Bufab Aktie

Good morning, and good afternoon, everyone, and a warm welcome to this Q1 report from Bufab. My name is Erik Lunden, President and CEO of Bufab Group. And together with me here, I have Marcus Soderberg, our Group CFO. This presentation will be recorded and by attending to the meeting, you agree to the recording. I will start this presentation to give you the highlights of the quarter. After that, I will leave the word over to Marcus for some financial highlights. Then I will take you through the different regions' performance. And at the end, we will have time for sum up and Q&A.

If we start then with the highlights of the quarter, I would say that it's a good quarter from our side. I'm overall very pleased with our performance. We delivered organic growth and clear improvements in both gross margin and operating margin. I think we execute very well on our strategy with a clear focus on improved value creation for our customers through our offering and also solutions, and this work has clearly started to pay off in the quarter. The organic growth was 2.2% with positive development in 3 of the 5 regions, driven by mainly higher volumes. The underlying demand remained cautious in the market. We saw good demand in industries like energy, agriculture and food and defense, while demand in construction, furniture and interior design continued to be on a low level.

Both the gross margin and the operating margin increased compared with the comparative quarter and reached all-time high levels. The gross margin improved to 32.9% versus 30.3% last year, and we have now delivered 11 quarters with improved gross margin compared to comparison quarter. Our underlying cost level was slightly lower than last year, and we continue to maintain a good focus on cost control, while at the same time, we invest in growth where it makes sense. All in all, we delivered a strong adjusted EBITA margin of 15.3%. It's up compared to last Q1 in 2025, that was 12.7%. And it's also very encouraging to see that all regions and the vast majority of our sister companies contributed positively to this result by improving their performance versus last year.

I will now leave the word over to Marcus for some financial highlights.

Thanks a lot, Erik. So we'll start looking at the growth during the quarter. We did see organic growth, but still see the underlying demand to remain a bit cautious. But in total, the growth in the quarter amounted to 1.7%. We continue to see a gradual improvement of the organic growth, which is good, which came in on 2.2%. It's now actually the third consecutive quarter in which we see a gradual improvement of the organic growth rate, which we're very glad to see.

The acquisition of novia had a solid development in the quarter, contributed with 6.5 percentage points to the overall growth in the quarter, while the strengthened Swedish krona had a negative impact currency-wise of minus 6.5 percentage points. There was a small effect also coming from the during 2025 communicated divestment within Component Solutions Group that had a negative impact of 0.5 percentage points.

In terms of order intake, it should also be said that in the quarter, order intake exceeded net sales. Gross margin-wise, we are very satisfied with the gross margin development in the quarter. It increased compared to the comparative quarter and reached a high level of 32.9% versus 30.3% in the comparative quarter, an increase of 2.6 percentage points. The increased gross margin is a result of a continuous focused work to improve both our customer and product mix, landed purchase savings in the quarter, some price adjustments as well as the strengthened Swedish krona effect on the Swedish entities.

Over the past 11 quarters, like Erik said, we have seen strong momentum in our gross margin, and we expect this development to continue throughout the year. In terms of operating expenses, operating expenses as a percent of net sales increased slightly compared to the comparative quarter and amounted to 17.6% versus 17.2%. But if we adjust for the acquisition of novia made in Q4 '25, and the revaluation of contingent purchase considerations in the comparative quarter, the operating expenses as a percentage of net sales actually decreased slightly. So still good cost control. The lower underlying operating expenses is also a direct result from continuous strong focus on exactly cost control throughout the whole organization. And while maintaining good cost control, we also continue to invest in various growth activities such as investing in our sales organization, et cetera.

So clear improvement in operating margin. We are well on track to reach our overall margin target as a summary. And as I said, strong gross margin in combination with the good cost control that we saw in the quarter led to a clear improvement in the operating margin that landed on a strong level of 15.3% compared to 12.7% in the comparative quarter. Adjusted operating increased with SEK 62 million, meaning a growth rate of 22% to SEK 340 million versus SEK 278 million in the comparative quarter. It's nice to see that all segments increased its operating margin and the vast majority of our operating entities actually improved their overall result as well, which is also very nice to see. Given the strong start of the year, we are now well on track to reach our margin target for the full year of 2026.

Cash flow-wise, cash flow increased versus the comparative quarter, actually a direct result of the improved underlying result. There is one thing standing out a bit in the cash flow statement, and that is the noncash item figure in the cash flow statement that is considerably higher versus the comparable quarter. And the main driver behind this is that we build up accruals for the future payment of CBAM, that is EU's new carbon border adjustment mechanism, which affect all our European companies with start of January 1, meaning affecting all our purchases in the European countries from January 1. And the payment for those costs will be due in 2027. So we accrue for those during 2026.

Other things worth mentioning is that, as you can see, we build slightly more net working capital in this quarter relative to the comparable quarter, but the development of that is naturally due to that we are now back in organic growth phase, which is good. So solid cash flow in the quarter.

If you take a look at the balance sheet, we continue to strengthen the balance sheet throughout the quarter. Debt-wise, the group took good steps in the right direction, driven by a solid cash flow in the quarter. We reduced the overall debt level of approximately SEK 90 million despite the fact that we have a strengthened Swedish krona affecting the loans for the acquired companies negatively in the quarter. But still, we were able to reduce debt with approximately SEK 90 million.

Reduced debt in combination with strong development of our operating underlying result in the quarter also led to an improved net debt-to-EBITDA multiple. Net debt-to-EBITDA decreased with 0.2 multiple points, down to a multiple of 2.4, which is well within our financial target range long term. So I guess you can say that we continue to strengthen our balance sheet after acquisition of novia already, meaning we are ready for new value-adding acquisitions when the right opportunities appear.

With that said, I'll leave the word over to you, Erik, again.

Thanks, Marcus. And I will then take you through the regional highlights, and I would like to start with the Region Europe, North and East. The total growth for the region was minus 1.3%, of which organic growth was positive 1.7%. Market conditions continue to vary across countries and customer segments in the region. We saw positive development in Finland and Sweden, while demand in Denmark remained weak. The furniture and kitchen sector continued to face lower demand where defense and digital infrastructure remained strong in the quarter.

The gross margin improved by 3.0 percentage points, driven by better customer and product mix and the consolidation of purchasing volumes. As in the previous quarters, currency effects have also had a positive impact on the gross margin for the region. Operating expenses increased quarter-to-quarter, mainly due to remeasured additional purchase considerations in the comparable quarter. Adjusted for those effects, the share of cost increased only slightly compared to last year. Overall, this resulted in an improved adjusted operating margin of 16.1% compared with 14.2% last year.

If we then continue with the Region West, the region showed a strong growth of 24.7%. This growth was largely driven by the acquisition of novia Group, which contributed by 23.7%, while organic growth came in at a solid level of 6.3%. The organic growth was driven by strong development in France, Spain, Turkey and Czech Republic, and supported by increasing market shares and also better product mix in the region. The demand was particularly strong in sectors such as mechatronics, aerospace and defense.

Also, the gross margin had a positive development, improved by 2.2 percentage points, driven by better product mix and higher added value in the new projects. The cost level was in line with last year, reflecting continued cost discipline in the region despite higher activity in the market. As a result, the adjusted operating margin improved to 15.3% compared with 13.4% last year. Finally, worth to mention is that the newly acquired novia Group developed according to plan during the quarter and contributed positively to the region.

If we continue with Americas, the total growth for Americas in the quarter was minus 6.1%, mainly impacted by currency effects, which accounted for negative 13.4%. At the same time, the organic growth was strong at 11.6%. The organic growth was mainly driven by price increases and demand in the RV and the trailer market, which is an important segment for ABS. It remained stable, but on a low level. We also continue to see weak demand in the automotive industry, which particularly affected our sister company CSG in the U.S.

