Systemair AB (publ) ($SYSR)

Welcome to Systemair Q4 2025/'26 Report Presentation. [Operator Instructions] Now I will hand the conference over to the President and CEO, Robert Larsson; and CFO, Anders Ulff. Please go ahead.

Thank you very much. You are all most welcome to this presentation, where me and Anders will cover the fourth quarter for Systemair. As you heard after the presentations, we open up for the Q&A. So the agenda, I think it's quite straightforward. Let's move directly into Slide #3. So Systemair was established in Skinnskatteberg in 1974 by Mr. Gerald Engström, who today remain as the main owner and Vice Chairman of the Board. And during the years, the company has grown consistently and has now achieved annual net sales of EUR 1.3 billion. Systemair was listed at NASDAQ in October 2007. We are a company operating with our core values of simplicity and reliability. We develop, manufacture and market energy-efficient and high-quality ventilation products, and we are proud of our wide product portfolio. And in addition, we are determined to meet our customers' expectations on delivery reliability, availability, sustainability and quality. Today, we run our own sales companies in 51 countries, and our products are available in totally 135 countries. We operate 27 factories in 19 countries, and we have about 7,400 employees. Slide #4. So what stands out in Q4 is the strong organic growth in the context of the current market conditions and the uncertain geopolitical situation. We see this as a sign of strength, and we are encouraged to continue executing on our continuous improvement agenda. At Systemair, we have since a long time back, had our Systemair production model that allows us to operate efficiently across all our factories. It contains a firm logic, ways of working, best practices, et cetera, and allow us to achieve scale of economy across many sites. Now we embark on developing and implementing our Systemair sales model with the same ambition. We want to offer our decentralized sales organization tools and processes to become even more successful, winning more and better business and at the same time, gaining efficiency. It is in this context, we decided to make a concentrated effort in the quarter to restructure parts of our German sales and service organization. Yes, there were some one-off costs involved in this specific case but we are convinced that it will pay off. During spring and our Q4, there were several major international fairs where we showcased new products and developed our customer relationships. And for example, at the Acrex exhibition in Mumbai, India, a new advanced air handling unit called Vayrox was launched. It is designed for the Asian market, it is strengthening Systemair's positioning in high-growth industrial and commercial segments, and it reinforces our commitment to innovation, localization and long-term market expansion in Asia. In the quarter, we also launched a pilot program for women mentorship. We believe that diverse teams perform better and being a growth company expanding our talent pool is important for our long-term success. Next slide, please. Slide #5. One strength of Systemair is a global and diverse customer base, providing us with a solid foundation for profitable growth and also high resilience. Western Europe is continuing as our largest region with 45% with the other 4 regions fairly equal in size. Anders will share more details about the development in each of the regions, but you can already here conclude that there was no major shift in share between the regions during Q4. Slide #6. I did already mention it. We are very pleased with almost 10% organic growth in the quarter, given the current market conditions and uncertain geopolitical situation. The mission is to double the size of the company within 7 years, which corresponds to 10% annual growth. To make this feasible, a bit more than half of the growth must be organic. So almost 10% in the quarter and slightly over 6% during the last year is just what is needed. With this, I hand over to Anders.

