RATO-B.STRATO-B.STSTO
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Operator: Welcome to Ratos Q4 earnings call 2025. [Operator Instructions] Now I will hand the conference over to CEO, Gustaf Salford, and CFO and IR, Anna Vilogorac. Please go ahead.
Gustaf Salford: Good morning, everyone, and thank you for listening in to the Ratos Q4 call. I will start by giving some highlights for the full year 2025, an important and eventful year for Ratos, a year of change with several strategic milestones that created a more focused and streamlined company. I'll give you some examples. The sale of airteam, a supplier of technical ventilation solutions in the beginning of the year. The listing of our construction company, Sentia, on the Oslo Stock Exchange in June. Since then, the share price of Sentia increased more than 30%, and last Friday, Sentia proposed a dividend of NOK 5.5 corresponding to a dividend percent of 96%. Diab has continued its focus towards more advanced materials and applications into new industry segments such as subsea and defense. And we finalized the year with a major add-on acquisition in HL Display of the German player, Deinzer, the largest acquisition in HL Display's history. 2025 also came with challenges that required operational improvement projects in some of our companies, but also major restructuring in Plantasjen that resulted in a reduced and more optimized footprint that is better set up for the future. Plantasjen is a different structure compared to when we acquired it in 2016. And we did the required balance sheet adjustments in the fourth quarter to reflect the new structure. Today, we also announced that we have divested Expin Group to Baneservice, Norway's leading railway contractor. This is an important step in the continued streamlining of Ratos, to strengthen our focus on long-term value creation. We're pleased that Expin Group will be backed by Baneservice, a strong and committed owner as the company continues its journey, and Anna will come back to the specifics on the financial impact. In terms of the overall market situation, macroeconomic and geopolitical uncertainty had a negative impact on the overall demand situation in most of Ratos segments in 2025. But if we now turn to the isolated Q4, we started to see a gradual improvement in net sales, mainly driven by increased demand in the defense and energy sectors. We also won some major orders supporting future net sales. In Q4, HL Display secured orders in the U.K. and North America of around SEK 500 million to be delivered over 2 to 3 years. After the end of the quarter, Aibel was awarded a 5-year framework agreement with an estimated value of approximately NOK 20 billion, and Presis Infra secured a 5-year contract worth about NOK 900 million. Overall, we expect the uncertain macroeconomic and geopolitical situation to continue to impact our companies and the markets. And if we now move on to the net sales development in Q4 and for the full year. In Q4, we saw an organic growth of 3% for our continuing operations, and 2 out of 3 business areas reported growth. Industry came in at plus 2% and Construction & Services at plus 9% and Consumer at minus 4%. So all in all, for the full year, net sales came in at minus 1%. In Q4, our adjusted EBITDA increased by 57% compared to last year. EBITDA was positively impacted by lower losses in Plantasjen and the contribution from the minority holding in Sentia. Diab delivered robust sales growth with improved profitability. The EBITDA margins improved in all segments, except Industrial Services, where the general market uncertainty remained with longer decision-making processes, having a negative impact on our consulting activities. The full year adjusted EBITDA increased by 17%. The 2025 earnings per share or EPS increased by 19% from SEK 2.36 to SEK 2.8, supported by improved earnings and lower effective tax rate. The Ratos Board of Directors proposed a dividend for 2025 of SEK 1.3 per share corresponding to 50% of profit of the tax. This is in the upper span of our dividend payout ratio of 30% to 50%. And if we now turn to the development by business area in Q4. For Industry, organic net sales grew by 2% and adjusted EBITDA declined with minus 17%. Within the industry, Product Solutions had a positive organic growth of 6% with EBITDA growth of 23%. Diab benefited from the strong demand across several industries and geographies. In Industrial Services, we saw net sales declining with minus 1% with a 44% decrease in EBITDA year-over-year. This came from weaker performance among the consultancy companies related to overall slow market, especially in the automotive segment. The ongoing automation projects in Speed Group also put pressure on the profitability in the quarter. And for Construction & Services, we saw that Presis Infra reported net sales growth in the quarter, but the profitability was impacted by the product mix and the timing of projects. We also saw a worsening market for rail electrification in Finland, and it continued to impact Expin Group numbers. Adjusted EBITDA increased with 39%. And if you adjust, for the Sentia minority contribution, adjusted EBITDA increased with 12%. Adjusted EBITDA margin, excluding minority holdings came in at 9.8%. If we now turn to consumer, we saw organic net sales growth of minus 4% and Plantasjen was declining with minus 6% versus last year's Q4. However, if you do a like-for-like comparison, sales was slightly positive versus last year and EBITDA increased as a result of the executed reconstruction. KVD's profitability was negatively impacted by the lower volumes, partly offset by cost-saving initiatives. Adjusted EBITDA came in at minus SEK 106 million, an improvement from last year's minus SEK 209 million. And with that, I would like to hand it over to Anna for the financial section.
