Volati AB (publ) (VOLO) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's presentation with Volati. With us presenting today, we have the CEO of Volati, Andreas Stenback; and CFO of Salix Group, Martin Hansson. [Operator Instructions] And with that said, please go ahead with your presentation.

Thank you, and thank you, everyone, for listening to our quarterly presentation. Let's dig into it. So Volati, we're an acquisitive growing group of well-managed companies with strong earnings and cash flows. And today, we consist of 3 business areas, but I'd rather talk about our 6 platforms. And our business model is to develop these platforms and build them independent and strong. Currently, we are evaluating a separate listing of the platform Salix, which is also our largest business area and very happy to have the CEO of Salix Group, Martin Hansson, with me here today to tell you a bit more about Salix Group later on during the presentation. So let's get into the numbers. Our Q4, the sales came in, in line with last year and EBITA increased some 3% in the quarter. Salix developed very strong, showing a growth in EBITA of 74% and I would say that Ettiketto had a stable development. In Industry, I'll get into that a bit later on, we see a mixed development. Very strong operating cash flow, up 8% compared to last year. And the net debt-to-EBITDA ratio is now down at 2.5. So just concluding the full year then, we have seen a sales increase of 7%, and that's supported by Ettiketto that grew close to 30%. Salix also had a strong growth of roughly 15% compared to last year. The growth we've seen is acquisition-driven as the organic sales growth were flat over the year. However, that is quite a shift compared to the year before where we had a minus 7% organic sales growth. EBITA growth came in 10%, of which 2% organically, much driven by Salix that grew almost 50%, of which half of that was organic. Earnings per share, a positive trend in that as well, up 14%. The overall market conditions have stabilized since the bottom in 2024. I think that's very obvious when you look at the graph to the right on this slide. We do see signs of improvement. However, that differs between the platform, but Salix currently being the frontrunner and the end markets in which we operate there. We expect that trend to continue or I expect that trend to continue. However, it's very hard to predict the pace of the recovery. On the next slide, yes, as I said, we came out at SEK 8.4 billion in sales and SEK 726 million in EBITA. So that's where we are right now. I always say that Volati should be evaluated over time. And if we do that, we can see that we have managed to grow at an annual -- average yearly pace of 15% per year in EBITA. However, since 2021, the yearly growth rate has been lower. What does that mean? That means that we have created a growth gap. That growth gap is -- the reason behind that is that the markets that we're operating in has had challenging conditions. But we need to close that growth gap. If I look into 2027 and where we have to be in order to achieve that, that should put us in a position where we have to show an EBITA of between SEK 1.1 billion to SEK 1.5 billion of EBITA that year. So that is the challenge that we have ahead of us. Looking at the financial targets, EBITA growth, 10%. So it's a positive trend compared to last year, but it's still under our financial goal of 15%. As we have operated under that goal for a year -- a couple of years now, that means that we need to surpass that and exceed that goal for a couple of -- in the coming period. ROE, the return on equity is almost there already now. I expect us to reach and exceed that goal shortly. And net debt-to-EBITDA is where I expect it to be. So with that, I thought we would go into describing the 3 business areas in a bit more detail, and we start by handing over the word to Martin, who will tell you a bit more about Salix Group.