Thank you, Robert, and good morning to everyone. So our fourth quarter of the fiscal year '25/'26 is covering the month of February, March and April, we met pretty easy comparables in this quarter with a negative growth last year of 2%. This quarter started off a little bit slow in February, but March and April showed good growth. Total net sales amounted to SEK 3.28 billion compared to SEK 3 billion, more or less exactly last year. This corresponds to an increase in sales by 9.1%. The currency conversion effects have declined during the quarter, so the organic growth was pretty much on the same level at a positive 9.6%. We can conclude that for the seventh consecutive quarter, we are reporting an organic growth in a relatively slow but sluggish and gradually improving market. We go to Slide #7. A bit more details in the net sales development. We saw organic growth in all regions, except for the Nordics during the quarter. We completed the acquisition of NADI in India in August last year, and this has contributed with 1.3% of net sales for the quarter. And then finally, currency effects. The strengthened in Swedish krona resulted in a negative effect on sales by 1.8%. The effect comes from several currencies since we have operations in many countries. Going to Slide #8. We go into the geographical breakdown, and I will comment on the organic growth rates for each region. Then, starting with the Nordics where we had close to a flat organic sales development in the quarter, the Norwegian market is suffering from low construction within the residential building segment, where we have a relatively high exposure, while the Danish market is currently in a period of lower demand on the commercial side. However, we can conclude a nice growth in sales in the Swedish market. In Western Europe, our single largest region, we are proud to report an organic growth of 9% for the quarter. Within the region, we experienced a positive development, especially in U.K., Belgium and Italy. We are also happy to see continued cautious growth on the German market. In Eastern Europe, we had again very strong organic growth of 19%. Sales were especially strong in the quarter in Czech Republic, Poland and Slovakia. In North America, the organic growth rate was 17%. Our North American operation, focusing on school ventilation has entered the start of the peak season with good demand in the market. We have also seen several changes in the tariff recently. From the beginning of April, the tariffs increased to 25% of the total product value. But in the start of June, they were revised down to 15% for most of our products. Our ambition, however, is to forward these tariffs to the customers. In Middle East, Asia, Australia and Africa, we had organic growth in sales of 11%. We experienced a quarter with good sales in Turkey due to some larger project deliveries but also good growth in Australia and Middle East. All in all, total organic growth at 9.6%. Going into Slide #9. Our gross margin was strong and amounted to 36.3%. This was slightly under the 36.5% that we achieved last year. explained by product mix and price increases on components and freight. As a side note, we have communicated price increases to our customers starting from 1st of June. Overall, we are happy to see yet another quarter with strong gross margin. Our adjusted operating profit amounted to SEK 292 million or an operating profit margin of 8.9%, which is slightly above Q4 last year. The adjustments in the quarter relates to a provision for financial receivable from a previously disposal of a group company of SEK 17.5 million. Further, we have taken a restructuring costs relating to the German sales and service organization of SEK 22.9 million. Selling and admin expenses in comparable units increased by 5%. Slide #10. Profit after tax amounted to SEK 214 million compared to SEK 119 million last year. Net financial items for the quarter were negative by minus SEK 4 million compared to minus SEK 99 million last year. Currency effects on bank balances and loans were negative and amounted to minus SEK 9 million. Interest expenses amounted to minus SEK 12 million compared to SEK 21 million last year. We had a relatively high tax rate for the quarter at 29.8%, which is affected from not activated deferred tax assets. Going to Slide 11, the cash flow development for the quarter. We achieved a free cash flow of SEK 46 million compared to SEK 264 million last year. Within the working capital was a significant increase in trade receivables of SEK 156 million, due to the higher sales in the quarter. Net investments of SEK 150 million relates mainly to the production capacity investments in India, Slovakia and Sweden that we are currently working with. Our net debt has decreased down to SEK 888 million, which is SEK 13 million lower than a year ago. Adjusted net debt to EBITDA amounts to 0.54 and we have a strong balance sheet that enables us to pursue further investments for organic growth. In relation to that, I would also like to highlight that we have during the quarter, renewed our financing agreements of a total of EUR 130 million for the coming 3 years with better terms than before. And then on Slide #12. And we are reporting our last quarter of our financial year, now I would like to summarize what we have achieved. We are proud to conclude an organic growth for the full year of 6.1%, which is in line with our expectations. Looking at the adjusted EBIT, we have achieved a margin that continues to increase for yet another year, taking us closer to our target of 10%. Over to you, Robert.