Anna Vilogorac: Thank you, Gustaf. So let us dig through some details of net sales and adjusted EBITDA. So looking on the left-hand side in the bridge of the organic components, we saw a really good contribution from this 3% organic growth. EBIT margin accretion of 70 basis points. On the M&A side, we didn't have a lot of activities of executed M&A for the quarter, hence, zero or very limited contribution from that. Hence, we were really happy to see the closure -- signing of Deinzer within HL Display. Moving along in the bridge, we saw a really good contribution from reconstructing activities in Plantasjen for which the closed stores contributed 130 basis points on our EBIT margin. FX continue to impact us negatively. This stems predominantly of SEK strengthening towards Norwegian krona. Our associated company, Sentia, contributed significantly, 120 basis points, and we should remind ourselves that the same period last year, so Q4 2024, we did not have this minority share in Sentia. So this is not a bridge effect. It's a full effect. Last but not least, our associated company, Aibel, contributed slightly negatively, so margin dilution of 30 basis points. This has to do on project mix. So it's a little bit lower profitability than we saw same period last year. If we would have looked at the full year bridge, Aibel would have been a positive contribution and Aibel actually leave this 2025 with record high order book and a record year behind them. So moving into next page. This was one of the important happenings during quarter 4. We have conducted a reconstruction in Plantasjen, which meant that we do have a vastly different footprint. We've gone of having 3 markets in Nordic countries to 2 markets. We have closed down 1/3 of our stores, and historically, Plantasjen could generate revenues of SEK 5 billion and had EBITDA margins of above 15%. This is vastly different now. So the 2025 year ended at SEK 3 billion in sales. And what we were happy about is that for the full year, we reported a 5% EBITDA margin. But due to this vastly different structure, we made a conservative estimate here. And hence, an impairment of goodwill was booked in quarter 4. Going forward, however, we do feel that Plantasjen is a more resilient company, and also, it was good to see that we have broken this negative sales trend in Q4 and posted slight positive growth. So going forward, the focus will be of delivering profitable growth, and we are really happy of a new CEO joining as of April. Another important happening was that we signed a contract to sell Expin Group, but this is one of the major overhauls that has been done during 2025, where we exited direct exposure towards construction industries but also that we decided that we are not the best long-term owner for the Expin Group, and hence, we are really happy to see Baneservice, a reputable and committed owner, to support Expin continuing journey. This has resulted in a negative impact on our reported results of minus SEK 800 million. This is noncash and that this has been booked in quarter 4. We also do expect positive cash flow impact upon closing. Also, what is important just to remember that we do have a couple of different ongoing disputes as we did discover some accounting differences, accounting deficiencies, post our acquisitions back in 2022. This, of course, would constitute an upside going forward. Turning our attention to net working capital. A big impact here is our disposal of Sentia as Sentia normally comes with highly negative net working capital. So we should focus on the gray bars, and comparing this quarter with same period last year, we saw that the relative net working capital came down even though we saw a slight uptick in absolute terms. This is solely explained by some timing issues in accounts payable in Construction & Services business area. And looking at our cash flow. Q4 is normally a strong cash conversion quarter. So it is this time around where we almost hit 200% cash conversion mark. But also here, we did see impact from the structural changes, especially Sentia again, and some impact from Plantasjen from last year. But if we look at on the right-hand side and focus on the underlying development, we did see a solid increase of 67% up. The only business area not contributing versus last year was Construction & Services and again, has to do with timing of accounts payable. Looking at our leverage, we peaked at Q2 2025, had also to do with a Sentia disposal as Sentia normally has a very strong cash position. Now we are back at pre-Sentia disposal level, so very similar to last year at adjusted 1.4x in net debt to EBITDA. And just as a reminder, our share in Sentia is not included in these numbers and just looking at the share price from yesterday, this amounts to SEK 2.6 billion. And last but not