The gross margin improved significantly, increasing by 7.7 percentage points. This was mainly driven by general pricing adjustments and also very successful turnaround within our sister company CSG. Looking ahead, we expect the gross margin to come down slightly going forward, but remain on a high level for the region. The cost level was lower compared with last year, mainly due to the divestments of BGM within CSG, combined with continued good cost control in the region. Overall, this resulted in a strong improvement in adjusted operating margin, which increased to 21.7% compared with 12.5% in the comparative period.

If we then continue with the Region U.K. and Ireland, the total growth in the quarter was minus 12.2% with organic growth of minus 3.8%. We continue to see a low demand in the manufacturing industry, impacting both Bufab U.K. and Ireland, combined with lower market prices, which impact Apex that are doing stainless. But also weak confidence within the U.K. construction market, combined with unfavorable weather in Q1 resulted in lower sales volumes for TIMCO. The gross margin improved by 2.0 percentage points, mainly driven by sourcing savings and lower freight costs. The cost level for the region was lower compared with last year. This is partly explained by the fact that the comparative quarter was negatively impacted by customer loss as well as restructuring costs for mainly Apex. Overall, this resulted in an improvement in adjusted operating margin, reaching 11.7% compared with 9.5% in the comparative period.

Finally, we have Region Asia Pacific. The total growth for the region was minus 25.3%, organic growth accounted for minus 14%, while currency had a negative impact of 11.3%. The decline in organic growth was mainly attributable to Bufab Singapore due to lower demand from some large customers and also termination of an unprofitable customer in that company. Bufab Shanghai saw a small decline due to a very strong comparable quarter in Q1 2025. The gross margin also improved in Asia Pacific by 3.4 percentage points. This was driven by our active work with value-based pricing together with purchasing savings in the region. The cost level was somewhat higher, primarily as a result of lower volumes and currency effects. Overall, this resulted in improvement in adjusted operating margin, reaching 16.6% compared to 16.1% in the comparative quarter.

Before we sum up the quarter, I will take us through some highlights in the market. And I will talk about the Middle East conflict, trade barriers and also how we deal with that. While we had a strong start of the year, we have seen developments in Iran and the Middle East have increased the uncertainty in the market. On top of that, we have trade policies around us impacting us and our customers. If we start to say a few words about the conflict in Middle East, we have so far seen limited impact for our customers due to the conflict in terms of demand. Of course, a situation like this creates uncertainty in the market, but the only direct impact we've seen so far is higher cost level on air freight, which has a very limited impact on us as we use mainly sea freight.

When it comes to trade barriers like tariffs in U.S., CBAM in Europe, we act proactively to mitigate any impact for our customers and for Bufab. We have clearly seen in the last couple of years that turbulent times often create opportunities for a player like Bufab to take actually market share as customers increase their focus on securing their supply chains and that uncertainty drives consolidation that benefits us as we can help out in turbulent times to minimize impact for our customers. I think it's also very clear that our decentralized operating model makes us fast and flexible and help us to support our customers in the best possible way when we have turbulent times. So all in all, I think we act proactively and are well positioned to grab market share in an uncertain market.

Finally then, if we take and sum up the quarter. I'm overall pleased with our performance in the quarter. We delivered organic growth, clear improvements in both gross and operating margin, reaching all-time high levels despite a continued cautious market. Over the past 11 quarters, we have seen strong momentum in our gross margin, and we expect this positive trend to continue throughout 2026. But the market continued to be cautious overall. We see big deviations between segments and industries.

While we have seen a strong start to the year, conflicts in Middle East has increased uncertainty in the market, which, of course, could impact the demand if this continues. But as I mentioned in the previous slide, also open up opportunities for market share growth. Going forward, we will continue to focus on things within our control, and that is, of course, to gain market share, gradually improving our margins with a focus on gross margin improvement, delivering a strong cash flow. I think if we continue doing this in a proper way, we will be very good position when the market demand turns back. We see clearly that our strategy pays off. And despite the uncertainty in the market, we remain optimistic about the future and believe that we are in a very strong position for the future.

That was my final slide. I will now leave the room open for Q&A. Welcome to this Q&A session.

[Operator Instructions] So we start with the first question from Jonny Jin.

I have a couple of questions. I will start with segment West, I think, which sees an acceleration in organic growth, which is good. But could you please elaborate a little bit more what is driving that? Can we assume that previously announced customer wins have a full effect already now? Or is that still ramping? That's my first question.

Yes. Jonny, thanks for your question. Yes, we see good development in several sisters in the West. As I mentioned here, we have a good development in Spain, Czech, also in France. And we're actually doing a good job in grabbing market share. And when it comes to your second question here about this big contract that we secured last year, we have not seen the full effect of that yet. That is to gradually come in, in the following quarters. We have seen some impact, but more to come in the coming quarters.

Okay. That's fair. So maybe Q2 and onwards, we'll see more effect on the contracts. Is that fair?

Yes, that's fair.

Good. Then I want to move to Region Americas a little bit. I mean gross margin continued to be very strong, which is impressive. And I think it's up even compared to Q4. So maybe could you elaborate what is driving that? Is there any artificial timing boost or similar that we need to be aware of affecting the gross margin in Americas, because a lot of moving parts with divestments and structural changes, but also the timing of certain effects. Could you elaborate that, please?

Yes. As I mentioned also previously, we have seen very good development in our sister company, CSG, that is more or less a turnaround case. They had struggled with low profitability for some time. And the new management have done a good job in the last couple of quarters to change the way of working and also changing the profiles of customers and we are working with.

On top of that, we also divested BGM that was the manufacturing part of CSG. So that is one explanation why we see big improvement in performance in the region. On top of that, ABS has done a good job in working with both market share, but also on the pricing within their operations and also positively contributed to the gross margin. But there are some extra boost right now. So we expect some decline on gross margin going forward, but still be on a high level. So good work done, but maybe a little bit extra boost now in this quarter, but will remain on a high level also going forward.

That's fair. Could you quantify, please, the boost effect, the timing effect in this quarter?

No, I can't. We will not give any more details around that.

Okay. Fair enough. I need to try at least. But then I want to ask another one. I mean your comment there around slightly lower gross margin in Americas going forward, I think that's understandable because you previously mentioned that the boost from the tariff, I think that was coming into the comparables here in Q2 also. So I think last year, you said that roughly half of the gross margin improvement year-on-year stem from temporary effects. I think that's roughly 2.5 percentage points in that area. Is that sort of the magnitude we can expect decrease going forward? Or -- is that fair?

No, I don't think you should really take that conclusion fully, because we also have a big impact on the CSG operation that was not in that equation that much. That was mainly due to the situation in ABS. So you can't fully take that conclusion, because we also have a big impact on CSG's performance.

Okay. Yes, that's clear. Then just one final from my side. I think Fastenal had mentioned some timing lag in price increases actions to keep up with input cost and tariffs and such. Is that something that you have seen as well or...

No, not really. We have, I think, acted quite quickly on that. So if you mean there would be any lagging effect, so no, not really.

Henric Hintze, welcome to ask your question.

This is Henric at ABG. I just wanted to ask a bit on Region Asia Pacific. So like you mentioned, sales down here quite a lot, and it's been a bit volatile maybe on volume. Could you give us any sort of indication on what a normal level to expect here is and what is driving this?

Yes. The reason why we see this volatile numbers in the quarter is mainly driven then to Bufab Singapore. And that is driven by some customers that show lower demand in this quarter versus last year. And then on top of that, we have decided to step out from some unprofitable business that impact negative in the quarter. Having said that, I think looking forward, we continue to see a strong momentum in the other sisters in the region. So those big variations, we don't expect to see in the coming quarter as we saw in this quarter. So less volatile is expected going forward.