Good morning, everyone, and thank you, Andreas. I will say a few words about Salix. So we had a growth in the quarter of 7%. Underlying organic growth was flat in the quarter. Market conditions are improving. We have, in 2025, seen an uplift in organic growth. I will be back to that. Even though we didn't see it in the quarter, we have seen an underlying growth overall. DIY is the sector where we see some uplift during 2025. And DIY represents some 20% of our business. We also see an uplift in the professional segment. If you add the 2 together, we have some 50% of our business where we see some sort of uplift. Quarter 4 is less DIY heavy for us. It's not the home improvement, home renovation period where our products are really, really, so to say, we're not selling so much for the home renovation area in the quarter 4. If we take the EBITA, we grew by 74% compared to last year. That is an organic growth of 45%. So 45% EBITA growth despite a flat organic sales growth, as previously mentioned. The EBITA margin reaches some 9% in the quarter, which is an improvement over last year of 3.5 percentage points, so from 5.6% compared to last year. So 2024, as we see it, was a little bit of a challenging year. So the climate, we believe where the market bottomed out. So just to remind ourselves that comparable numbers were a bit low 2024 when we compare this year's numbers with last year's number. So margin expansion, we continue to improve our operational performance in the quarter. Normalization of exchange rates and freight cost supports margin, but also structural measures and improved value chain activities in the operation. That's been on the agenda over the past years, and we see the benefits of it in improvement, both in cost percentage, but also in margin improvement, both in the quarter but also on the total year. So if I summarize, 2025, we passed SEK 4 billion in sales. We passed SEK 400 million in EBITA. The SEK 4 billion in sales, we see around 15% in growth sales and 4% comparable growth during the year. Out of the SEK 400 million, it's, as Andreas said, 50% in total EBITA growth and 25% in organic EBITA growth last year. That makes us land on a 10% EBITA level that should be compared with 7.6% 2024. I'm also happy to see that our working capital is moving in the right direction and that our growth came out of the comparable business, of course, is something that we are very happy about. I'm proud and happy for what the team has achieved and hard work during the full year. So thank you for all the hard work to my dear colleagues listening into the call. So if we move to the next slide, I will say a few words. As Andreas said, Salix is preparing for a potential listing. And here, a few headings about the cornerstones of how we would like to present our business. I've selected a few comments from this slide, and I would like to bring your attention to the right-hand side of the slide, where you see the financial targets. So these 4 financial targets of net revenue growth of more than 15% I will come back to EBITA margin. EBITA net working capital of more than 40% and the net debt 2 to 3x the earnings. The EBITA margin, we did have an increase during spring together with the Board of Salix and Volati to increase that from 10% to 12%. And keeping in mind that we landed 2025 on a 10% EBITA margin, we see further potential to improve margin, hence, the new target of 12%. Moving our attention to the left-hand side of the presentation, a few selected comments here. We have delivered stable growth and performance in a period of challenging market conditions since 2022. We have acquired 8 companies since '22, sustained a healthy EBITA margin combined with a controlled net debt ratio. We have improved productivity and performance through yearly structural measures. As I said, this is an ongoing way of working for us to go through yearly structural measures to improve productivity that then delivers good cost control, improved margin and in the end, over 80% cash conversion. This combined helps us to invest in next upcoming business. Logistics sourcing and common transport contracts are areas where we benefit from our common scale and cooperation. And with this said, we are ready for volume growth as we have experienced an overall loss since 2022 of some 25% to 30% in the period of volume. It's not sales value, but volume loss since 2022 of some 25% to 30% because of the market conditions. Next thing I wanted to say a few words about is the M&A, which is part of our DNA. We lead and develop our main business in such a way that we can acquire next business. And our way of realizing synergies adds to the Salix overall performance. If you see in the bottom of the slide, it talks about a stand-alone entity, and I would like to bring your attention to that the Volati system has developed us as an organization, as a team with training and education in such a way that we work independently with M&A today. We have been trained, I believe, from some of the best, Andreas standing next to me and the colleagues of Volati, so thank you very much for all the support throughout this development. So we went through some 150 potential targets '25. We're selective about what companies that we would like that could suit us the best and where we can add value and be stronger together. We see right now more activity in the market, and we are hopeful that we can step up the game a bit from the past average around 2 acquisitions per year since 2022. We have a strong presence in the Nordics to further build and expand our M&A agenda, but we are also curious to broaden this horizon outside the Nordics in the period to come. So all in all, with improving underlying market conditions, 4% organic growth last year from our perspective, a strong team throughout the Salix businesses. We look forward to an exciting future. And first and foremost, we look forward to an exciting 2026. Thank you.

