VBG Group AB (publ) ($VBGB)

Welcome to VBG Group Q1 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Anders Erken; and CFO, Fredrik Jigneus. Please go ahead.

So very welcome to the presentation of VBG Group Quarter 1 2026. I will make a short summary of quarter 1, the highlights, and Fredrik will give you all the details, and then we will make a short summary in the end on the direction that we are going in. So please, Fredrik. So if we conclude the quarter 1 highlights, we can say that it was a stable quarter from our side. Revenue increased by 2% compared to the first quarter 2025. And adjusted for currency and acquired volume, sales increased by 5.3% I think it's important also that we understand the 3 divisions and our geographic spread, and it's comfortable that all 3 divisions grow organically and also that we grow organically on the 3 main geographic areas, Europe, North America and rest of the world. We will dive in a little bit on the next slide to see our market segmentation split, but it's interesting to note that the drivers here, that is price adjustments and one of the most important segments within Mobile Thermal Solutions, the side-by-side segment grew by 24%. And of course, both Defense segment for Truck & Trailer Equipment and Ringfeder Power Transmission had a good quarter when it comes to that. So for Truck & Trailer Equipment, the growth was 24% in quarter 1. And as Martin Lundstedt confirmed last week on Friday, we see the same picture when it comes to the truck suppliers in Europe, we see increased volumes here. When it comes to the result, we managed to maintain our gross margins and the group delivered a solid EBITA margin of 12.7%. And I think Fredrik will come into details, but it's worth mentioning that the currency had a SEK 22 million negative effect on the operating result. Order intake was flat compared to quarter 1 2021, but currency adjusted, it was plus 8% and the book-to-bill ratio increased to 111%. And last but not least, our operational cash flow reached SEK 92 million. You can flip to the next one. And I think this is a nice picture to understand. We are not just a drawbar coupling company from Vanersborg. We have 3 divisions as we see, and we are working in many industrial verticals. Of course, the drawbar and truck business is important for Truck & Trailer Equipment. But as mentioned, the defense segment is now in double digits. And as you can see on the Mobile Thermal Solutions, it's a 1/3 split of these sites, and we had a positive trend within the side-by-side business. On the contrary, we had a slowdown on the bus side in Mobile Thermal Solutions. And as mentioned many times, Ringfeder Power Transmission works and is present in a lot of industrial segments or verticals. And this time, the machine building segment and Aerospace was growing together with Energy and Process Technology. So you can continue with the details, Fredrik.

Thank you, Anders. Okay. The first quarter sales increased by 1.9%. And adjusted for currency and acquired sales, the growth rate was 5.3%. FX headwind is about 9% for the group as a whole. EBITA amount to SEK 175 million in the quarter, and our EBITA margin declined from 13.1% in the first quarter of '25 to 12.7% in the first quarter of '26. The SEK strengthened during the quarter compared to the comparison quarter, and we have an impact on the group in all divisions. The FX effect on EBITA was negative SEK 22 million in the quarter, but most likely, we have now seen the peak of the FX effects. During the first quarter, we took the restructuring cost within MTS of SEK 2.1 million. And the operating margin was also affected by increased prices for raw materials such as copper and aluminum, and we have a lag compared to our price increases. Operating cash flow was strong and stable and amounted to SEK 92 million before CapEx in the first quarter compared to SEK 28 million in the comparison quarter of '25. Earnings per share amounted to SEK 4.53 compared to SEK 4.58 last year. We will go through the first quarter with some touchdowns on each division. Truck & Trailer Equipment to start with. Sales for the quarter increased by 3.3% compared to the quarter last year, which amounts to SEK 448 million compared to SEK 433 million. Adjusted for FX and acquired volumes, organic growth amounted to 1.4%. Demand for coupling products has continued to be high with a continued good market in Australia. Defense segment has grown by 24% in the quarter. And like Anders said before, the market for trailer components in Europe developed slightly positively from a low level in the first quarter. EBITA for Truck & Trailer Equipment increased in the first quarter compared to the previous year to SEK 95 million with an EBITA margin of 21.5%. Truck & Trailer Equipment delivers growing revenues with a stable high margin -- EBITA margin. Going over to Mobile Thermal Solutions. Sales for the quarter decreased by 4.6% compared to the previous year and amounts to SEK 671 million. Adjusted for FX and acquired volumes, organic growth increased by 5.7%. EBITA for Mobile Thermal Solutions amounted to SEK 58 million with an EBITA margin of 8.7%. The quarter was affected by FX headwind, SEK strengthened against U.S. dollars and CAD, which has an impact on EBITA of almost SEK 14 million but also increased cost for raw materials, primarily copper and aluminum as well as a less favorable product mix. During the quarter, restructuring costs of SEK 2.1 million were taken to adapt the organization, which we expect to strengthen profitability going forward. This has contributed to a lower operating profit, EBITA and a lower operating margin EBITA compared to 2025. Going over to Ringfeder Power Transmission. Sales for the quarter increased by 20.1% compared to the previous year and amounts to SEK 258 million. Newly acquired Malmedie contributes according to plan. Adjusted for FX, organic growth amounted to 12.1%. Sales in the comparison quarter was very low last year. EBITA for Ringfeder Power Transmission increased to SEK 29 million, and the EBITA margin amounted to 11.2%. During the period, a cost of SEK 4.4 million was incorrectly recognized in the wrong period. It was relating to 2025 and was recognized in the Indian subsidiary. Given recent acquisitions in Europe, the proportion of European sales has increased over the last quarters and now amounts to 39%. And please note, we have an average aftermarket business of 23% in the group. Rolling 12 months is almost in line with the full year 2025, not adjusted for currency. FX plays still a large role, both in sales and EBITA. EBITA was negatively affected by approximately SEK 22 million in FX effect between the quarters. For the first quarter, the cash flow before CapEx came in higher than comparable year or quarter. After 2025, we have a net debt position if we adjust for pension liabilities and leasing commitment of SEK 580 million. During 2025, we had lower cash flow from operations due to lower underlying result and higher working capital tied up in accounts receivables. We made 3 acquisitions and started to build our new production facility in Toronto, which explains the change in cash position. VBG Group has still a strong financial position that can be used to develop the group going forward. ROOC amounts to 28.8%. The decrease during 2025 is relating to the acquisition of the land and building in Toronto, which increases the balance sheet, but does not give a positive EBITA effect or contribution before consolidating the 3 facilities that we have today. But this KPI is also affected by somewhat lower EBITA. Thank you. And over to you again, Anders.

