Idun Industrier AB (publ) (IDUNB) Earnings Call Transcript

Hello, and welcome to the industry conference call for the third quarter of 2026. My name is Carl Korsheden, and I work as an equity analyst here at DNB Carnegie with a focus on acquisition-driven compounders, and I'm here to moderate this session. With me today, we are, as per usual, joined by Idun's CEO and CFO, Henrik Mella; and Oskar Samuelsson, who will take us through the quarter briefly after which we will, yes, follow that up by a Q&A section. And during this Q&A section, those of you who are dialing in are very much encouraged to participate and feel free to shoot your questions in the chat function, and we will make sure to cover them here in the studio. So with that said, I'll leave the word over to you.

Thank you, and welcome to the quarter 3 results for Idun Industrier. As usual, I will start with a brief introduction of repetition of Idun, who we are and how we work. So Idun Industrier, industrial group of companies sales, roughly SEK 2.6 billion and EBITA SEK 360 million. On a rolling 12-month basis, we have some 14% EBITDA margin. Idun consists of 22 group companies. We divide these 22 companies into 2 business areas: manufacturing, which is roughly 60% of sales and profit; and service and maintenance, roughly 40% of sales and profit. Idun is mainly Swedish and/or Nordic Group of companies. 3/4 of sales is generated in Sweden and more than 90% in the Nordic countries. And we have subsidiaries in -- outside Sweden, in Norway, Finland, Denmark and all the 3 Baltic countries. If we -- a few words about Idun as an investor or a compounder. As we have a lot of investment criteria, but our single most important investment criteria is that we look for profitable market leaders and then market leaders in small sectors within manufacturing, industrial trading, industrial services, only B2B. And if to say one thing about our business model, meaning the way that we manage our [ 22 ] group companies. We make very consistent and active use of the pilot school. That is, we believe that managers should have an ownership stake in the companies they lead, and we are -- we see on a daily basis, what this brings in terms of energy and enthusiasm in the companies. After that introduction, let's go over to the third quarter and some key figures. [ Net ] at least, I should first say this is a strong quarter for Idun. Net sales grows by 26% and EBITDA by more than 36%. And thereby reaching SEK 101 million. And this is actually the first quarter or the first time where we, in a single quarter, have EBITDA of more than SEK 100 million. So it's a nice milestone for us. Equally important, organic growth is back on track, double-digit organic growth, both sales and EBITDA growth by roughly 11%. So the EBITDA margin in the quarter was 15.3%. Cash flow growth and earnings per share as well. In this quarter, we also made one rather small, but still add on acquisition to our group company, Prident by buying the Finnish company safety reflector. They are offering reflectors and reflectors is an important product category for Prident. Since the first investment in 2014, we have made 35 investments. That's in new group companies and add-on acquisitions. Actually, more than 35%, if you would include some really small add-on acquisitions. But this means that we've made on average 2 to 4 investments per year, and we aim to continue in this space. So we have no objective of being the fastest-growing compounder, but we want to make this number of investments steadily year-by-year continue to grow. And if we look back a couple of years to 2020, we've managed to grow by 30% per year. We don't promise to keep up that pace, but that is where we have been so far. On this slide, you see sales growth per quarter during the last 7 years. And in the green blue line, you have the rolling 12 months figures. To the right, you see the sales growth split between organic and acquired growth. So well, you basically see a nice steady growth going forward. And the same figures, but for EBITDA. We also here see that the new add-on or new companies that have joined the group contribute in a very good way with SEK 19 million in additional EBITDA. And on this picture, you see rolling 12 months figures for sales, gross profit, EBITDA as well as the gross margin and EBITDA margin. And the message here is stability. It's -- sometimes the growth is faster, sometimes it's still growth, but a bit slower and now it's picking up again, but from quarter-to-quarter, we keep increasing profits. And it could then be mentioned also here that -- if we look at the recently acquired companies, well, some of them may abstain less [indiscernible] Mouldex and most recently, Nordbergs, these companies will contribute another roughly 30 million in EBITDA going forward as the full year figures come into the reported ones. With that, over to you, Oskar.