Okay. So with that, we leave Salix Group for a while and go into Ettiketto Group, which then is our second business area and second largest platform. So when it comes to Ettiketto, we showed a strong sales growth in the quarter. It was attributable to the acquisition of Clever Group in Germany earlier in 2025. As expected, we have seen a decline in margin as Clever is operating under the overall group margins of Ettiketto. We, however, already now see positive effects from our value-creating efforts and expect to continue increasing the margins in Clever. Early 2026, we completed the acquisition of Interket Group, which I will tell you a bit more about later on. But what that will support is the continued high growth, and it also brings us another value creation opportunity through expanding the margins also in that company. Looking into Industry then, Industry consisting of 4 platforms. And if I summarize the year for this business area, it's been quite an extraordinary year in terms of that many of the platform -- platforms has operating under challenging market circumstances. meaning that they have delivered below historical profit levels. We also saw that in Q4. If we start with Communication, however, there, we see a stabilized market -- or stabilizing market conditions, and we delivered an EBITA in line with last year. Tornum also delivered an EBITA in line with last year, very well done given that the market is still somewhat challenging. Corroventa, they did a very good job in the absence of seasonal floods. So in terms of sales and profit, they achieved very much what's expected under these circumstances. However, last year, we had quite some floodings, and it was a very strong year for Corroventa, meaning that they came in quite far behind during Q4 this year. S:t Eriks, which has delivered a resilient performance during the first 3 quarters of this year and have defended the EBITA through better margins despite having -- operating under a challenging construction market. They, however, also -- they saw a decline in Q4. That was mainly impacted by postponed infrastructure deliveries, which by all means then will come back in 2026. So that was the main reason for that deviation. So 2025 has been a challenging year for industry. We have and my colleagues in those platforms has been handling it very well. We were early on taking measures. We have been focusing on the long-term value creation rather than the short-term gains. But still, it has been a challenging year. I am, however, comfortable with that we are very well positioned in all 4 platforms and really very much looking forward to when the markets that we operate in starting to normalize. Acquisitions then. This slide shows that we've basically been maintaining an acquisition pace of roughly SEK 750 million to SEK 800 million of annual sales that we've been achieving that pace throughout the last couple of years. This is a consequence of having a very continuous and active work within our platforms to find, identify and complete add-on acquisitions to our existing platforms. Right now, the outlook is positive. I think we have several qualified leads that we're working with. But M&A takes time and a deal is not done until it's closed. I said that we had a good pipeline already during our last quarterly call. Since then, we have finalized Interket, which I will tell you a bit more about soon. However, I still expect that we have more to come. And then spending a few words on Interket then. So in early 2026, we completed Interket, which was an add-on acquisition to Ettiketto. It's somewhat of a perfect match. It's strengthening our position in 2 of our existing markets, that is Sweden, which is our home market where we've been active in for a very, very long time, but also strengthening our current activities in Germany, which we entered last year, 2025, through the acquisition of Clever. It also adds 2 new markets, and that is U.K. and the Netherlands, which will enable us to continue growing also on these 2 new markets. It's a very well-managed and well-invested company. However, there are only a few companies out there on the European market, which operate under Ettiketto's industry-leading margins. However, that also enables us to add value as a buyer. That's the way that we create long-term value for Ettiketto Volati by increasing the profitability in the companies that we acquire. So when it comes to Ettiketto, now we've added almost SEK 750 million of annual turnover in a year's time. And that's -- and given the proven model of how to integrate and realize synergies, that means that we have a lot of valuation also to come. Before summarizing the cash flow, as I said in the beginning of the presentation, we're very happy about the operational cash flow and the cash conversion is at good levels. We have had 2 years behind us, '23 and '24 when we had cash conversion in excess of 100% 2025 ended with a cash conversion of 88%. So the companies that we own and that we operate are showing good earnings and good cash flows. Also, what I want to say on this slide is that we are comfortable to temporarily stay with a higher net debt-to-EBITDA ratio in order to enable acquisitions. We did that in 2025. We ended Q2 2025 at 3.0, and we are comfortable doing that again if we have acquisitions opportunities that we -- that are value creating and that we want to act upon. As market normalize, the organic profit growth will accelerate, and that will have a positive effect on net debt-to-EBITDA. So a few summarizing words. An overall stable development in the quarter. And the big highlight is the strong contribution from Salix Group with a 74% EBITA growth. Looking at the full year, 10% EBITA growth. It's supported by a trend shift in organic development, where we have come from negative organic development in 2024 to a positive organic development in 2025. And also that we have been able to maintain the acquisition pace. We've already done the first acquisition in 2026, but we also have a strong foundation for continuing doing acquisitions, and we have a strong pipeline in place. We're also well positioned for accelerated organic growth. We've seen some effects in Salix Group of what happens when the market starts to coming our way, but we are still waiting for that effect in some of the other platforms. But we're very well positioned to take the opportunity of it once the market starts normalizing. And then we're continuing the evaluation of a possible separate listing of Salix Group. Still no decisions taken, but the preparations are developing according to plan. So with that, Martin and myself open up for any potential questions.

