR 105 million, up by 22%, and it exceeded the EUR 100 million mark for the first time in company history. All capacity expansion programs followed the plant across both Solutions and Application, we saw the expected progress. Last but not least, we updated our financial outlook for 2025 based on solid financial performance we have seen so far in the year and our expectations for the rest of the year. We now expect revenue in the range of EUR 2.65 billion to EUR 2.75 billion, and operational EBITDA between EUR 360 million and EUR 390 million. With this, we have concluded the presentation, and we will now hand over the word to the operator to guide us through the Q&A session.

[Operator Instructions] The first question is from the line of Claus Almer from Nordea.

Yes, I will start out with a few questions. The first is about the whole margin trend within Solutions. As I understand, part of the revenue and the surprisingly strong revenue comes from variation orders that may only be more or less a pass-through of third-party work. So maybe you could give some more color to how did this part of the revenue impact margins both in Q2 and maybe also how it impacts the full year guidance? That would be the first question.

Claus, can you please repeat your question again?

Yes. Can you hear me?

Go ahead.

Yes. So it seems like you didn't hear my question. So I'll try again. A question to you, Claes, is about the Solutions division. As I understand, part of the very strong revenue trend is given based on variation orders, which is partly driven by third-party work, where you only will add a small margin. So could you put more color to how does this third-party works impact your margins, both in the Q2, but also on the full year guidance? That will be the first question.

How much color I can give to that question, to be honest. But what we were drawing to on the Solutions margin for the second quarter were 2 aspects of it. The first one was the product mix. And let me also add that, that the product mix, of course, is a part of both the margin in the actual projects. And then the second one is also obviously the absorption of the assets that we have. So that's the first one. And the second one was also the reference to the variation orders, as you rightfully bring up now. Now the only thing we wouldn't have said that unless it was not an immaterial impact on the margin overall for the business line. Variation orders typically is -- it is always good news from a nominal perspective for NKT. So it's the right thing to execute those. It is giving us return without increasing our capital employed. So I want to start by saying that. Having said that, if it is more complex scope, obviously, the variation orders will carry inherently better margin. If it has been foreseen from the beginning, it would also typically carry better margin. If it is more low complex scope, it will carry a percentage-wise, a lower margin, or if it has not been envisaged from the beginning, it would also potentially be a cost-plus situation. But as for the total impact on the business line, I think it's difficult for me to give further guidance than this, Claus.

Okay. But it would be very helpful. It is so difficult to figuring out how is the margins trending in Solutions. So maybe trying in a different way, if you look at the guidance upgrade, and I know this is on group level, but is the higher revenue more about these variation orders with very little profitability impact and then the profitability or EBITDA upgrade is more about execution. Would that be a fair assumption? Or how should we think about the guidance upgrade then?

Yes, I think that's a good way maybe to ask the question. If I start on the revenue part of the reason looking backwards for us now, all else changed looking forward to increase the outlook, from a revenue perspective, this is pertaining to Solutions and also primarily Service and Accessories seen what has happened in the first half year. And this is in Solutions, it is pertaining to installation, the traction in installation and also variation orders that have been acquired. And for Service and Accessories, it's primarily connected to the fact that we have had a higher amount of discrete work, meaning repairs and maintenance products than what we foresaw from the beginning of the year. So that's the revenue perspective. If you look at the EBITDA perspective, then there is a less EBITDA impact coming from this revenue increase. And there, it goes back to the VOs from the variation orders, which are primarily executed with subcontractors, but also the fact that applications had a relatively low Q1 from a margin perspective, which is necessarily not possible to compensate in the second.

Okay. A little bit more -- now that I understand a little bit better at least. Then my second question goes to the pipeline conversion. And so as you mentioned that these conditional orders of EUR 3.5 billion will be converted over the next couple of years. But you also have the National Grid frame agreement and others. Maybe you could -- little bit more precise on what should we expect for the second half this year and maybe what will be for the next year? What are you seeing, so to speak?