Thanks. Going to our 2 business areas, starting with the manufacturing. Net sales grew by 22.8%, up to SEK 398 million, and EBITDA increased to SEK 66 million from SEK 53 million, driven both by acquisitions but also organic growth. The EBITDA margin of 16.5% is in line with last year. Our group company, Fredahl Rydéns, delivered another strong quarter, both in sales and earnings. And we now see results from the investment we did in the new hand the line for coffins some time ago. [indiscernible] had a setback in [ Widelife ] protection products in the quarter and has not yet recovered its through production sales that were weak in the second quarter. Culina products see fewer public sector kitchen [ e-tenders ] for the public sectors and is adjusting cost and also customer focus and among other areas for private restaurants. The newly acquired companies, [ Tobin Norway ] contributed positively. They have a lower gross margin than the current group. And that's also the main reason we see that we have a some lower gross margin on the group level. But on the other hand, they have a higher EBITDA margin that contributed positively. And finally, in the end of the quarter, as Henrik mentioned, we did a small add-on acquisitions in sales refractory in Finland for Prident. Going to service and maintenance that had a really strong quarter. Sales grew by 31.5% and driven both by the acquisitions of Mouldex and AGB that came in well and from organic growth. The margin improved from 13% up to 16% or EBITA up from SEK 26 million to SEK 41 million. [ Stora Gama ] technique had a good quarter with a high number of projects within composite treatment of water and wastewater facilities. And what could be mentioned is that the project's volume may vary between quarters, with a nice contribution. [ Triton ] also contributed to improve its results and has done so for some time, so that we are glad to see. Also, Stegaföretagen delivered a stronger quarter than last year with higher car hashing volumes and EBITDA growth in both the Swedish and the Finnish market while they continue to work to strengthen the margin within insulation and service going ahead. And as mentioned, the acquired companies also contributed both to results and margins. Cash conversion and net debt. Operating cash flow was SEK 38 million, up from SEK 33 million but low relatively to EBITDA of SEK 160 million in the quarter. Two effects mainly explain this. The first one was that the tax paid in the quarter was SEK 36 million compared to SEK 40 million last year, partly due to the newly acquired companies, but also due to temporary high tax payments. In addition, accrued, not yet invoiced income has increased with SEK 31 million due to current projects that has not yet been invoiced. We see that both 2 things will normalize as the projects will be invoiced and converted to cash flow. On a rolling 12-month basis, our cash conversion of 58% are unchanged. And historically, we have been well above 60%, and we don't see any structural changes that wouldn't make us go up to above 6% going forward. Net debt decreased by SEK 21 million in the quarter. And the net debt is now SEK 1,049 million. Net debt to EBITDA is [ 2.5 or 2.3], if you add the roughly SEK 30 million in EBITDA from recent acquisitions that has not been with us the full rolling 12 months. Good. And the interest cost has decreased from SEK 13 million to SEK 12 million and mainly due to the early bond redemption that was carried out in the end of June. Looking at our financial target, they are unchanged. First, EBITDA growth of at least 15% over time. On a rolling 12 months basis, we now have 15.3%, mainly driven from acquisitions. Organic contribution is only 0.9% even though the quarter was alone 10.9%. Second, net debt to EBITDA below 3.5x. We are now at 2.5 at reported pace. And the final one, dividend, up to 10% of the yearly profit adjusted for goodwill amortization. And with that, I hand over to Henrik again.

So last slide, and let's wrap this up. So this was a strong quarter for Idun. Sales growth, 26%, EBITDA growth, 36%, organic double-digit growth for both sales and EBITDA. Earnings per share is growing by more than 40%. We made one small add-on acquisition and if you say something about the future outlook from Idun's perspective, we look at it's gradually improving, and we look positive to the future. And we also see good opportunities for more acquisitions going forward.