least, we would just like to conclude on our previous financial targets, which were adopted 2020, 2021, and have been now concluded. So EBITDA in absolute terms, we said that we would take that up to SEK 3 billion, looking where we landed. And if we adjust for Sentia and airteam, adding that back, 2025 is at SEK 2.7 billion versus the SEK 3 billion in target. Hence, we did not achieve that. And looking at -- so we should have grown EBITDA by 15%, our actual was 13%. So close but not there. Looking at our leverage target, in the graph, you can see that our average is 1.2x, whilst the targeted range is 1.5x to 2.5x, we can say that we have seen a lot more disposals in the past 3 years than acquisitions. Hence, the leverage is slightly lower than what the financial target would indicate. And then the third one was the dividend payout ratio. As Gustaf said, for this year, the Board has proposed 50% payout ratio. But if we look at the past number of years, the average has been 52%. So now I hand back to Gustaf for some final remarks.
Gustaf Salford: Thank you, Anna. And I would just like to briefly summarize the year and the quarter. So 2025 was a year of transformation with several strategic milestones, and operational initiatives towards a more focused Ratos. In Q4, we started to see gradual improvement. We returned to net sales growth. We improved EBITDA. We won large orders, and we also did a very important add-on acquisition in HL Display. Going forward, we expect continued macroeconomic and geopolitical uncertainty to continue, but the Ratos team ends 2025 with a measured optimist going into 2026. We would also like to invite you to our Capital Markets Day on March 19. It starts at 01:00 here in Stockholm. So if you're interesting to participate, please send an e-mail to the address here on the slide for registration. I will present our strategy going forward, and Anna will present our new financial targets. But there will also be presentations by our companies and CEOs from Diab, HL Display, Knightec, and Presis Infra, some of our very important platform companies. So welcome. And with that, I would like to open up for questions.
Operator: [Operator Instructions] The next question comes from Henric Hintze from ABG Sundal Collier.
Henric Hintze: This is Henric. First of all, on Expin, I was wondering if you could just specify what types of costs were included in this figure that you adjust for, in the quarter? And secondly, I was wondering if you could maybe give us the sales and adjusted EBITDA for 2025 that Expin contributed with sort of we can kind of know what to expect after the divestment here.
Anna Vilogorac: Thank you, Henric. Starting with your first question. So minus SEK 800 million, which impacted our operating results. You can see that as a capital loss in its entirety, and then we will see what the actual cash flow impact will be at the date upon closing. Our best estimate now is that it's going to be SEK 50 million to SEK 70 million. And in regards to the full year results for Expin Group, we are at SEK 650 million in sales, and we had minus SEK 36 million in EBITDA.
Henric Hintze: Okay. Great. And after the divestment, Presis Infra will be the only majority-owned company left in the Construction Services segment. Should we view that -- should we view that as Presis Infra maybe also being a target for divestment? Or how will you view the structure after that divestment?
Gustaf Salford: Henric, it's Gustaf here. So no Presis Infra, we see it as one of our core platform companies. We also see good opportunities for add-on -- attractive add-on investments there. So no, we are very proud owners to Presis Infra and will continue to be so.
Anna Vilogorac: And just maybe to add little flavor, Presis Infra has shown a significant organic growth in the history. We also have really good return on capital employed, and we see these M&A opportunities to scale and add to the business.
Henric Hintze: Okay. Very good. And maybe one more question from me. The profitability in Industry segment here in the quarter was down quite a bit despite the organic growth in the quarter. So I was just wondering if you could maybe give us a bit more detail on the drivers there.
Gustaf Salford: I think I can take the overall picture, and Anna will complement here. But I think if you look at the technical consultants, and the last couple of quarters, it's been a bit weaker demand. The activity is not fully there. And that has an impact on the profitability. And then we have also had some market and product mix in our specific portfolio that has this impact on the overall profitability. And Anna I think I mentioned that we are investing in automation that will drive future profitability in this segment. However, in the quarter, that has a negative impact on the margins.