Thank you very much for that presentation Andreas and Martin. And yes, let's open up the Q&A. [Operator Instructions] We've got the first person calling in. We have Carl from DNB Carnegie.

It's Carl here from DNB Carnegie. Just a couple of questions from my side, if I may. I'm starting off with Salix. Could you perhaps talk a little bit more about the current development there and the market dynamics overall? I guess organic sales growth is flat here and thus coming down a bit year-over-year versus what we saw in Q3. But on the other hand, margins are strengthening quite substantially. What would you say are the sort of key reasons for that clear margin uplift? Is it just the cost savings? Or is it more of a product mix or any impact from recent acquisitions? Or maybe if you could just try to break that down into the different buckets.

Thank you. You helped me with the answer there a bit. So that's good. I think if I start with the market, the underlying market, as I said, we see an uplift. We have organic growth. We also, I believe, in a few areas, take market share. So we have new businesses that are coming our way. But we have seen in the DIY sector mainly during last year, also a little bit in the agriculture sector, we have seen an uplift in sales. So we see it in our numbers, and we also read it in the macro data that something is happening out there. So 2024 was maybe the year where we flattened out and 2025, a little bit more of a transition year, but we see some signs of recovery. So this helps us, of course, after a couple of years nurturing margins and costs when we have some volume and turnover coming on top, we see a very quick uplift. Quarter 4 is not so much of a home renovation quarter for us. So the sales were flat, but we had a 7% uplift in sales, helped by the acquisition. Then on the margin side, I said that a few things here helps us. We have a more normalized exchange rate. We buy in euro and dollar and so on, and they are more of a normalized level compared to a year ago and 2 years ago and so on. So this, combined with the freight cost is also more of a normalized level. We ship things overseas. So these are also back to normalized levels. If you remember in the past, we have seen some hiccups in the Suez and so on, various things that has pushed the prices up from a container perspective. Then on the other side, what we do to impact is, of course, product mix, as you mentioned. We do this cost out. We work systematically with value chain activities, purchasing, sourcing to, yes, lead our business in a way to create more space and margin development. So these things combine what we do with cost control, overall tendering processes for freight, land transport and such things that we can do as a group, economy of scale helps us operationally. So all these combined helps us to have a better margin development then. And not to forget what I also said that 2024 was maybe a year that was on the lower side. So compared to 2024 and all the activities that we are doing, you see this uplift from an index perspective.

Yes. That's very clear. So it seems to be more structural, I guess. It's nothing in the quarter specifically that's more of a one-off character that boosts the margins then.

No, no, no, I shouldn't say. No, it's not. It's -- and we have had good margin development with us the whole year. And actually, if you look back to the last couple of years, we have managed to have quite a stable margin despite all of the turmoil that we have seen in the market. This is the activities that we are taking, the operational activities that we have done, implemented that has helped us sustain a quite healthy EBITA margin and gross margin throughout this period. That's both margin and cost control as the volume in the market has declined, as I said, 25% to 30%.

Yes. Perfect. And is it possible to specify here how much M&A is contributing to Salix growth here in the quarter year-over-year? And is Timberman performing according to your plan?

Timberman, yes, great to have Timberman on board and according to plan. I think that, as I said, year-on-year, sales-wise, 15% up comparable 4%, right? So 2025 compared to 2024, 15%, it was 14-point something, but almost 15% on the sales numbers and 4%, a little bit more than 4% comparable growth. EBITA, 50%, 5-0, total growth and roughly 25% organic growth.