Thank you very much for that. Let's jump over to the Q&A section. [Operator Instructions]. [indiscernible] said a couple of questions so far all ready. So let's go through those. Firstly, we have a question on -- how do you view the move of CPO and its impact on the [ Shellbersplust], if any?

Yes, I suppose the question means [ SEP], which is a big customer to [indiscernible]. They will move their production facility from [ BispGordon ] to Poland. And this move is happening now. So very short term, this is -- has no impact because they are rather need to build up components. We produce for them control units for these tailgate lifts and some other components as well. And it should also be said, even after a move to Poland in the current discussions, they want to keep buying these control boxes from us. Of course, if you look ahead, 3, 4, 5 years, once they are solidly established in Poland, you cannot -- there is a risk that they will start looking for local suppliers but we have a very good cooperation since many years. We are quite competitive when it comes to price, and it's not that easy because the -- it's not like we have one control box. It's many different kind of units and we own also some of the tools to produce them. So there is a risk, yes, but we are working to mitigate them in parallel looking for other customers as well.

That's clear. And another one here, other compounders has managed to keep its HQ very [indiscernible]. And I said that you have hired another one for HQ. How do you view this going forward?

Well, I should say, I do think that we are rather lean as well. So we are 8 people in the headquarters, and we have more than 1,000 people in the in the group. Our total cost, I think, is like SEK 26 million for all the function, including everything we pay for legal services or whatever we do. And this is 1% of our turnover and less than 1% of our market cap. So that's one way of answering it. And the last one is Anders who joined recently on [ Ringstad]. It has been 2, 2.5 years, I think, since the last 3 years almost 3 years. And with Anders, we see that we will be able to invest in many new companies without adding more people. So we think that we are now quite fully invested, although we are 8 people for more than 1,000 people. So -- but we completely agree with that decision should be made in the companies, and we have a lean mother company, and we think we have.

Super. A couple of other questions here. Service and maintenance grew strongly in the quarter, how much of the segment's organic sales and EBITDA growth came from [ store ] to gas, water and sewage projects.

I can answer that. As mentioned, we had organic growth, both in manufacturing and service and maintenance. But service and maintenance came out stronger. So double-digit organic growth, both in sales and EBITDA for the business area and single digit for manufacturing. Of course, a lot of projects for Ståthöga contributed well, but it's not only projects in the business. They have some continuously contracts as well. I would say, it comes both from projects that may vary over time, but also current pricing within the whole business area.

Got it. And another question on that, have storages projects now been completed? Or do they also run into Q4? And can you say anything about the backlog heading into 2027?

[ Forest ] outage, they have some continuously contracts, and they also have a project. The projects are quite short. So we don't have that long visibility going ahead. But we see that they still have projects to finalize in Q4.

Great. And yes, I mean if we look at Q3 overall, just from a performance point of view and talking maybe specifically about the organic growth, both on the top line as well as on the EBITDA level. Would you say that it exceeded your own expectations after Q2 that we are now taken another step up? Or is this -- was this, yes, in line with how you viewed Q3 all along and after Q2?

Will we -- I would say it was slightly better than we expected. We did expect profit and sales growth. And I think we commented it after the Q2 that we thought that the second half of the year would be stronger. So we indicated that -- but on the margin, it was slightly better.

Got it. That's clear. And yes, when we dig a little bit into maybe service and maintenance, obviously, a very strong performance this quarter. I mean, you have previously highlighted certain one-offs or things like that in the past. For instance, during the last quarter, who we impacted you negatively then. Is there anything to highlight from maybe a positive point of view in terms of one-offs or things that seem to be more of a, yes, temporary character that might have boosted figures this quarter? Or is this more of a, yes, good representation of underlying performance, you would say?

I would say that Ståthöga MA Teknik had good sales in the quarter due to many ongoing projects. So that contributed positively and that the projects may vary over time. But having said that, I would say we do not have big one-offs that we thought that we should sort of flag that this is not recurring or nothing like that, really.