Anna Vilogorac: And that is for Speed. So Speed is doing these automation projects, which, of course, come with additional cost up until the automation is up and running. So that's the one. We also have had weaker biotech segments and, so TFS is also contributing to this decline. .
Operator: The next question comes from Bj�rn Olsson from SEB. .
Bjorn Olsson: First on Aibel. You mentioned that due to the product mix, you see a sort of deteriorating margin. Could you give any guidance if this is to be expected for the years to come as well or if this is more of a one-off? .
Anna Vilogorac: I would say like this, not deteriorating project margins. I might have misspoken. It's lower profitability than it was last year. It's still great. So that's only in comparison with Q4 last year. I would say, of course, it's a project business. You can never know for sure, but we don't expect any material change from what we've seen in this very good 2025.
Bjorn Olsson: So flattish margins ahead?
Anna Vilogorac: I would say so. And then it depends how much new project, how much change orders, how much maintenance is in there.
Gustaf Salford: Anna and I, we were up in Haugesund visiting Aibel, and it's a very impressive and well-run operation. And I came back from that visit with a strong positive view on the offshore segments in the years to come here. And I think the indication from these large orders of the SEK 20 billion, and that could actually be more in the coming years, is one indication that it's a very strong company, Aibel, with a strong future.
Bjorn Olsson: Great. And on Expin, you mentioned that you have an ongoing legal dispute. Could you give any figure and time line of a potential resolution? And if sort of in what ballpark we talk about in terms of financial amounts that you could see as an upside potential? .
Gustaf Salford: I think there is processes ongoing. We don't want to go into the details on those processes. I think that's important to say they have to run and we have to follow them and work with them closely. So I think it's too early to say the financial outcomes of those processes.
Anna Vilogorac: And I would say these kind of disputes, be warned, they can take a very long time. So it is difficult to judge, but it's a substantial amount.
Bjorn Olsson: Okay, clear. And just final question on -- you mentioned the automation investments in Speed. When do you expect this to start yielding improving efficiency and so forth?
Gustaf Salford: I think it's very exciting times now on the automation overall, the trend in the warehousing sector and 3PL and so on. So it's very important to do those investments to have a good offering in also the years to come. Right now, we are in a very exciting phase where we start to go live with these projects and these new solutions. And then starting from the coming quarters, we will see gradual, bigger automation of those volumes going through different warehouses. So I think a small start and then we will accelerate into Q2, Q3, Q4. So that's the plan we have at the moment.
Operator: The next question comes from Georg Attling from Pareto Securities. .
Georg Attling: I just wanted to come back to the margins here in Industrial Services. So I'm wondering, first of all, how much of that margin contraction is Speed? And how much of that is the technical consultants? And then second, your predecessor, Gustaf, guided for SEK 80 million in the cost synergies in the Knightec, Semcon merger. I'm just wondering if you still stand by that estimate?
Gustaf Salford: Yes. I think I can start and Anna will continue. If we start with the margins, there is a slight decline in the industrial consulting or technical consulting segment. I think if you look at the industry as such, I think if you take Knightec Group, they're holding up well, and if you do a benchmark of the other companies. However, there was a bit of what we call market mix with more volumes from markets outside Sweden, that impacted a bit. Then we had Speed as we mentioned. If you look at the synergies then that we have been working on the last year or so, if I remember the call correctly, it was added from SEK 50 million to SEK 70 million, and I keep the SEK 70 million on the synergies, you saw some of them in the quarter, I think it was SEK 10 million in the quarter. So we're on a run rate of SEK 40 million, and somewhere mid into this year, we expect to be at the SEK 70 million, and I stand behind those numbers as well of the fiscal year 2026.
Georg Attling: That's very clear. Second question on capital allocation. So I mean, if you treat the incentive position as cash, you're almost in net cash and still the dividend wasn't that big of a hike and no comments on buybacks either. So just wondering what the plan is here on the capital allocation? Are you going to ramp up M&A? Or how are you going to make sure that you aren't going to end up in net cash for too long?
