VBG Group AB (publ) (VBGB) Earnings Call Transcript & Summary

Welcome to VBG Group Q2 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.

Good morning, everyone. Welcome to the VBG Group presentation of Q2 2026. It's me, I will give you a summary of the quarter 2, and Fredrik will give you all details, and then we will make a short discussion about the future. It's been another volatile quarter with new tariffs and geopolitical tension, especially in the Middle East. Still, revenue increased by 8.7% compared to the second quarter of 2025, and adjusted for currency and acquired volumes, sales increased by 8.3%. 75% of the growth was related to volume and 25% related to price adjustments. All divisions showed growth together with all 3 geographic markets: North America, Europe, rest of the world. In summary, the third-best quarter revenue-wise. Interesting is that the side-by-side segment within Mobile Thermal Solutions increased with 19% and the Defense segment within Truck and Trailer Equipment with 60% compared to second quarter last year. Ringfeder Power Transmission, our third division, showed growth in all industrial verticals. And we see a clear trend that the European truck OEMs increase their volumes. We see also a limited impact revenue-wise due to the tension in the Middle East. It's mainly the sales related to the semitrailer segment that is affected. Very important for us is that the order intake increased with 11% in the quarter compared to Q2 2025, which indicates good demand in the coming quarter. The group delivered an EBITA margin of 10%. It's worth to comment that the new tariffs and commodity price increases in Mobile Thermal Solutions had a negative effect on the operating result in the second quarter. And as mentioned in the press release in the end of April, we reserved SEK 19.3 million for restructuring costs in the division Ringfeder Power Transmission. And now to the details, Fredrik. Please go ahead.

Thank you, Anders. I will change picture. The second quarter was characterized by a strong -- continued strong demand across the group. Organic growth reached 8.3%, and all divisions contributed positively to sales development. Overall, sales increased by 8.7% to SEK 1.48 billion. EBITDA amounted to SEK 149 million, and the EBITA margin declined to 10%. The lower margin was mainly driven by 3 factors: restructuring provision relating to the consolidation in Germany, higher raw material costs and the impact from changing U.S. tariffs that temporarily outpaced our price adjustments. Excluding the restructuring provision, the underlying profitability would have been stronger, of course. Cash flow was lower than last year due to the higher working capital requirements, mainly inventory and receivables, driven by growth in sales and preparations for the move of the Toronto facility. Let's go through each and one of the 3 divisions, starting with Truck and Trailer Equipment. Truck and Trailer Equipment delivered another very strong quarter. Organic growth was 3.1% despite a relatively tough comparison quarter that included larger one-off orders in both U.S. and China. Demand remains strong in the Nordic markets and in Australia, while European trailer markets showed signs of recovery. The Defense segment continued to grow rapidly, increasing by approximately 60% during the quarter. EBITDA increased to SEK 82 million, and the EBITDA margin reached 20%, demonstrating the strength of the business model and the operational leverage. Going over to Mobile Thermal Solutions. Mobile Thermal Solutions reported strong demand and a double-digit organic growth of 10.2%. Sales increased to SEK 783 million, and growth was particularly strong in the side-by-side segment, which continued to perform very well. Profitability was impacted by raising raw material prices and new updated implementation of U.S. tariffs during the quarter. Although we have implemented price increases, there are temporary timing lag before the full effect is reflected in earnings. And this is really tough when the environment keeps changing all the time. We saw encouraging signs towards the end of the quarter as pricing actions started to take effect. Ringfeder Power Transmission, Ringfeder delivered its strongest sales quarter ever. Sales increased by 23.5% to SEK 285 million with an organic growth of 11.1%. Demand was particularly strong within automation, aerospace and defense-related applications, while Malmedie continued to develop according to plan. EBITDA was impacted by SEK 19.3 million in restructuring provision relating to the consolidation of production into Dobrany in Czechia. Excluding this item, profitability would have been stronger, of course. Product mix during the quarter was also negatively affected margins. Importantly, the consolidation supports future efficiency improvements and strengthen the division's long-term competitiveness. Could you please change picture there. Okay. One of VBG Group's key strength remains our geographical diversification. North America represents approximately 50% of the sales; Europe, 36%; and the rest of the world, 14%. This balanced exposure reduces dependency on any single market and creates resilience in volatile environment. Another important stabilizing factor is our aftermarket business, which accounts for roughly 1/4 of the group revenues and contributes recurring demand throughout business cycles. Cash flow before investments or CapEx was weaker than last year due to increasing working capital requirements. Higher sales levels drove receivables while inventory increased as part of the preparation for the Toronto facility move. During the first half year, we continue to invest in our long-term growth agenda. The Toronto facility is progressing according to plan and represent the majority of the group capital expenditure. Even after these investments and 3 acquisitions completed during last year, we maintained a strong financial position with a significant financial flexibility for future growth initiatives. ROOC declined to 26.6%, mainly due to the increased capital employed relating to the Toronto project. The facility has not yet contributed to earnings, but will support future capacity and efficiency improvements once fully operational during fourth quarter 2026. To summarize, we delivered another quarter with a strong organic growth across all divisions, increasing order intake and continued strategic progress in both Toronto and Dobrany. While profitability was impacted by temporary factors during the quarter, we continue to invest for future from a position of financial strength. With that, I hand it back to you, Anders.