Thank you. If we look at our sustainability agenda, we published for the first time an audited sustainability report in the beginning of April, and we are very much focusing on 3 areas. It's the reduction of CO2 emissions, it's reduction of waste and reduction of accidents in our factories. So future focus, and I might tick in open doors, but looking ahead, I do anticipate continued market volatility and geopolitical tension. But we have an organization that is agile and responsive to changing conditions. Overall, while tariffs remain a challenge, the net impact on our operations is marginal. We have done a tremendous job in offsetting these changes. The largest impact was the commodity price increases for Mobile Thermal Solutions that Fredrik already mentioned and especially copper and aluminum. And we are committed to offset these cost increases with price adjustments during the first half of 2026. And we have so far reached roughly 75% of the target, and it will be delivered then the rest in quarter 2. We are also positive, and we are committed to capitalizing on the strong order book going forward. As mentioned, order intake adjusted for currency during the quarter was plus 8%. And we can also mention that sales and order intake gradually improved during the quarter. And we really can't see any indications of lost business or lost orders or canceled orders because of this geopolitical tension. We will also continue to finalize our building in Toronto, and we expect to have that in end of quarter 3, beginning of quarter 4 and fully operational in the first half year of 2027. We also announced this morning that we will consolidate Ringfeder Power Transmission's production facilities in German, Neunkirchen with a Czech facility and build a brand-new building in Dobra, Czech Republic. This is part of our strategy to be more efficient, to increase capacity and strengthen our long-term competitive edge. And as Fredrik has said, with our financial strength and our decentralized organization, we are prepared what lies ahead. Through our cash-generating divisions, we are committed to complementary acquisitions as well as investing in organic growth. This will lead to continued sustainable profitability. So by that, we are finished with our presentation, and we are open for questions at this point.

[Operator Instructions] The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. So I thought maybe if we could start off with the MTS margin, which is down 200 basis points year-over-year. Of course, I mean, it's natural explanations here with raw material, et cetera. But is it possible to quantify how much of the 200 basis points is related to the raw material impact versus the negative mix effect?

I would say that the majority of this is related to the material cost increase. But we have a negative effect also on the product mix. And this is on the bus side, where we see that the ratio of electrified school buses is declining, which has an impact both on revenue and the result. But the majority comes from the cost increase on the material side.

That's very clear. And if you -- if we see sort of the full price increases that you have implemented being finalized here end of Q2, I mean, is it fair to assume that the MTS margin will sort of gradually raise up to 11%, 12% here in H2 or anything that speaks against this?

I mean we are committed to have agreements to mitigate these cost increases during quarter 2. But of course, you have to look at the order book also, what is orders that are committed to a certain price. But definitely during quarter 3, it will be fully implemented. But we should already see signs in quarter 2 about this.

Okay. That's very clear. And if we take the bus side of the business, you comment on it being slightly soft, partially due to EVs. But is it soft across both school buses and transit buses?