Gustaf Salford: I think that's a big part of our strategy, Georg, that we are now developing. The capital allocation strategy going forward. We have talked a lot about focus. We have talked about streamlining, but we have also talked about add-on M&A on our key platforms. But I would like to come back to the more detail, the strategy going forward on the Capital Markets Day, the 19th of March.
Georg Attling: Yes, that's clear. Just a final question on -- I appreciate if you don't want to go into too much details here, but you've been at the helm now for a couple of months. Just interesting to hear your first impressions and also if you -- what you want to do with the Ratos in terms of divestments and acquisitions, is it any different to what the strategy was before you came on board?
Gustaf Salford: Thank you for that question, Georg, because I really enjoyed my first time here at Ratos. So I started off 1st of December, and I said, I really want to visit all the companies, meeting all the people, that's key for me, understanding the leadership, the CEOs, the management teams. And I've been very impressed. I mean, of course, some companies, they have challenges, but they also have a lot of opportunities. So for me, it's really learning the business from the ground up and being very interesting in what our companies are doing from that knowledge base and together with the leadership team here at Ratos is really to thinking about how can we add value? Where can we add value to the companies, where can we add value to our investors and our shareholders, and from that, we will then do this kind of streamlining strategy, as I mentioned, into focusing more on a couple of the platforms we now have and drive growth there, from organic growth, but also from add-on acquisitions. So that's something we are working on. So that's a bit of the ingredients that we will add to the Capital Markets Day strategy. But exactly what that will be is we need to -- I don't want to disclose that now. We'll come back to that on 19th. But I think Ratos has a fantastic opportunity to create a lot of value. We need to take some tough decisions for sure. And I think we showed that in Q4 that we did. And we'll continue to do that going forward with the aim to create shareholder value. So that's what I can say today.
Operator: The next question comes from Johan Sj�berg from Kepler.
Johan Sjöberg: First, Gustaf, maybe you could talk a little bit upon what you see now going into 2026? I mean, given your company's big share of sales towards the Nordics where you see better PMIs in general and also potential impact also from lower interest rates as the Nordics starts to cut the interest rates earlier than rest of the market. Could you talk something about it? Do you see any change whatsoever in terms of sort of sentiment among consumers or the industry, please?
Gustaf Salford: Absolutely Johan. And that's actually something I spent quite a lot of time on reading report, looking at the new KPIs and indices coming out about the business cycle going forward. And I think if you look at the consumer sentiment, it's not me saying, I'm just looking at data, but that's more positive in the end of the year and the beginning of this year. So I think we see positive signals there. And as you can say, if you look at the Plantasjen numbers that we mentioned previously, that's also a positive signal. I mean I also think if you look at biotech clinical studies, et cetera, an area that I've spent some time on previously as well, you see positive signal there as well that more of these midsized biotech companies and pharmaceutical companies will run more clinical studies going forward. And then overall, Nordics, I believe in the Nordics, and I think it's really a pleasure working with these countries, both Sweden and Norway, that is the majority, I think it's up to 75%, 80% of our revenues that, that will develop well. So I see a lot of positive signals. On the flip side, maybe you can see the more industrial cycle with impacting our technical [ consulting ], we are a bit cautious there. We want to see that demand coming back, and we see it in some segments. We mentioned defense, really growing nicely and strongly. We mentioned energy as well. But if you look at automotive, that is a bit more challenging. So of course, we serve a lot of markets, but I just wanted to give you some important highlights from some of those markets that we serve.
Johan Sjöberg: Yes. Got it. Anna, can ask you on the book value now of Plantasjen, how much do you have it on your books now? Because, I mean, we are sort of used to -- we have seen a lot of write-downs, I must say, over the years for us who sort of -- and I keep getting surprised, but there is more to write down, to be honest, where is the book value now in Plantasjen?
Anna Vilogorac: I would tell you, Johan, roughly, it will be around SEK 1 billion, and then you have the leasing debt on top of that, which is additional SEK 2 million.
Johan Sjöberg: So SEK 2 million out of the SEK 3.6 billion in the leasing is from Plantasjen?
Anna Vilogorac: Yes. .