Okay. But is this Q1 level sort of a reasonable level to expect?

We don't know exactly what will happen in the terms of demand in the coming quarters. There's still a lot of uncertainty in that region, also driven by the situation in Middle East impacting some of the sisters. So it's very difficult to predict and give guidelines on how the demand will continue in the coming quarters. So I avoid that.

Okay, sure. And just on the overall organic growth in the group we're seeing in the quarter here. I mean, you have been talking quite a bit about taking new customers in a weak market over the past year or so. Can you give us any indication of how much is market recovery, or if there is any market recovery in the organic growth figure versus you taking new customers?

We see mainly volume effect in the improvement, and that is driven by mainly good work with market share in some sisters that we think are the main contributor to the organic growth in the quarter. The general market continues to be on a quite cautious level, I would say. As I mentioned in the intro session, the trend continues with really strong demand in some segments and others continue to be on a weak level. So the organic growth is mainly driven by volume and good work on market share.

Yes. Okay. And maybe just finally on the gross margin potential here as well. So you mentioned you expect it to keep seeing a positive development throughout this year. Just sort of with the work you're doing internally and the plans you have in place, is there any reason to expect that, that work will be largely concluded this year or that there is further potential beyond that?

I think what defines our gross margin development is how well we are actually giving value to our customers and lower their total cost and give them value creation. So if Bufab continues to do a good job here, also that should be paying off in the gross margin. But how that will develop, time will tell, but our work here in the different systems to do our best to gradually improve our customers' performance and lower the cost for us then to gradually improve our gross margin. So time will tell how good we're doing this and how much value we create.

Zino Engdalen, welcome to ask your question.

Zino from Handelsbanken. I'd just like to start off on a follow-up to Jonny's question on organic growth in Region West, if it's possible to give any idea around how much of the organic growth that is coming from these previously announced customer orders?

No, we don't disclose any exact number how much is new orders and how much is the rest. So unfortunately, not.

Well, I also needed to try. Going to the comments you made around the freight costs, it sounds like it should have a relatively -- or it sounds like you want to convey the message that it should have a relatively limited impact while you also highlighted that there were cost savings from that in U.K. and Ireland. Is that, so to say, fair to say that the freight cost risk is relatively low?

Yes. I would say that there are 2 different things. If you take the situation in the Middle East that's impacting the supply, here, we see limited impact. And the only impact we've seen on freight then is on air. And luckily, we have a quite small limited air freight in our business. The other part was the lower freight cost in U.K. and Ireland, and that is actually linked to the high freight cost that we had in the comparative quarter in 2025 that was actually standing out. So now we can say we have normalized the level on freight in U.K. and Ireland. So there are 2 separate topics there actually. But all in all, we have seen limited impact on freight for us and our customers. And the main thing we have seen due to the conflict situation is actually on air freight.

Very clear. And I'd also like to follow up on the other big customer projects you announced with Babcock, if there are any. Anything you can disclose there regarding the progress of that contract and how the expectations are for the ramp-up there?

We are doing well with that account. We are continuing building up the support structure for the customer, and we will see gradually positive impact on our net sales with this customer in the coming quarters and years to come. And how fast and how quick it goes, that's always difficult to say in those type of accounts, because it takes two to tango, us and the customer, and also a little bit how they should look at their production. But good start with the implementation phase, and we expect to see gradually positive impact on our net sales for that region.

Very clear. And just lastly, on capital allocation, given that you highlighted the net debt, that you have a continued appetite for M&A, if there's anything you want to share with regards to platforms or add-ons, or if it's more opportunistic, so to say?

No. We're looking at both. In our strategy, we are looking at 2 types, you can say, of acquisitions. We look both at platform acquisitions where we enter a new market or segment, that could be both within trading and niche, and that is bigger players then. And secondly, we're looking at add-on acquisitions where we add on a company that want to contribute into a certain sister somewhere in the world. So we are looking at both and have both type of companies in our pipeline.

Okay. Since there are no more questions, I would like to thank you all for attending this meeting and wish you a nice day ahead. Thank you.

Good morning, and good afternoon, everyone, and a warm welcome to Bufab's Q4 report. My name is Erik Lunden, and I am President and CEO of Bufab Group. And together with me here to present the quarter, I have Helena Hager, Acting CFO. This presentation will be recorded and by attending to the meeting, you agree to the recording.

I will start to take us through the full year of 2025 and some highlights from Q4. And then I'll leave the word over to Helena for some financial details before I go through each of the regions. And then at the end, we will have time for Q&A. If we then start with 2025, it was another record year for Bufab -- results despite a weak market. We had a total growth of 0.5% in the year, where the organic growth was 0.3%. It was a record high gross margin at 31.9%, and the adjusted operating margin ended up at 13.3% for the year.

The Board proposed a dividend of SEK 1.3 per share for the year. We continue to have a strong execution of our strategy. We have added more and more value-added services to our customers. We have some technical issues, so we need to wait for a minute. [Technical Difficulty] Okay. We try again, sorry for the technical issues. We start to recap the full year 2025, and it was another successful year for Bufab.

We ended up with record high results despite a quite weak market out there. Our total growth in the year was 0.5%, whereas the organic growth was positive 0.3%. We delivered a record high gross margin at 31.9%, and our adjusted operating margin ended up at 13.3%. The Board proposed a dividend of SEK 1.3 per share for the year. What I'm very pleased with is that we continue to execute very well on our strategy. We have more value-added services to our customers and also improving how we work with value-based pricing.

From a sustainability point of view, we also had a good 2025. We launched new offering to our customers, and we got recognition from EcoVadis with Platinum rating in 2025. I'm also very pleased how we work with the customer and product mix, and we secured very interesting projects during 2025 in key segments like defense, infrastructure and in general industry. We also acquired the novia Group in Q4, and we also divested a small manufacturing part of CSG in U.S. during the year. And all in all, I'm pleased with the performance. We have strong momentum and put ourselves in a good position to deliver our profitability target for 2026.

If we then jump into the highlights of the quarter. Q4 was a strong end to a successful year for Bufab, and I'm overall pleased with our performance. We continue to focus on things within our control, and most of our systems out there delivered very strong results in the quarter. The organic growth was slightly positive, 0.3%, and the modest growth reflects the continued uncertainty we see in the market with big variation between countries and the customer segments.

Demand was strong in energy, agriculture and food, digital infrastructure and defense, while the mobile home trailer market was stable and construction, furniture, interior design and automotive industry remained weak. We delivered a very strong gross margin, 33.8% versus 29.3% last year, and the adjusted operating margin improved to 13.1% compared to 11.8%. The underlying cost level was unchanged compared to last year if we then adjust for novia and the acquisition of VITAL. And we continue to maintain strong focus on cost control, while we, of course, continue to invest in growth in cases where it makes sense. And all regions, except U.K., Ireland, delivered strong results in the quarter.

I will then leave the word over to Helena for some financial details. Please, Helena.

Thank you, Erik. Let's review the financial highlights, starting with net sales. Net sales for the quarter increased by 3.7%, resulting in a total of SEK 1.931 billion. We see a positive increase of 0.3% in organic growth. However, this growth varies across the regions, showing positive results in Europe West and the Americas, while in contrast, the Asia Pacific, Northeast and U.K., Ireland experienced negative organic growth. And that is, as Erik said, reflecting a continued uncertain market, but is also partly explained by 2 larger project sales in Q4 in previous year affecting this one.

The change in net sales is also influenced by a negative currency impact of 6.6%, and that is the strengthening of the Swedish krona that is -- that has led to this revaluation effect. And additionally, we have the acquisition of novia Group and VITAL that contributed 10% to the net sales increase.