Yes, I see. And you don't possibly have the same figure for Q4?

We don't give that detail, sorry, Carl.

Okay. And yes, you touched a little bit about this earlier, Martin, but are there any particular product categories or subsegments here you think are standing out on the positive versus negative side? Perhaps any comments on the DIY versus professional side in Q4, maybe starting now in Q1 as well as maybe any comments there on the agriculture and forestry versus the construction part of it?

This is tricky because it's not an exact science in the way we measure. I mean we have many segments, many products in a few countries that we operate in. So -- but if I try to say something is that what we see in the market data is that it's a little bit of an uplift if you take DIY and professional 2025. It's not substantial, but it's a few percentage points up in terms of growth, what we see in the market data. And this can be confirmed with our own data. And of course, our hope is that this will continue with us into next year that we have flattened out 2025, a little bit of an uplift and this will continue. We have a, you can say, underlying need for rebuilds and renovations back since 2022. With this volume drop of 25% to 30%, there is an underlying need in the market. What we also see is that these bigger projects are still to be seen. So it's mainly smaller renovation, home improvements and so on, roughly half of the sales that represent our business that is starting to move. And we have seen a movement during 2025, and we don't see any reasons for why that should change, rather the opposite. But we are hopeful about that this will continue to develop during 2025 in the -- sorry, '26 in the Nordics. The agriculture segment, the same here. We have seen in certain segments more -- you can say the small -- not small, but the smaller business maybe the farmers buying product from us -- independent farmers buying products from us during the period. So this is a smaller segment for us in the total perspective, but we also have seen an uplift in sales during 2025 here and don't see any reasons why that should change in the coming period.

Yes, that's clear. And are you worried for the organic growth prospects now going into Q1, given that -- I mean, the increased road subsidies are now gone as of January 1?

I've not had such much training as Andreas had in these call, but we are more safe to comment about the past. And if you look back the last couple of quarters, we see an uplift in certain segments. And it's -- because it's 1st of January, we don't see any reason why things should change. But we are, of course, as you are following this closely, and we are hopeful about also 2026, as I said.

Yes. That's very clear. And then leaving Salix and moving on to Ettiketto. Is it possible to specify what is the real issue here in Sweden? And also if there are any customers in particular or any product verticals that is driving, I guess, the slower development there? Or is it more broad-based, would you say?

I wouldn't put it that way that we have a real issue in Sweden. Sweden is actually developing fairly well. I did comment on Q3 that we were a bit disappointed in the beginning of Q3 when it comes to the development in Sweden, and then it started to pick up during that quarter, and it has continued to pick up also during Q4. So it's nothing that I can see that is structurally happening or our -- any specific customers that are changing their behaviors or anything like that. I think one thing to keep in mind also when it comes to Ettiketto is that Q4 last year was extraordinary strong. It was very strong and meeting that is quite okay. We're also showing organic growth in Ettiketto. Looking at this year, we're showing organic growth both in terms of sales and EBITA.

Yes. All right. That's clear. And if we move on to Industry, starting with Corroventa maybe, can you describe just how you see the comparison here going into Q1 and Q2? And also if you have observed any signs of increased activity, I guess, on the flooding side so far in Q1?

Any -- no signs of floodings this far as far as I know. I think those kind of news reaches us all when we can read about in the newspapers. But just to elaborate a bit about how that effects -- those effects work. So basically, in Q4 2024, we had quite some floodings. And that was -- if I remember it correctly, I think it was mainly in the U.K., I might be wrong there. But it was -- we had some floodings in the end of Q4 2024, and that continued a bit into Q1 2025. What that means is that with no floodings in Q4 2025, we're meeting tough comparables. And I would say in the very beginning of Q1 2026, we're also meeting some floodings. But then I've also said that 2025 as a whole has been an extraordinary dry year. So we will continuously meet a lot easier comparables in Corroventa throughout the part of this year, I would say, already starting from mid-Q1 or something like that. And it's very rarely -- very rare that we see 2 such dry years in a row. But this is definitely something that is outside of our control. And I think you, Carl, will read it in the newspapers at the same time as we will because it usually ends up there once those things hit Europe.