No. As commented before, maybe I should make a longer story about this. We saw since, I would say, 2024 that we were losing volume due to Nova pulling out of the U.S. So the transit bus volumes has deteriorated over time. Now we can see even in Swedish money in SEK that we are stabilizing the transit segment now. And even in local money that we are gaining back. Last year, we put a lot of effort in product development in order to come up with -- and come out to the market with competitive products, and we see -- we start to see results on the transit side. On the school bus side, we can see that there is a clear product mix change. And that means that the number of electrified school bus solutions are decreasing. The volumes in itself are the same, but we can see a clear change in the ratio of electrified drivelines on school buses. If this is just a quarter at certain accounts, I can't tell you, but we monitor the situation, and it has a clear impact on quarter 1 revenue and the result from MTS. Let me also comment then we shouldn't discuss the currency too much, but the school bus business is 100% business in the U.S. And of course, that the headwind is much, much greater than 9% in the bus business for us. Currency has a larger impact.

That's very clear. And then if we jump over to Truck & Trailer Equipment, I mean, you commented on the semitrailer market bottoming out here for a couple of quarters. It looks like the coupler business is holding up well. Defense is growing strongly. And I guess you have some general annual price increases. So just wondering if there is anything holding back the organic growth in Truck & Trailer Equipment here in Q1 that could potentially accelerate going forward?

No. I think we see a good positive trend within Truck & Trailer Equipment. And as you saw on the chart, the major impact for us is the truck business. We can see since the end of quarter 4 2025 that volumes are steadily growing within the 7 big truck OEMs in Europe, which is positive. And by history, we see that the volumes at the OEMs really pull the market conditions for our largest customer base when it comes to first installation. And that is the body builders who build the gravel truck, the distribution truck or the timber truck or whatever. So it usually starts like a quarter or 2 quarters after the truck OEMs going forward. So no, we see a good trend going forward.

That's very clear. And sorry, just one last question here on your announcement this morning of the new facility for Ringfeder Power Transmission. Is there anything you can say regarding either payback calculations or cost savings that you are expecting here?

No, not at the moment, Gustav. But I mean, this is a long-term investment for us. We see the consolidation within the German production unit where we have been working in roughly 1 shift, and now we consolidated to get a more efficient output, and we get a state-of-the-art building to build efficiency and productivity for the future. And this is long-term commitment that we want to stay really competitive in these small niches that we are acting.

The next question comes from Jonny Jin from SEB.

And I also have a couple of questions. I think I will start with the organic growth. I mean all divisions show organic growth in the quarter, which is good. But could you give an estimation of the split between price and volume contribution in the quarter? I mean, what is a fair assumption of price impact in the quarter?

Thanks for the question, Jonny. Yes, we can see that the price adjustments they stand for about 25% of the increase and the rest is organic then.

Okay. That's clear. And entering Q2, could we expect similar price magnitude? Or will it be even higher in Q2 or...

It will be basically the same impact.

Okay. That's clear. Then coming to MTS. I mean, I guess the price impact here mainly relates to the MTS side. But I mean, despite higher price contribution in this in this quarter compared to Q4, it seems like organic growth is somewhat slower compared to Q4 MTS. So what is sort of driving that? And how is your visibility entering Q2 within MTS, would you say?

I would say -- and it's connected to Gustav's question as well. Number one, when it comes to product mix, we can see that in the quarter 1 2026, there is a clear product mix change compared to the previous quarters 2025. We have a much lower volume of HVAC systems to electrified drivelines within school buses. That is the main product mix change. And as mentioned earlier, we had a multiple of 3 up to 4x for each system delivered when it comes to electrified drivelines. And on top of that, without knowing exactly details, but we can see that the currency impact, especially in North America with the U.S. dollar in relation to SEK, it was the peak during quarter 1, 2026. So that are the 2 main drivers for not increasing the organic growth to the same level as quarter 4, which was roughly 9%. And now we are talking about 5%.

Yes, that's fair. I understand that. But I think -- I mean, the mix impact, I think you had similar reasoning in your Q4. So should we -- I mean, is the mix effect even more elevated now? Or I also want to tie this to your comment about higher price increases. I mean, have you seen any response among customers that they have been more hesitant, which affects volumes? Or how should we read that?

No, we can't see it and it comes back to the order intake figures as well. We can't see any cancellations. Of course, there is deep discussions when you compensate prices in the market. But I mean, it's necessary for us to compensate. And I think it's a general trend to see what has happened to copper and aluminum in the last 9 months.

Okay. Yes. Just one final from my side. I mean, coming back to orders. If you exclude the acquisitions, what was sort of the book-to-bill in the quarter? And also, could you give the split among the divisions? I mean, the order -- organic book-to-bill in trucks and MTS, for instance?

Jonny, the book-to-bill ratio was 111% in the quarter for the group. I can't go in detail about it. And what was your second question around?

Organic growth, order intake.

Order intake. We split the organic and the acquired volumes. So the order intake related organically, that was 3.3% and the rest was acquired volume.

Okay. That's clear. And is it fair to assume that orders is above sales in both Truck & Trailers and MTS?

You can answer.

Yes, it's above sales.

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

So thank you very much for all of you participating. We appreciate that you are listening to us and hopefully have a better picture of VBG Group going forward. Thank you very much for your participation.

Thank you very much.