Moving forward to the margin. We are pleased to see a significant improvement in our gross margin as well as a high operating margin in the quarter. The gross margin for the quarter was 33.8%, representing an increase from 29.7% in the same period last year. Additionally, gross margins improved across all regions. And the improvement is driven by several different factors. It's driven by savings in purchase, active work with improved customer and product mix and also price adjustments and currency.

The strong gross margin has been a key factor in achieving this high operating margin, which has resulted in an adjusted EBITA margin of 13.1%. And as Erik mentioned before, the underlying cost level was in line with previous year when adjusting for a novia Group and VITAL. We also had some favorable impacts related to currency affecting the cost, while acquisition costs had a negative effect compared to last year. And as we said previously, we continue to maintain a focus on cost control throughout the organization, while we also invest in companies and projects that will help us to grow for the future.

The cash flow. From the operating activities amounted to SEK 224 million, corresponding to a cash conversion of 93%. The cash flow from operating activities in the quarter was higher than in the comparable period, explained by improved earnings combined with improved working capital. The increase in inventory was smaller than in the comparable period. And on a full year basis, we can see that the inventory levels in the companies have normalized after the pandemic years.

So the working capital in relation to net sales amounted to 38%, which is then mainly due to reduced capital tied up in inventory. Finally, the net debt-to-EBITDA ratio is up after the acquisition of novia, landing on 2.6 -- maybe you remember, but in our last call in October, we communicated an expected net debt of 2.7 by the end of '25. After the novia acquisition in late October, net debt was 3.0 and positive to see by quarter end, it is now improved to 2.6.

That was all from the financial highlights.

Thanks, Helena. I will then continue and give you some details from the different regions. And I would like to start with the region, Europe, North and East. The total growth was minus 4.6% in the region and organic growth was negative 1.8%. Demand in the furniture and kitchen sector, where HT Bendix in Denmark operates remained low, while demand in defense, digital infrastructure was strong. Gross margin was very strong for the region, up 4.3 percentage points, driven by active work to improve our customer and product mix, price adjustments and consolidation of purchase volumes and also positive currency effect on the gross margin.

Operating expenses was up versus last year, mainly due to one-off related to workforce restructuring, but also inflation pressure. And the adjusted operating margin improved to 12.9% compared to 10.5% last year. If we then continue with Europe West, the total growth was 39.2%, of which 40.4% was acquisition and 3.9% was organic growth. We saw good demand in general in energy and defense, while automotive and construction industries continued on low activity levels.

The gross margin was up 6 percentage points, driven by price adjustments and increased added value services on new projects and also novia contributed positively on the gross margin. Adjusted for VITAL and the novia Group, share of OpEx was lower than the previous year, and we ended up on a very strong operating margin of 16.2%. Novia Group actually had a negative impact on the operating margin for the region due to the full year bonus provisions and currency effects booked in Q4, but novia expect to have a positive impact on the region during 2026.

If we then continue with Americas, they showed total growth of minus 4.1% and organic growth was positive 9.1%, mainly driven by price increases. Demand was stable, but on a low level for the mobile home and trailer market and lower demand was also noted in the automotive industry for CSG. The gross margin was up 8.4 percentage points driven by price adjustments, the divestments in CSG -- part of CSG and also reclassification of obsolescence reserves.

Some explanation here. The gross profit in Americas has been influenced by reclassifications of obsolescence, which involves relocating costs between GP and OpEx. These adjustments in onetime gave a positive effect on the gross profit for the quarter, alongside a partially offsetting negative effect on OpEx. And additionally, obsolescence costs have risen over the year, primarily in Q4 due to enhanced compliance with our reporting guidelines.

So if you adjust for this, we still have a very positive development in the gross margin and up on around 37% for the quarter. We also saw higher operating expenses mainly due to increased obsolescence reserves for Americas and end up on a positive development for operating margin and end up at 11.3%. And I can also mention that we have previous quarter had some positive impact on the gross profit due to tariffs on nontariff goods in the inventory, and that didn't have any impact in the Q4.

If we then continue with U.K., Ireland, total growth amounted to negative 12.5%, of which the organic growth was minus 2.4%. We saw low demand in the manufacturing industry impacted Bufab U.K., combined with lower market prices, which impacts APEX and their stainless business. Gross margin was up as well, 3.0 percentage points, mainly driven by sourcing savings and lower freight charges. We saw higher cost level due to inflation from higher social tax and national minimum wage in U.K.

The adjusted operating margin ended up at 8.1% compared to 9.0% in Q4 last year.

And then finally, Asia Pacific, the total growth for the region amounted to minus 22.4%, of which currency was 12.7% and organic growth was negative 9.7%. Bufab Shanghai delivered strong numbers and Bufab India noted minor negative growth and Bufab Singapore had a larger decline due to a larger onetime project sales in Q4 last year, as also Helena mentioned. Gross margin was up 2.3 percentage points due to purchasing savings and active work with our value-based pricing.

We also saw a higher share of OpEx in the region, primarily due to lower volumes and a smaller currency impact. The adjusted operating margin improved to 14.7%. Before we sum up the quarter, I would like to share a group news. And at this time, I will highlight one of the customer deals that we closed in 2025, and that is a major project with a world-leading supplier in the semiconductor industry.

We signed this contract in 2025 after long discussions with one of the world-leading manufacturer to semiconductor industry. And it is mainly BUMAX products that we'll deliver, but also C-Parts through FLOS. And it is tailor-made solutions that is part of this package to the customer. In this type of deal, we deliver typical peace of mind and clear value to our customers through cost savings, short lead times, quality control, et cetera, so full scope support for the customer. And this is a high-volume project that we started in Q4 this year -- sorry, last year. And we predict this project to ramp up during 2026 and 2027.

And why is this type of deal good for Bufab in the future? First of all, this is in an industry where we aim to grow, where we see long-term growth potential. We can also utilize our strength as a group with our broad offering and our capability to give tailor-made solutions for our customers and give the right services and solutions that they need. We deliver clear value for the customer, and this is a win-win. If we perform well, we will also deliver strong growth and also higher margins and much higher than the average margin that we have in Bufab.

And our aim is to create a long-term partnership and a win-win situation for the customer and for Bufab, of course. If we then finally sum up the quarter and talk a few words about priorities and outlook. First of all, I would like to say that I'm overall very pleased with our performance in 2025. We continue to focus on things within our control and execute our strategy very well and have delivered a record high gross margin and operating margin for the year. I'm also pleased that we delivered a strong Q4 despite quite weak market still out there. And over the past 10 quarters now, we have gradually strengthened our gross margin, and we expect the gross margin to continue to have a positive development also during 2026.

Despite the uncertain market conditions, we are optimistic about the future. We continue to focus on things in our control and give value to our customers and of course, continue to try to grab market share in a market that is actually good for market share growth. Continue to focus on improving our margin with focus on improving our gross margin, but of course, also be cautious with costs. And finally, continue working with our net working capital and secure a strong cash flow also in 2026.

And to sum up, I think we have a good momentum right now and put ourselves in a good position to also deliver on our profitability target for 2026.

That was my final slide. So I will now open up for Q&A.

[Operator Instructions] We start with the first question from Jonny Jin.

A couple of questions from me. I think I will start with North America. I mean, obviously, a very strong gross margin here in the quarter, and we touched upon that a little bit. But could you maybe break down the effect from the reclassification of obsolescence reserves here in the quarter and general underlying improvements and the effect from the divestment. If you could break down the drivers a little bit closer.