Yes, absolutely. If I start with the EUR 3.5 billion that you referred to as basically the order commitments maybe on top of the backlog, so to speak. And there, we don't expect any conversion of that to backlog for the remainder of this year, but as we said, in the coming years, and that also includes potential conversion next year. But then without going further into the details of that, then for the rest of the spot markets or frames, we have seen in the first half year around EUR 3 billion, as I said, initially being awarded. We can see that there is a fair amount of activity on the market for the moment, and we do expect some larger awards to be made in the coming months. That's now I'm refraining from speculating as to whether NKT will win or not, but I can confirm that we see that it's likely that there will be some major awards in the coming months.

And the next question is from the line of Lucas Ferhani from Jefferies.

My first question was again on Solutions. Is there a part of the kind of higher revenues that's maybe a bit more pricing on the backlog? Or this is solely kind of those variation orders? I'm just asking that question again as we think into 2026, if excluding even variation orders, there's still some positive impact from pricing as you move project mix?

No, I wouldn't say, not to a material extent in the second quarter. It's -- of course, you can discuss the churn of the backlog. I think we have talked about that before, and that will be a gradual churn over the next couple of years. But the material impact from a change from legacy to more recent projects will come in '27, both for the existing assets in operation today, but of course, also with us taking the new assets into operation. Then again, this will vary from quarter-to-quarter. But if anything, I think the composition, as we also alluded to in the presentation, was perhaps less favorable in the second quarter.

Perfect. And the second one is on Applications. If you can talk around -- firstly, in Power Grid, it seems the contribution from Solidal is kind of similar to what we've seen before, but the margin has really rebounded versus kind of Q3, Q4, Q1 that we've seen this last 12 months. So is it just that the pricing environment is better? Is there also some seasonality? Q2 is usually a bigger quarter, so you can speak around that. And just to confirm on the improvement in low voltage in Construction, it's not something you have seen in Q2. So it doesn't necessarily have a positive impact in that Q2 number? Or is it still better kind of year-on-year? And do you expect kind of Q3, Q4 to be better in the low-voltage Construction segment?

There was many questions here. So you have to correct me now if I miss anything of it, but I will try to shed some color on the profitability in Applications. And you're right, it was very strong quarter for Applications. So from a margin perspective, the 13% margin is a record for that business line. So that we are definitely satisfied with. If we try to put it into a little bit of context, if I start with the segments, so the Power Distribution segment, meaning then primarily the medium voltage cables, but also part of the 1 kV cables. Here, we were benefiting in the second quarter from assets that we took into operation in the first quarter. And this is in Sweden and Czech, particularly following those investments that we've earlier said that on a full year base may imply a 5% to 10% revenue increase. That allowed us to recognize more revenues. And because of the strong market, there was also loading to do the same, and that also contributed to the earnings. And on top of that, of course, also Solidal had an aspect in that as well into that very segment. Secondly, if you look at the Construction-based segment, there -- this remains subdued. So that means both prices and volumes on a year-on-year comparison was lower in the second quarter versus the same quarter last year, although we did towards the end of the second quarter, note a slight improvement in the demand for construction-related cables. And we maintain our pessimism around this segment for the full year of '25. But of course, it was not bad news that we did see a slight improvement at the end of the second quarter. So that's a little bit from a segment perspective. If I then take the perspective of Q1 to Q2 development, you will recollect the discussions we had also in this forum, where we explained the profitability in the first quarter referencing to 3 different areas. We talked about the mix in Applications, especially in the medium voltage to Power Distribution segment. we talked about selected pockets of competition, and we talked about the Construction segment. I think the Construction segment I just described. And if I then go to the mix, we noted a positive development of more favorable mix enjoyed by the Applications business line during the second quarter, which contributed also to increased earnings. And finally, the selected pockets of competition, I think we labeled as we saw an easement of that in the second quarter. We are humble and competition will always be there and will always be there, but at least the impact of that was less in the second quarter. I hope that sheds some light, Lucas. Now you can enlighten me if I forgot any aspect of your question.

That's all super clear. No further question. And just to Line, congrats and wish you the best for your next adventure.

Thank you very much.