Thank you very much, Fredrik. So, 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 changing tariffs remain a challenge, the largest impact was, as Fredrik mentioned, the commodity price increases for Mobile Thermal Solutions, especially copper, aluminum and plastics. We are committed to offset these cost increases with price adjustments and cost take-outs. And as Fredrik mentioned, we see progress in the end of the quarter. And coming into detail, it was the adjustment of the tariff Section 232 on the 6th of April, which meant that products with a higher volume than 15% of steel and aluminum got a tariff of 25%. It was changed then on the 1st of June down to 15%, but still had an impact. On the other hand, we are committed to capitalizing the strong order book going forward. And as mentioned, the order intake increased by 11% during the quarter. We will also finalize the building in Toronto during quarter 3. We see that we have the keys to the building in the middle of October. And as we announced in April, we will consolidate Ringfeder Power Transmission production facilities and build a new building in Dobrany, Czech Republic, not far away from the existing building that we have, Dobrany, Czech Republic. And this is part of our strategy to be more efficient to increase capacity and strengthen our long-term competitive edge. So with our financial strength and our decentralized organization, we are prepared for 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 end the presentation, and we are open for questions.

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

It's Gustav here from Nordea. I thought maybe just to start on the order intake here, you commented 11% year-over-year. Can you just give us a bit more color on whether it is equally, sort of, split between the different segments or if it's more tilted towards any of them?

First of all, as you all know, the currency effect is much smaller compared to quarter 4 2025 and quarter 1. But still the 11% is not currency -- it is not taking care of the currency, so to say. But when it comes to the order intake, it's I would say, evenly distributed a little bit more on the Ringfeder Power Transmission side from a percentage point of view.

Okay. That's very clear. And then if we just jump into Mobile Thermal Solutions here and the margin. As you say, you implemented price increases, you announced it in Q4. It is gradually coming here into effect. You could see end of the quarter here. Should we expect to see you're compensating fully for the increased cost in Q4? Or is that too early, would you say?

I would say like this. First of all, it's like going to the amusement park and hit the frogs. I mean you bang one frog, but later it pops up on another place. And it's literally the same when it comes to the tariffs. We were surprised that it was changed during the quarter when we had a good trend and then the impact. But we continue, as mentioned, with price adjustments and cost takes out. And we saw a good progress in the end of the quarter. We see that it will take another quarter before we have covered the lag. So practically by -- if nothing else happens during quarter 3 and quarter 4, we see that we have good progress into quarter 4.

That's very clear. But are you implementing further price increases now in Q2 or?

Absolutely. And they will have an effect in quarter 3 when -- I mean, order book will -- when you increase prices, the order book will gradually implement these price changes.

That's perfect. And then I was just wondering if it's possible for you to say if we just -- I mean, assume a similar mix in MTS that we are seeing today, but then see that you are compensating fully for the increased cost here. Do you expect that to be enough for you to come back to double-digit margins in MTS?

We see that we will come back to double-digit margins in the end of the -- with the same product mix that we have today and the price adjustment and cost takes out that we have.

That's very clear. If we take a view on the longer-term margin here for MTS and also, I guess, including also the new Toronto facility, what type of margins can this business potentially run with, if just ballpark or if you can just reason a bit about it or anything?