Yes. So I will not share all the details, but we have -- if we adjust then for obsolescence, we have an improvement in the quarter, ending up around 37% on gross margin compared to 33% last year. And that is driven by the improvement in CSG when we divested the manufacturing part of CSG, that is improving our overall profitability situation with a better customer product mix. And on top of that, ABS and also CSG is working well with their pricing management that is contributing. So we're going from a level around 33% to 37% if adjust then from the obsolescence that gave us a boost in the quarter. That is a little bit of what I can say about the gross margin in the Americas.

Yes. Okay. So it sounds interesting, majority structurally, obviously then. On demand, a quick question there. I think book-to-bill is back above 1 here in the quarter, which is good. So how should we think about demand going forward, would you say? And what sort of visibility do you have in new customer contracts getting on board as you take market share? Or what is your gut feeling there?

Yes. What I can say is that there's still uncertainty in the market. So it's very difficult to predict how the demand will turn out now in 2026. But if you look at things that we can control, I'm pleased with the performance in '25 in terms of market share gains and also secure some big projects that we know that will help us and support our growth levels in 2026 and 2027. That is sure. And then if we get some tailwind from the overall market, that is in the crystal ball, so to say, but I'm optimistic we put ourselves in a good position to, I would say, harvest when the market bounce back. But we still see many industries and segments with quite low demand and not picked up yet. So we continue to put ourselves in a good position to hopefully be -- get some leverage from that when the market bounces back.

Yes. Understood. But can you say something about how big the new contract with the leading manufacturer of semiconductor equipment is in the -- is for you. And also, I think you highlighted Babcock contract and the size of that last quarter. Is that any effect on that already now? Or when will that show in numbers?

Yes, both those projects are, for us, significant volumes and that will contribute on gradually on top line and right away on the gross margin because it's a high-value services that we provide to those customers. And they will have gradually positive impact on the net sales and also margin in 2026. We will not be able to disclose any details about the numbers, but more that will gradually help us during '26 from top line and also margin point of view.

Understood. One final quick one. I think gross margin in U.K. is also very strong and did quite a big jump here in the quarter year-over-year. So was there anything particular that drove that? Or how should we view the U.K. going forward here?

No. As I mentioned in the call, I'm overall very pleased with our gross margin improvement during 2025. All regions are contributing and also systems in the regions are more or less all of them are doing a good job to improve their situation from a gross margin point of view. And that is paying off step by step. And here, U.K. is no exception. There challenges is the market situation in U.K. in general, but also, of course, also situation for stainless with tough prices out in the market. But from a gross margin point of view, they, alongside with the rest of the organization is doing a good job, I think, and gradually improve the situation. So that I'm pleased with.

Gustav Berneblad, welcome to ask your question.

It's Gustav here from Nordea. Just to start off here, maybe in Europe West. I mean, a very strong margin. And it would be interesting to hear just what do you see there in terms of temporary effects here impacting the margin positively. I mean if we look at Q4 in recent year, it has not really been the seasonally strong quarter, so to say. So it will be very interesting to hear.

Yes. No. West have a good, as you said, development in Q4. I think a little bit, as I mentioned when Jonny asked his question about the gross margin, more or less all companies in the region West are performing well from a gross margin perspective and are good in improving their customer product mix and also adding value services with higher margins to our customers. And on top of that, there are projects like this supply to semiconductor industry that is starting to give results as well. So all in all, they do a good job and improving the situation. So -- and then also in Q4, they had a positive customer product mix as well that contributed positively. So I would say it's -- the main driver is the good work they have done for quite some quarters now is paying off, but also a favorable mix in the quarter.

And in regards to your commentary in the report as well, I mean, you say that the novia Group has a negative impact on the margin as well. Is it possible to give any indication of that.

Yes, that's true. I mean they give a positive impact on the gross margin, but a negative impact on the operating margin in the quarter. And that is because the way they have done the reclassifications, the previous owners will take a lot of the reservations and costs for bonuses and currency and others in Q4 impacting the operating margin negatively.

Having said that, with our way of reporting and putting reservations in place, we expect novia to contribute positively to the region West from an operating margin point of view starting now in Q1 and continuing in 2026. So if you remove novia from the acquisition, the old West, so to say, are performing very well in the quarter and have a good momentum.

That's perfect. And then maybe on your comment here, it's not only in Americas, we are seeing price increases. It sounds like West as well. But on a group level, what would you say out of the 0.3% organic growth is driven by price versus volumes in the quarter here?

I would not share the details around that. I would say that it's a combination of factors that drives the improvement. One is the working with pricing management and the other that is very important as well is that we still continue to get sourcing savings and we keep them. And thirdly, we are, I would say, better in doing value-add services that we are increasing every time. So we give our customers a broader range of support that generates higher margin. And we have, as we have mentioned before, also secured deals that is contributing positively.

I mentioned this deal here in the semiconductor industry that, for example, is helping West in Q4 and will continue helping them also in 2026. So the new deals that we are adding to net sales is contributing positively as well. So it's a combination of factor that is helping us on the margin side. And yes.

Yes. And sorry, one last one, very quick one. Are you still seeing -- or are you seeing any change here to the situation regarding the buyers' market in China. Or is that still supporting you?

It's still supporting us.

[ Mattis ], please ask your question.

A question on ForEx impact on profitability. Could you be able to quantify the impact on gross margin and operating margin coming from ForEx?

No, we don't disclose any details on the ForEx on gross margin and on net sales. We don't do that. We have -- as you can see, we have some countries, as I mentioned, in some regions, we have positive effect driving like we mentioned in Northeast, for example, that is contributing positively and others is the other effect. So it's a mixed bag, and we don't disclose more details than we have mentioned here in the different -- for different regions.

Since there are no further questions, I hand over to Erik to close the meeting.

Yes. Thanks, everyone, for joining. I wish you all a nice day ahead. Thank you.

Hi, everyone, and a warm welcome to Bufab's Q3 report. My name is Erik Lunden, and I'm President and CEO of Bufab Group. And together with me here, I have Helena Hager, acting CFO. This presentation will be recorded and by attending to the meeting, you agree to the recording. I will start this meeting to go through our Q3 highlights, and then I will give the word over to Helena to take us through some financial details. After that, I will go through some regional highlights and some group news before we end up the meeting with sum up the quarter and Q&A.

So if we start then with some highlights of the quarter. Overall, I am very pleased with our performance in the quarter. We continue to execute very well on our strategy, and it continues to give results. Something that was very positive to see that was that we finally got some organic growth, 1.4%, first time in 2 years, primarily driven by increased market shares. The market though contains uncertain with a big variation depending on geographical areas and customer segments. Demand was still strong in energy, agriculture and food, medical technology and defense, but weaker demand in mobile home, trailer market and also in construction and furniture. We end up to have a very nice gross margin in the quarter, record high on 32.7%, and we now have 8 consecutive quarters of gradually improved gross margin.

Our operating margin adjusted ended up at 14.2%, which actually is in line with our financial targets for 2026. If we look then on our cost base, the underlying cost base was changed in the quarter compared to Q3 last year to adjust for one-offs. And I think we are good in managing our cost base overall, and we continue to invest in growth at the same time as we take good cost control throughout the organization. Something that was very nice to see in the quarter was some new customer projects across key segments like defense, infrastructure and general industry. And I'll come back to that. I'm also very pleased that we managed to finalize the acquisition of novia Group in early October, and I have also one slide on that later on. I will now leave the word over to Helena for some financial highlights. Please, Helena.

Thank you, Erik. So let's look into the financial highlights, starting with the net sales. We can begin by noting a 2% increase in net sales in the quarter, bringing the total to SEK 1.917 billion. Even more notable is that we can see a positive increase of 1.4% in organic growth, as Erik mentioned earlier. And that is driven by our increased market share and also the impact of higher prices resulting from U.S. tariffs. The organic growth is also being driven by all regions with the exception of Ireland and U.K., which is, of course, positive and with the Americas making the most contribution.