So to -- maybe just to add one last thing, reminding what you said there, seasonality, yes, Q2 is a strong quarter typically for the Applications business line, and that needs to be kept in mind also when extrapolating further. And especially Q4 is typically a fairly weak quarter for the Applications business line. So just leave you with that reflection. And I don't know if congratulations is in order, actually. That's not how it feels to me, but we take your comments.

The next question is from the line of Akash Gupta from JPMorgan.

I got a couple of questions as well. I'm sorry, I got disconnected earlier from calls, so apologies if I ask them again. But my first one is on Solutions. So I think -- I mean, if you look at the full year or second half expectations, I mean, Line, you mentioned in your prepared remarks that for the full year, you are still guiding for slight growth, if I'm not wrong, and that would imply double-digit decline in the second half. So maybe if you can clarify if that math is correct or anything that you would like to add to that calculation?

I think what we say about rest of year or we say about the outlook in general is that we have a higher installation scope than we expected when going into the year, and that's due to this, especially driven by specific variation orders and we see a high activity level to be continued. And then we see also Service and Accessories having a higher activity level related to repair works. And these are difficult to predict. But based on what we know now, this is what we have included in the outlook. And then Application is more or less in line with expectations. So that's on the revenue side.

My question was more specifically on Solutions. So if I recall correctly, you said slightly positive for the year. Is that revenue outlook still hold? Or how do you see solution revenues for the full year?

Yes. Okay. So now -- so we don't guide on the business lines. So I think what we said back in early this year was the expectations. Then variations orders will come in and can change the picture. And this is also what you are seeing here in the first half, and you will see in the second half as a part of why we changed the outlook for the year also.

Okay. So basically, you're expecting some impact of variation orders also in the second half as well?

Well, variation orders by nature also come at different kind of times and not to be predicted linearly. But yes, definitely, that's what we execute on, and we could see rest of year variation orders is a part of that.

My second one is on competition in medium voltage. I think in Q1, you commented about competition in some countries. Where do we stand on competition when we look at various countries exposure you have in medium voltage space? And has there been any change in Q2 versus Q1?

Thanks, Akash, for your question. And I will repeat the question a little bit or the answer from earlier there that you're right, we talked about selected pockets of increased competition in the first quarter. And what we could note during the second quarter was an ease in that pressure. So that means a sequential improvement versus Q1.

The next question is from the line of Xin Wang from Barclays.

Very strong execution there. Congratulations. My first question may be a follow-up on the high-voltage order momentum there. So you said you will likely see larger tenders coming to the market over the second half. Can you maybe give us more color on what region looks more promising or which TSO have potential tenders that they will launch on to the market?

Thank you. I know we are a little bit apprehensive of being too specific around exactly what tenders are out there, but I think we can repeat what we have said before, just first clarifying that it's not only tenders coming to the market, it was when I was referring to activity, I was referring also to tenders being firmly awarded to the market. So meaning being converted into backlog with any of the suppliers. And we have historically said that we expect U.K. to be a strong market this year. And I think I would leave it with that. And then I think it's -- you will be able to guess what could be the case.

Yes, indeed. And then my second question is on applications. So in the regions where you encounter or foresee higher competition from local suppliers, do you see opportunity to consolidate them, which will help you take out competition and also improve your mix in the segment and you did execute the Solidal consolidation very well.

Thank you. And a good question, a strategic one. We can -- if just reflecting in the wider perspective, the Applications segment also in the medium voltage space is much more diversified and fragmented, if you will, than what it is in the high voltage. So just by that aspect, of course, the opportunities of consolidation presents themselves, so to speak. And we have also seen historically that consolidation has occurred. You mentioned one of the examples now, and there are others. Our growth strategy has primarily been and still is organic, where we are investing our money if we want to grow primarily towards opportunities that would allow us to support our 20% RoCE ambition. So that goes to the first or if there are strategic relevance to those organic investments. But secondly, it would also, of course, be an opportunity for M&A. This is more opportunistic and not something which is a fundamental part of our strategy. So we will let logic lead us. If there is good business logic to do something like that, then we would absolutely not take it off the table.