Thank you very much, Anders. So clearly, margins have been closing in on the financial target of the 10% operating margin over a business cycle. We do not provide forecast. And of course, there are no guarantees. But assuming a continuing stable or even slightly improving market conditions, combined with our own improvement agenda, it is most reasonable to assume that we will reach the 10% level during the coming year. Okay. Slide #13 it is. So Hermann Vogl Heizung und Sanitär in Germany has selected Systemair products for a ventilation system, continuously adjusting the airflow in the building based on sensor data and the control system. We choose to present this project since it is a great example of technology being available, but not yet mainstream in the industry. And this technology has potential for achieving next level of comfort and energy efficient. And I think this is the story about the ventilation industry. There is more value that can be provided to customers that is kind of compared with the current mainstream solutions. Slide 14. We are ramping up our new factory in Riyadh. Unfortunately, we have not yet been able to have a proper inauguration because of the geopolitical situation. Still, for the new stadium in Riyadh, Systemair will supply a complete package of products for a comprehensive ventilation system. The top highlight of the project for Systemair is that all the products will be Saudi-made locally in our new factory in Riyadh. Next slide, please. So we are now executing on this strategy to build a more focused and scalable commercial model. And to illustrate what it means in practice, we here share some details on what it means for our Swedish sales organization. On the left side, you see the directions. The starting point is the group agenda, which is then adopted by the local leadership team for the specifics of the Swedish market. To the right, you find the main execution steps. This is a full transformation and the program continues well into 2027. And all -- and just remember, the ambition, as I said before, is to drive both the growth as well as efficiency or sales productivity. I guess that was the last slide, so we open up for Q&A.

[Operator Instructions] The next question comes from Jakob Marken from Seb.

So a couple of questions from my side. Starting on the organic growth. Overall, very strong, as you said, and some regions even having almost 20% organic growth here in the quarter. I mean, is there anything here that sticks out being bigger projects or something being of a one-off character? You mentioned Turkey, but besides that, is there anything that we should have in mind going forward here?

Well, thank you for the question. I think I'd probably kind of let Anders provide some insights on this one.

Yes. As I mentioned during the presentation, then, we have seen that on a monthly basis, it's been lately a bit more volatile than we have experienced before. And also in the -- as you can see then, we come from a quarter with low growth. And before that, we were on 8% organic growth. So I would say that the current environment is more volatile than before, really. But I wouldn't say that there are any except for Turkey then and also, I would say, Eastern Europe is also more project-driven. But what we have -- what we are seeing in, for example, in Western Europe and the North America is not really related to any specific projects.

Okay. Perfect. And on the organic growth, I mean, you're posting a lot better organic figures than the many others in your segment. Is there any particular subsegments from the -- on the client side that you see performing very well? Or where do you see the demand coming from?

I would comment in saying that I think the growth is kind of broad-based Yes, we have some weak spots. We speak about the residential segment in the Nordics and so on. But apart from that, I would say we are happy to see a broad-based growth.

Okay. I see. And then on the [ price ] side, you said that you implemented price increases from June due to components being more expensive now and you also talked about price increases due to tariffs in April. Can you help us with the magnitude of these price increases and when should we expect them to impact the P&L?

So the background for the price increases. We have seen some input costs increasing. Freight, I think, is kind of worth mentioning, but also just looking at the London Metal Exchange, you'll find that copper and aluminum and steel also has increased a lot, energy prices and so on. And certainly, we always look for improving our own efficiency to start with. But this is a situation where we need to kind of ask kind of go out with price increases. So and then the magnitude, we expect ourselves, let's say, our ambition is to compensate for the increased costs we have. But then we have a very wide product portfolio, and we operate in many markets. And at the end of the day, it is our customers choosing between us and others. who suits their needs the best. So kind of the -- there's a big and wide price spread. So I'm not prepared to share a specific number with you. Would you add...

I mean in the past, we have seen that we have been able to compensate ourselves pretty well for the increased cost base, really improve the price increases. So -- that is absolutely the ambition in this case as well.

Okay. And the last one for me. Just on the working capital buildup here in the quarter, as you said, relating to good growth in the quarter. Is there anything in particular that you see now that make us -- that should make us expect a working capital release in Q1? Or how should we expect cash flow in Q1?