The change in net sales is also influenced by a negative currency impact of 4.4%, and it's coming from the strengthening of the Swedish krona against most currencies, but especially the U.S. dollar, and that has then led to a revaluation effect. And also the increase in net sales is explained by the acquisition of Vital, which has then contributed with 5%. Let's move on to the margin. As Erik also said, we are pleased to see a significant improvement in our gross margin as well as a record high operating margin in the quarter. The gross margin for the quarter reached 32.7% and an improvement from 30.6% in the previous period. And we are also pleased to notice that the gross margin increases across all the regions.

The gross margin is then, of course, contributing very nicely to our record high operating margin, giving us an adjusted EBITA margin of 14.2%. When looking -- moving on and looking at our operating expenses, we can see that the cost level is consistent with last year when we do the adjustment for one-off items. The primary one-off items include capital gain from the divestment of Lann and Halborn last year and also cost from divestment within Component Solutions Group in U.S., and that happened this year. Then we also have an effect of the operating expenses in Vital is also explaining the difference. And additionally, we had a revaluation of earn-out in the third quarter last year. And also worth mentioning on the positive side is that we have a benefit from a favorable currency effect. But we also continue to focus on cost control while investing some of the savings into growth initiatives.

Our primary focus, I would say, is investing in people and our facilities to support and also drive the growth further on into the future. And the cash flow from the operating activities amounted to SEK 293 million, corresponding to a cash conversion of 108%. And the cash flow from operating activities was slightly lower than last year quarter, mainly due to the reduction in inventories not being as significant as in the comparable period. So the inventory levels subsidiaries have normalized, you can say, after the pandemic years. And we also see some inventory buildup taking place during the year, and that is mainly in order to improve the service level to customers, but also we see a buildup of inventory for new businesses that will come next year.

And then finally, the net debt against EBITDA ratio has shown a positive trend this quarter, decreasing to 2.3% or 2.3%, sorry. And in current month, we anticipate an increase in net debt to 3.0 due to the acquisition of novia. However, our estimates indicate that we will continue to improve this ratio, and we expect the net debt to reach approximately 2.7% by the end of Q4. Thank you. Over to you, Erik.

Thanks, Helena. I will then take you through the regional highlights, and I will start with the Region North and East. The total growth in the region was minus 2.1% and organic growth was positive 0.5%. We saw strong development in BU East and also in Bufab Finland and stable demand in general industry, while furniture and kitchen, for example, academic Denmark and the energy sector in Nordic remained weak. Gross margin was strong, up by 3.9 percentage points, driven by improved value sales, customer product mix and consolidation of purchasing savings. In addition, currency effects had a positive impact on the gross margin.

Operating expenses increased SEK 27 million compared to last year, but the difference was mainly explained by revaluation of earn-out and one-off effects in connection with divestment of Bufab Lann Hallborn, but also negative currency effect and inflation. Adjusted operating margin improved to 14.6% compared to 14.2% last year for the region. If we then continue with the Region Europe West. Here, the total growth was 20.5%, linked to the acquisition of Vital and the organic growth was positive 1.7%. We continue to see very strong development in the Bufab Czech, also followed by Bufab Spain, driven by market share. Demand in energy, defense, infrastructure continue to be strong in the region, while automotive and construction continue to be on low levels. Also here, the gross margin was up 0.3 points, driven by price adjustments.

Operating expenses increased by SEK 18 million year-on-year, mainly related to Vital, but also investments in some customer cases linked to growth in the coming years. Adjusted operating margin ended up at 12.7% for Region West. If we then continue with the Americas, the total growth amounted to 3.6% and organic growth was 12.6%, driven by tariff revenue. The demand was stable in Americas on a quite low level for mobile homes, but also for the automotive industry for CST. We divested a small manufacturing unit within CST in the quarter, and that expects to continue to have a positive effect for the profitability for Region Americas in the coming quarters. Our gross margin increased 6.2%, driven by improved customer product mix, general price adjustments, but also the effects of tariff. If we estimate the short-term effect of tariff is estimated to be half of the gross profit level in the region. Even despite support from the tariffs, we see very strong development in Americas on a gross margin point of view.

Operating expenses increased by SEK 1 million year-on-year, but adjusted for divestment within the CST group, the operating expenses decreased for the region. And all in all, the operating margin improved to a strong number of 22.2% versus 12.5% last year. If we then continue with U.K. Ireland and U.K. Ireland is the region that now are challenging the toughest market conditions, I would say. The growth amounted to minus 9.6% and organic growth was negative 4.1%. In the region, we see continued low demand in the manufacturing and general industry, impacting both Apex and Bufab U.K. For Apex, that are operating within stainless is still very low prices in the market and that impacts their performance. TIMCO holding up volumes and profitability well in a very challenging market. Gross margin increased by 0.2%, mainly driven by sourcing savings for the region. The operating expenses for the region was in line with last year, and the adjusted operating margin was 10.7%.

Then finally, we have Asia Pacific. Here, we had a total growth of minus 7.4%, but a positive organic growth of 1.3%. Shanghai and India continue to show strong organic growth in areas such as electronics, marine, rail and energy. Gross margin improved for the region by 0.8% due to purchasing savings and also good work with value-based pricing in the region. The operating expenses decreased by SEK 7 million year-on-year, primarily driven by positive currency effects. The adjusted operating margin then improved significantly to 14.3% for the region. I will then take us through some group news that happened in the quarter, but also in October. And I will start with the great news about the acquisition of novia Group that we see as a very important strategic platform within the Bufab Group going forward. novia Group is a German expert provider of global sourcing solutions, and it fits very well with our strategy. The group has a turnover of EUR 50 million in 2024 and profitability significantly higher than Bufab's target for 2026. The operation in Germany and Switzerland with sales in Europe and U.S. and also assembly in China and Vietnam.

What novia do is that they provide customers with sourcing solutions, engineering expertise and assembly, which creates clear customer value and will be a good addition to our portfolio in terms of offering. They have an interesting profile in terms of markets and customers. They are strong in med tech, energy, sanitary and general industry, as example. And we're also pleased to see that Markus Bauer will continue as MD for novia Group also going forward and also be a minority shareholder in the group. And we managed to finalize the acquisition in mid of October. So it's now in our books. So why then novia Group? For me, this is in line with our strategy and fits perfectly well in our plan for the future. As I mentioned before, novia brings important new capabilities to Bufab through their engineering expertise, also how we work with assembly and technical services and a very interesting place in the value chain. It also expands our footprint in Germany and also in Western Europe with a strong and diverse customer base, where I think it could be a win-win both for novia's growth going forward, but also for the Bufab Group.

It also will have a positive impact on our profitability in the group, novia at a run rate on significantly higher operating margin than our 2026 target. And also, I see novia as a perfect platform for both organic growth within this field, but also add-on acquisitions to build a big player within this field going forward. So all in all, I'm very pleased that we now can welcome novia and the novia team to the Bufab Group. As I also mentioned in my intro, I'm pleased how we're working actively in the market and taking market shares in many regions. One example that took place now in the quarter was the framework agreement that we signed with Babcock that is one of the leading suppliers within defense, aerospace and security. We won a competitive framework agreement with competition with other C-parts suppliers in a very interesting growth area for us going forward, which is defense. A little bit short about Babcock. It's a big player within this field, has GBP 4.8 billion in turnover and a backlog of approximately GBP 10 million. And we think that they are perfect type of customers for our services. For Babcock, we have tailor-made logistics solutions that will be on site for them, and it's now up and running actually, but hopefully more to come in the coming quarters.