Johan Sjöberg: Okay. Good. And then also just coming back to you, Gustaf, may be you could -- obviously now you met up with all the companies here. What was sort of the rationale or I understand the Expin acquisition has not really worked out as you had hoped for. And I mean obviously, the market against you, you got the fraud and everything like that. So it was very unlucky, of course. But what was sort of when you met up with then looking at it, what was sort of why did you decide to, this is not the segment where we should focus going forward here? Because I mean, for us, on the outset, I apologize for my lack of knowledge here comparing Expin with the Presis Infra, but it seems like sort of these are the similar segments. So why did you decide to exit this and also at this time of the cycle, given that your earlier comments that, hopefully, you would see better markets in '26 going forward?
Gustaf Salford: I fully understand and respect that question. And I think it's also about performance. So we have one company, Presis Infra performing extremely well, serving more road infrastructure, maintenance, especially in the Nordics, but also in Sweden. And if you look at Expin Group, that was not fully the case. I mean there is good trends in the Swedish market. Finland has been extremely challenging, and I think we mentioned that in many quarterly reports. So I needed to go into my new position here and look at the companies where I believe we can add most value and grow companies. From that analysis, together with the management team and Anna here, we came to the conclusion it's better that we focus our energy, time, capital on platforms that in the Ratos ownership where we can add most value going forward. So it's really from a capital allocation and value creation analysis that we came to that conclusion. So that's the background. But I believe, I mean, it's a potentially good market going forward and so on. But I think Baneservice will be an excellent owner of Expin Group going forward.
Operator: The next question comes from Linus Alentun from Nordea.
Linus Alentun: Just a quick couple of questions here from me. I mean you secured major orders here for a HL Display, Aibel and Presis Infra. I was just wondering if you could provide some more visibility here on when you expect this could convert into revenue? And does this give you confidence into 2026 here despite the uncertain market uncertainty?
Anna Vilogorac: So Linus, if we look at Aibel, this is a 5-year contract. So it's -- and you can roughly just divide it by 5, the SEK 20 billion that we got. That's how that looks. For Presis Infra, it's the same thing. It's a 5-year contract for those NOK 900 million. And then last but not least, the HL Display, these SEK 500 million are spread over 2 to 3 years. And if we look at our current order backlog, I would say it's roughly 1/3 to be delivered in 2026. So we do feel confident that this is a good sign, that orders are coming now. And also one thing worth mentioning is that for Aibel, we already have that kind of a frame agreement with Equinor. So this is a repeat. On the other hand, the value has increased a little bit. So NOK 5 billion extra versus the previous period. So it's a great base load. .
Linus Alentun: Okay. Super, super. And just one question here on the -- continue on the capital allocation here. I was just wondering, I think someone else mentioned it by buybacks here. Is this something that is on the table? Or do you see the M&A pipeline here is strong enough to deploy capital there instead?
Gustaf Salford: Linus, that's often a question you get. I think today, we announced what the Board proposed in terms of dividends. So that historically has been the focus of Ratos for sure. Then we have an interesting pipeline of add-on acquisitions. So I would take it in that order. And you should say never say never on buybacks, but it's not our primary focus right now.
Linus Alentun: Okay. And just one last question here regarding the shares in Sentia here, if you could perhaps give some more flavors here -- flavor regarding our thoughts here on this position.
Gustaf Salford: Yes, for Sentia for sure, and I recommend all of you to look through and listening to Sentia's report last Friday, where they had really interesting presentations about data centers, et cetera. And so that's a good material that you can take a look at. I think for meeting Sentia, understanding Sentia, I'm impressed by the company. I'm impressed by the market they serve, and they're well positioned in that segment. And I'm optimistic about that segment into 2026 as well. And they also have a strong operation, as you know, in Sweden. And I've been visiting some of the construction sites and so on. So I think that's a strong place to be into next year as well. So I'm positive towards our ownership in Sentia.
Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Gustaf Salford: Yes. Thank you to all of you for listening into our call and your questions. So if I summarize a bit whole call, 2025 was an important and very eventful year for Ratos. And we are now working really hard to drive strong performance into 2026. So I also hope to see many of you at our Capital Markets Day coming up when we'll present our strategy and financial targets going forward. So with that, a big thank you to everyone dialing in. Thank you.