Yes. I think we go now into the first quarter, and we expect good growth going forward as we -- I mean, on the path where we are currently. So I mean, the expectation would be to continue to increase the working capital within trade receivables going forward. On the inventory side, we don't see that there's any specific need for inventory buildup due to shortages of components or similar currently.

The next question comes from Lara Mohtadi from ABG Sundal Collier.

Anders, a couple of questions from my end. My first one is on Germany. You flagged a continued cautious optimism. But maybe you could just break this down a little is what you're seeing driven more by the renovation and well nonresidential side rather than new build, well given how soft German residential construction still is? And on order intake, can you actually improving? Or is it more sort of stabilizing at low levels?

I think we are -- let's say, I think we are a bit optimistic going forward about the German market kind of we have seen growth in the past. We see growth in this quarter, and that's what we expect going forward also. I wouldn't say that we see a major change in kind of in patterns. It's boring maybe -- a boring enough, maybe, but it's more of the same, I would say. Would you add something to that, Anders?

Yes, I think you said it well, Robert, I don't think it's especially the new build that is driving the growth. I mean also on the German market, we are present in many business areas also. So this is product-wide growth that we are seeing and partly built on other areas like the industrial part, I would say.

Okay. Great. And just a second one on sort of -- you had a very strong organic growth in the quarter. So just wondering a little bit about the durability of this. You said that North America and the Western Europe weren't project driven, which is incurred, but did you see any maybe customer prebuying ahead of these tariff increases in North America and the price increases in 1st of June in the rest of Europe?

It's really hard to say. We are announcing the price increases from 1st of June when it kind of in general. So it's really hard to say. But specifically for the North American situation, I don't think that the tariffs had any impact on the buying behavior because it was kind of sudden. It was announced on April 6 that this is coming. But there has also been continued changes in the situation and not only the kind of the tariffs themselves, but the interpretations has been shifting over the months. So it's kind of -- it's really a tedious job keeping track on this one. And we do also expect that there will be further tariff changes kind of down the road. We hope for the situation to stabilize. But I would say that I'm particularly happy about seeing the growth -- the organic growth in North America for the fourth quarter here. We have new leadership in place, and we have chosen some directions for the next time to come. we are going kind of -- our mission, or my mission is to double the size of the group or the company in less than 7 years. And in order to reach the positions that we would like to have in North America, it has to be faster than that. So I think that is the context.

Okay. And you just mentioned that you have a target of doubling sales in 7 years. Could you maybe help us understand how much is going to be organic and how much is acquisition related?

So 7 -- doubling in 7 years, that means 10% growth per year. We have earlier communicated, I think, quite openly that the majority has to come from organic growth and then the balance then from acquisitions. And the reason for this is that we all know that organic growth kind of -- it's a fantastic profit contributor. So that's the logic. And it is also -- and it is doable. So looking at the last quarter, we were close to 10%. Last 12 months, we are just above 6%, which is kind of that would be needed then. So 6% plus 4% makes 10%. And of course, it could be 7% plus 3%, who knows? But I think this is the growth pattern that we would like to see going forward.

And just the last one from me. The gross margin was down a little bit year-on-year. And with these price hikes and the 25% U.S. tariff pass-through, when do you think you'll be seeing a recovering input cost inflation? Should we sort of model a margin lag through the first year H1? Or how should we model this?

This is for you, Anders.

As I mentioned before on the previous question, in the past, we have been able to set off the cost increases pretty well through our price increases. Yes, of course, there's a lag also due to the order backlog and to reach out the full way to the end customer also. So I would say, in general, we spoke about the other a backlog of a couple of months, really. So it's not a very long backlog either really, which is quite good.

And then, of course, there are contracts that needs certain kind of certain time duration to change them, but I think that's a fair estimate.

The next question comes from Adela Dashian from Jefferies.

One question on your operating leverage. I think about that. I mean, yes, we did see very strong organic growth this quarter, but the margins only expanded modestly. So I guess what's holding you back or holding the operating leverage back at this stage of the cycle? And then maybe also like if you could comment a bit on the regional mix, could that be something that has to do with us not fully seeing the potential in the margins?