And as I mentioned, we believe that we can streamline and support Babcock on the procurement and efficiency overall, and that will be a win-win with this partnership. One important enabler for us is sustainability. In the deal with Babcock, but also with other customers, we see more and more, especially in Europe, that our strong position within sustainability is a key enabler for us to take market share. One strong recognition for our work with sustainability was that we got the Platinum EcoVadis rating in October. And for me, this is a positive signal and achievement that we are in the top end when it comes to sustainability within the C-Part industry. I will then finally sum up the quarter and say a few words about the outlook and our priorities going forward. First of all, I would like to highlight once again that I'm pleased in the way that we are delivering on our strategy. I think that our strategy gives clear value to our customers, and that is also paying off now in the organic growth, but of course, also in our gross margin and operating margin.

We delivered a record high gross margin and adjusted operating margin. Even if we then adjust for the tariffs in that helps us short-term U.S., we still have a record high gross margin and operating margin in the group. So I'm overall pleased how we work with that. We will continue to have a strong focus on cost control, but at the same time, invest in the key areas for growth. It could be customer cases, but also, of course, in infrastructure in sales to put us in a strong position while the market rebounds. Because the market is still tough out there, it's uncertainty in the market. But all in all, we are still positive about the future. We'll continue to focus on things within our control and put us in the best possible position when the market rebounds.

So to sum up, continue our work with our strategy, that is to continue to be active in the market and take market share. Of course, continue the gross margin journey that we are on. We still have much work to do here and continue to strengthen that margin, but also then be cost efficient overall in the organization to end up on a strong operating margin. And we continue to deliver a strong cash flow, focus on our net working capital and inventory. That was all for today. I will now leave the floor open for Q&A, please.

So welcome to this Q&A session.

[Operator Instructions]

We start with the first question from Jonny Jin. Please ask your question.

Can you hear me?

Yes.

Just a couple of questions from my side. I think I'll start with a quick one on the gross margin in America. I mean you mentioned already that roughly half of this strong gains stem from temporary effects from tariffs. I suppose it's roughly 3 percentage points. But can we expect the tariff effect to disappear completely already next quarter? Or could this effect remain a little bit ahead as well? That's my first question.

It can remain a little bit ahead as well. So that will be a gradual decline. And then as I mentioned, there are still a lot of other works ongoing to gradually improve also the gross margin in Americas. So it will be 2 factors here. One, decline due to the tariff effect, but also gradual improvement with the work the team is doing both in ABS and CSG.

Yes. Okay. That's more structural. So this temporary effect will gradually disappear coming quarters?

Correct.

Yes. Okay. That's clear. And then moving to Region West. Margin -- EBITA margin there is down 100 bps despite the inclusion of Vital and you also showcased organic growth in that region, so -- and higher gross profit. So could you just explain a little bit what happened there on the EBITA margin? And how should we view that going forward?

Yes. We have some higher operating margin -- sorry, operating expenses in the quarter for West. We have quite significant investments in growth actually in West that is impacting the numbers in the quarter, that will benefit positively for the region in 2026 and '27 that is impacting. And then, of course, there is -- for some companies, a little bit tougher situation in the market that's impacting the performance. But I would say that I'm all in all, not that concerned about the situation in the West. I think they have the cost level under control.

Okay. Understood. But was there any unusual high cost in that segment this quarter that is not -- should not be extrapolated or?

Yes, they will not be at the same level going forward.

Okay. Can we say something about the magnitude of those costs in the quarter?

No, not really, but no details, but some of them is investment in growth that will disappear, yes.

Yes. Okay. Then one on North and East Europe. I mean gross margin is also very strong in that region. Could you maybe elaborate more what is driving this? Is there any temporary FX effect that is fitting you with the strong or a weaker dollar? And -- or like how much is structural would you say? And how much is -- are there any temporary effects there?

The majority of the improvement is driven by the good work they're doing in the region with the customer product mix, sourcing savings so on, but they also have a positive currency effect for the region in the quarter. So it's both contributing, both good work, but also the currency effect.

Can we pinpoint the magnitude of the currency effect in this quarter from the margin?

The bigger effect is on the other areas, not on currency, but it...

Yes. And then one final on outlook and demand here. I mean you're now back on organic growth trajectory. And I also -- I mean, you recently press released the Babcock contract, and I feel like you have some momentum in the business now. And this contract, I suppose, is also a result of you having long discussions with customers before signing. So can we expect more of these type of contracts announced going forward? And can we expect this continued organic growth to continue here in Q4 onwards as well?

Yes. When it comes to our activity in the market and market share gains, I'm positive with the development in 2025. I think we have secured several important projects that will pay off in -- mainly in '26, '27 and onwards. With the new way we are working with our customers, where we do often tailor-made solutions comes to logistics solutions and so on. There is -- the good thing is that then you get a bigger part of the cake, but also that drives initially bigger investments to make it happen.

And we expect more of those to materialize in top line in '26, I would say, mainly. So that is positive. The market overall, I think, still remains on a cautious level. So I hope to see us delivering organic growth by being good in the market and to see some -- hopefully, these trends continue. That is what we're aiming for.

Yes. Interesting. We'll see. But just one final. I mean, I think you usually don't press release new customer contract wins like this one. So was there anything particular reason why you chose to press release this? Or could you say something about the size of this deal?

We don't talk about any numbers, but there are a couple of reasons why we did the press release. First of all, is the size of the deal and potential. The second is that we see defense as a very interesting focus area for us going forward, and we have secured interesting projects in this area in 2025. And thirdly is the way also that we provide service and solutions to our customers in a case like Babcock, where we do I would say, significantly helping the customers with efficiency and way of working and also cost -- total cost when it comes to C-parts. So there are a couple of factors why we choose to do this. And then of course, also that in this case, the customer also positive and willing to do this as well that impacts.

Yes. Okay. I understand. But is it fair to say 1% or 2% of sales and then it's beneficial for mix or it could be even more on?

I will not share any detailed number. I will say that it's a good framework that we have signed with a customer that consumes a lot of C-parts.

Henric Hintze, welcome to ask your question.

This is Henrik at ABG. So first, just one follow-up on the Americas thing. Can you give any guidance regarding how long it will take for the tariff boost effect to dissipate completely from the gross margin?

In the coming quarter, we estimate it to gradually decrease. So yes.

Yes. But will it still be there in Q1, Q2? Or will it be partially there in Q4 and then...

Then I need to have a crystal ball. I don't have it. So I can't share that how the market will develop exactly in Q4.

Sure. And on the organic growth in this quarter, you reported a slight organic growth now. I was just wondering if you could give any flavor on how much of the net positive impact here is from new customers year-on-year compared to how the market is developing?

We see the main reason for the organic growth is market share gain in different parts of the world. So that is which is the main driver for this positive number in the quarter.

Okay. That's interesting. And you have been speaking quite a lot about new customer contracts, not only this quarter, but over the past year or so. I was just wondering, do you expect at some point to see an acceleration in the contribution from market share gains? Can you sort of see that in your pipeline or anything like that?

If we sign contracts like Babcock and others that we have communicated, that will gradually give us a positive impact on the organic growth and market share gains. Then we don't guide on how much this will impact for the coming years more than that it will be a gradual positive impact. How it works is that you build up a foundation with, for example, solutions in place and then you gradually increase number of C-parts from those customers' accounts. So that is what we expect to happen.

And then on top of that is, of course, impacting the speed depending on the market situation and how quick the market rebounds in many areas where it's not that high activity as it was before, for example, with [indiscernible] and those that are quite low volumes. So no detailed guidance I will give you more than that, it will be gradually impacted postively.