Yes, that's fair. And on S:t Eriks, is it possible to quantify, I guess, the magnitude of the postponements you are talking about and also if you're expecting -- I mean, to see all of this hitting the P&L in full now already in Q1?

I think the way we look at S:t Eriks right now is it's very similar to where Salix was maybe a year ago or so. So -- and for then, Salix, it was still very much about defending the margins, keeping profitability because we had a slightly declining market or the market has started to stabilize. But then through taking operational measures, you can defend the EBITA. And that's what we've done very successfully in Q1 to Q3 in this year, which also means that we have an underlying better margins today compared to what we had in the past, which we will take the benefits of once the market return. And then we will most likely see the same kind of effects that we've seen now in Salix when the market has returned somewhat there. In terms of kind of the timing in Q4 and Q1, it's true that -- so we came in short in Q4 to be very open about it, was a disappointment. It was mainly because of delays in a couple of infrastructure projects. We hope to see those delivered in Q1. Keep in mind, however, that S:t Eriks is a Swedish company operating in Sweden. And if you are to put pipes into the ground, you also need to have the weather with you. So we haven't had that in January. However, it's way too early to say whether that will have any effect on Q1. If it won't have an effect on Q1, the weather, then hopefully, we'll get some of that -- those volumes back.

Yes. Understood. That's clear. And just lastly from my side on the topic of M&A. You described activity there as stronger than usual in the report. Is it possible to elaborate a little bit more on that? And also if there are any particular, I guess, segments or platforms or geographies you believe are standing out on the positive side?

So we have a very active pipeline work in all our platforms. We're also following that from a Volati perspective. And so we're following that across all platforms. And what we can see right now is that we have more qualified leads than we usually have, meaning that we have more opportunities to complete acquisitions than we usually have, taking into account the return requirements that we have and so forth. We have activity across all platforms. We have it in the Nordics. We have it outside the Nordics. So I would say that it's fairly broad. So I think that's what I can tell you right now, Carl.

We'll move on with some written questions that we have received, and we'll start with the first one. You reported minus 5% organic growth. Can you break down the organic performance by platform and explain what specifically changed in Q4 versus Q3 to drive this negative churn?

I can give it a try. So basically, we saw a flat organic development in Salix. We saw slight negative development in Ettiketto, but that was slight. I will break that down into that we had a very strong last year in terms of organic development in Ettiketto, so we're meeting tough comparables. And then in Industry, there is a mix. But if you look at Industry as a whole, we've had a negative development. And one main reason behind that is Corroventa that we don't have any floodings. We also had a timing effect, for example, in S:t Eriks. I think we already elaborated on the reason behind that. I wouldn't say that we've seen any major shifts in the market space compared to Q3. Actually, what -- if we look back at 2025, the organic development has -- we've had variances between the quarters. But if you look at the longer trend, it has been positive. So again, looking at the full year 2025, we had a flat 0 organic sales development compared to minus 7% the year before. We also have had a positive EBITA development compared to a fairly big negative number. So the overall trend, I would say, is still positive.

And we'll take one final question here. Given the negative 5% organic decline in Q4, what's your expectation for organic growth trajectory through 2026? And when do you expect to return to positive organic growth?

I answered that question basically by answering the previous question is that we see an overall positive trend. The pace of that positive trend is really hard for us to judge, but we see it. If you look at 2024 -- 2025 compared to 2024, we have clearly had a positive trend. And I expect that trend to continue into 2026. However, the pace -- the one I could tell, please give me a call.

Okay. And that concludes the Q&A section, and I'll hand over the word back to you, Andreas, for some concluding remarks.

Yes. Firstly, thank you, all the colleagues of Volati for 2025. I think we've done a very good job. We have to take one step back and remind ourselves that basically, it's going in the right direction. We have turned the trend. We are showing growth. And we've seen through the example of Salix what is happening once we see that market starting to normalize, then we really see an organic EBITA growth, which I'm really looking forward to seeing also in some of the other platforms once we get there. So thank you.