Anders, you started -- you presented the breakdown and...

Yes, I think we would, of course, be helped by a bigger growth -- organic growth in the Nordics, really that would help the margins. So we have better margins in the Nordics compared to, for example, Middle East, Asia, Australia and Africa as one example then. We also pointed out here that, of course, we have seen some price increases on the material and so on. So that needs to go through all the way as well then to increase the margin. So -- and also on the mix side and where are we growing? So a good growth then in certain areas where we have bigger projects, bigger projects normally means a little bit lower margins than the normal day-to-day smaller sales, really. So that's also a difference here, I would say. And you have to remember also when looking at the gross margin, last year was exceptionally good also, and we are on a quite high level. So all in all, I would say that we are happy with the gross margin. It can always be better, but it's quite on a very good level for this quarter, at least.

And on the topic of this quarter, and I guess, modeling the coming quarters and we keep coming back to the same question, which is the durability of this organic growth -- and I guess it's a valid question because it's been so volatile over the past couple of quarters. And you now mentioned that you have in certain regions at least good traction on the project side, which I would assume to some extent, increases your visibility on the coming quarters? Would it be fair to assume that in the regions where you do have that sort of exposure that the organic growth trend is now it's here to stay. And then maybe in regions such as the Nordic, it's going to take a bit longer. Would just be great to get some sort of color on the expectations going forward?

I think I'll start with, let's say, kind of -- I'm sorry for a bit repeating myself, but I think the key message here is that kind of compared with our long-term targets, we need something in the region of 6% to 7% organic growth. which is what we have actually had during the last year despite a bit volatile, as Anders described it earlier. Then, of course, let's say, we would hope for the Nordic markets to recover. We believe in our own efforts in kind of reshaping the Swedish organization. And then I already told you that to reach our ambitions and kind of achieve a better position in North America we have to grow faster than the average of Systemair Group. So with that in mind, I think that's kind of as good as we can put it right now. Do I miss something, Anders or...

I think you put it well. I mean, for the full year, over 6% organic growth in individual quarters, it has been a little bit up and down during this year. and probably it will continue like that. But I don't see anything that has changed in the market that would change this view of continued organic growth.

So let's say, we said after the last -- last report during -- when we presented the last -- the Q3 that kind of we were, let's say, we were looking forward to stable or slightly improved market. And I would say the same statement would hold true for this quarter also.

The next question comes from Anders Jafs from SB1 Markets.

Yes. I just have maybe some question regarding the Nordics, specifically. Obviously, you mentioned Sweden that you see good growth there. And then obviously, bit weaker in Norway and Denmark. Did you -- have you seen any indication maybe towards the end of the quarter or that you see some stabilization in those 2 countries? Or should we maybe expect a bit weaker first half of next fiscal years as well in these 2 countries? Or how do you view that currently? Maybe some more color on that would be helpful.

Yes. I would summarize it like this, let's say, the situation in Norway with a slow residential market that has been persistent for some time. The belief is that kind of we are -- it should be at the bottom and kind of the hope for a recovery kind of during some time ahead of us is there if that materializes or not, it's really, really hard to say. But kind of that is -- if you check on the market reports and these things kind of there is this expectation, but we have heard the same messages for a long time, I would say, the hopes of a recovery in Norway. Sweden, let's say, stabilizing seems to be kind of stable. I think the new thing is the commercial market in Denmark, which has been turning down a bit later than compared with the markets in Sweden and Norway. So I think that's the time sequence of things.

Okay. And maybe to connect to your restructuring in -- on the German side this quarter. Do you see any need to maybe restructure any other small subparts of the organization for next year? Or is that anything you'd like to comment on or not, maybe. And also maybe get some more color on the German restructuring now this last quarter?

I don't know if there is so much more to share, kind of -- sometimes you can get stuck sort of well, the expectation is that all parts of the organization should continuously improve its positioning and kind of the operations, how we are executing business. In Germany, we got to a situation where we got a bit stuck and then we end up with this type of activity. It's much better for business. Our business is much better for our clients, and it is certainly better for the company. if we are really in a strong continuous improvement momentum, which we are targeting in kind of in all normal cases. Having this said, we say that we are continuously evaluating all parts of the organizations. And when we see there is a need to do sort of more of a concentrated effort, we will do that. But we are not announcing these ones ahead of the schedule.

Yes, yes. Fair enough. And maybe, obviously, lastly on the M&A market currently if, I mean, you obviously have a very strong balance sheet. And if you see anything you see on the broader M&A market currently, which makes you a bit more hesitant or how do you view that side currently?

I think there is no surprise to anybody that we're continuously kind of evaluating targets. That's kind of obvious because we have people working with this every day. But I think it's about pricing is always a topic. But for all -- for us, there are many more things than the pricing that is kind of criteria. We are very kind of for us, corporate culture is really important for, of course, it has to be strategic fit. Some of the kind of targets that we dream about that would not be available for right now, but that might happen down the road. And at the end of the day, it's kind of the price kind of you need to agree on something. When this happens, we will be very happy until this, we are kind of consistently working on our projects. So yes. It's not a very decisive answer, but I think you know the game rules here.

Yes, yes. But it is bolt-ons that you will be looking on or I mean, if you're looking 2, 3 years down the line? Or is that something you can comment on or...

Sorry. So we have communicated earlier that sort of -- the sweet spot for us would be some EUR 30 million to EUR 50 million net turnover for the target companies that we're looking at. Of course, when we grow in size, our appetite for larger acquisitions would likely to grow also. But of course, we need to buy what is available on the markets. But I would say EUR 30 million to EUR 50 million, that's a good range.

[Operator Instructions] The next question comes from August Flyning from Handelsbanken.

Two questions from my side. The first is on growth. Could you just provide some information on the Q4 development now and whether parts of this growth should be seen as projects being pushed from Q3 into Q4 as an outcome of the very cold weather that we saw last quarter?

That's a good question. I have not really thought about that one. We let's say, we -- when we presented the third quarter I don't think that we specifically mentioned anything about cold weather, specifically had that as an explanation. Now we learned that other actors in the market. They did mention this. I'm not so sure about that. We know that kind of there has been delays and so on. But at least internally, we have not used that as an explanation.

It's really, really hard also to judge if something is pushed forward or prebuying. But of course, when you launch price increases and there are added tariffs and so on, of course those 2 things they drive, prebuying to a certain extent. But to quantify that, that's really hard.

And my second one, I know you -- we touched upon this a little bit earlier, I think, but discussing margins. And could you just -- I know you were in on that a while ago, but could you just give us -- provide some color on how we should see the Q4 margin compared to the Q2 margin, for example, where you had similar sales level, but 300bps higher margin in that quarter.

We haven't done that comparison between those 2 quarters. We normally compare ourselves with the same quarter last year, really. So I mean you have seasonality, different product mix...

The calendar is different. So many differences.

All right. could you just give -- okay, the product mix -- how much -- and you mentioned, obviously, Nordics as the region mix perhaps that drove the margin a bit down this quarter perhaps. But yes, nothing more to consider in that question.

On the margin mix, you mean?

Yes.

I don't think I have anything more to add than we have already given in this specific context when it comes to the gross margins. Of course, I mean, as I said before, then I mean, where we have a strong market position compared to where we have a weaker market position that makes a change really in the margins. Also depending on if we -- if it's the products that we produce ourselves or if it's traded products, we have traded products also as a complement to our product offering really to be able to deliver the full package and projects.

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

Let's see. I don't think we have any written questions. Do you want to...

No. If there are no more questions, I thank you for your attention, and I wish you a fantastic day.

Yes, we'll see you again, hopefully, 27th of August when we have Annual General Meeting in Skinnskatteberg and also present our quarter 1 report. So looking forward to that, wish you a nice summer.

Thank you very much, and goodbye.