But you think it's more reasonable to expect that new customers will gradually start contributing to organic growth rather than that we'll see a step change in growth rates at some point when a lot of contracts start?

Gradually improvement, I would say, that is the now it works in our industry. Even though that those type of contracts, of course, start on a higher level than maybe traditional sales that we had in the past, but still it's a gradual increase, as you can expect.

So since there are no further questions, I hand over to Erik to close the meeting.

Okay. So thanks, everyone, for joining today. I wish you all a nice day ahead. Thank you.

Good morning and good afternoon, everyone, and a warm welcome to Bufab's Q2 report. My name is Erik Lunden, President and CEO of Bufab Group. And together with me here today I have Par Ihrskog, my CFO. This presentation will be recorded and by attending to the meeting you agree to the recording.

I will start today's presentation to go through the highlights of Q2, and then, I will leave the word over to Par for some financial highlights before I go through the performance in each region, and then at the end, I'll sum up the quarter, and then, we'll have time for Q&A.

If we then start to look at the highlights in the quarter, I must say that I'm overall pleased with our performance considering the geopolitical situation. Our efforts in the quarter to continue strengthening our gross margin, while gradually reducing our cost base, have been paying off and leading to an all-time high gross margin and also a strong operating margin in the quarter.

The revenue was down by 4.8%, largely driven by currency effects. Our organic growth remained slightly negative in the quarter at minus 0.3%. Region Asia Pacific showed the strongest growth in the quarter, while U.K., Ireland the weakest. The demand varies still across companies and segments with the defense sector and agriculture showing the strongest growth.

The gross margin, as I mentioned, strengthened during the quarter amounted to 31.1% compared to 29.8% Q2 last year. The increase is a result of our effort to continue to create more customer value creation and also due to lower purchasing prices during the quarter. Our adjusted operating margin was strong, ended up at 13.1% compared to 12.2% last year. And also, I would say a step in right direction to reaching our profitability target of 14% EBITDA by 2026.

I'm also pleased to see that we continue to be very active in the market. And we could see in the quarter that we've been able to secure several major customer projects in key segments, like defense, agriculture and also general industry. One example is Kverneland in Norway, an international company using agriculture machinery, where we'll be appointed as new C-Parts supplier.

And what I highlighted by choosing Bufab was we could offer the broad solutions with the logistics, sustainability and also our global presence.

I'll also briefly like to mention what we communicated last week, and that is the divestment of a small manufacturing unit within CSG Group in U.S. The divestment is a result of the view that we presented in December 2023 at Capital Markets Day. We will be going forward aiming to focus on our trading and complementary niche businesses as our core.

We would aim to gradually improve our profitability. The transferred business generates net sales of approximately SEK 35 million, and the divestment expected to have a positive impact on profitability in the region Americas going forward.

I will then leave the word over to Par for some financial highlights. Please, Par.

Thank you, Erik, and good morning, good afternoon. Some more details on the financials then, starting with the sales. Our revenue was down by 4.8% in the quarter, ending up at SEK 2.039 billion. The 4.8% can be explained by a negative organic growth of 0.3%, a currency effect of minus 4.9% and then a positive effect from -- this is a net effect of acquisition of VITAL and also the divestment of Hallborn and Lann last year. So the positive effect from VITAL is 5.4% and the negative from the divestment is 5%. So net ends up at plus 0.4%.

And then if we move to the next slide, our gross margin strengthened in the month, ending up at 31.1%, and the combination with also good cost control resulted in an improved EBITDA margin in the quarter, ending up at 13.1% compared to 12.2% last -- Q2 last year.

The -- if we move to the next slide, on the cost control side, our operating expenses was reduced compared to Q2 last year by SEK 8 million. And it's a combination of our cost reduction initiatives that we've been running now for a while. We reduced FTE and reduced traveling and other costs that we have reduced, but also we have a positive currency effect helping out.

The cost control is compensating the inflation that we are still facing. And despite inflation, we can then reduce the operating expenses by SEK 8 million.

The initiative on the cost reduction, we will continue to see some results for the remainder of the year coming from that. I would also like to mention related to the manufacturing unit in U.S. that Erik mentioned that we will see some minor and not material restructuring cost during the upcoming quarters from that activities.

So going over to the cash flow. We had a cash flow from operating activities of SEK 245 million in the quarter. That is representing a cash conversion of 89%. And cash flow is lower than Q2 last year, and that's mainly coming from high inventory reduction last year that now we have come to a normalization of our inventory. We still had a positive effect from the inventory reduction this quarter, but much smaller than last year.

Next slide, please. And on the net debt related to EBITDA, we ended up on a net debt of SEK 3.199 billion and leverage of 2.5x, that should be compared to 2.8x last year. In the quarter, we also had a dividend of SEK 199 million. That also had an impact on the leverage.

Thank you.

Thanks, Par. I will then continue to take us through the performance in each of the regions, and I would like to start with the region Europe North and East. The total growth in the region was minus 14.9%, and organic growth was almost flat. The difference between the sales growth and organic growth is mainly explained by the divestment of Bufab Lann and Hallborn that took place last year.

HT BENDIX in Denmark noted continued weak development while Bufab Poland and EU East saw improvement in their demand. The gross margin in the region improved to 2.8 percentage points and reaching a high level of 31.2%. The strength in gross margin was a consequence of improved customer product mix and also good work with purchasing savings in the quarter.

Also, the operating expenses decreased by SEK 18 million, mainly due to the divestment of Bufab Lann and Hallborn, but also due to cost savings initiatives and efficiency. All in all, the region end up on a solid operating margin that improved to 14% compared to 11.7% Q2 last year.

If they continue with the region Europe West, the total growth in the region amounted to 18.5% and organic growth was minus 0.4%. Of the change in sales, 24.7% was attributed to acquisition of VITAL. Organic sales decline was attributable to lower activity levels in the automotive and construction industries, and the gross margin for the region was in line with last year.

Operating expenses increased by SEK 15 million year-on-year, mainly related to the acquisition of VITAL. If they look at the adjusted operating margin, ended up at 11.8% compared to 12.4%. The region had some negative impact in the quarter. We have moved our operations in France. And, therefore, SEK 2 million in sales was put forward from June to July. And also that we have extra cost -- moving costs of SEK 2 million, one-off cost for the same move. We also had some impact negatively due to investments with a new customer at Bufab Flos in Netherlands in the quarter. And finally, VITAL contributed positively to the operating profit for the region in Q2.

If we then continue to Americas, the total growth amounted to minus 8.2% in the region, and organic growth was plus 1.7%. The demand was stable for the mobile home and trailer market, but still low demand in automotive industry for CSG. The gross margin was strong for Americas, increased by 4.7 percentage points, driven by general price increases and adjustments, mainly for ABS and also effects of the tariffs that have taken place in the quarter.

Operating expenses declined by SEK 30 million year-on-year due to good cost control and efficiency gains in Americas. And adjusted operating margin reached a high level of 19.3% compared to 11.6% last year. And I will later on come back with more details about Americas linked to the tariffs.

If we continue then with the region U.K. and Ireland, the total growth amounted to minus 8.5%, and organic growth was minus 4.1%. The decline for the region was mainly driven by lower market prices, which impacted Apex, but also lower demand in the manufacturing industry impacting Bufab U.K. and Bufab Ireland that are both trading business in the region.

The gross margin declined by 0.7 percentage points, mainly driven by price pressure in the construction industry for TIMCO. Operating expenses increased by SEK 1 million year-on-year, mainly due to one-time cost related to the consolidation of warehouses that we do for Apex. This consolidation of warehouses will give a positive effect this year with full effect in 2026. And to sum up then the adjusted operating margin for the region ended up at 10.8% compared to 12.7% in Q2 last year.

Then, finally, we have the region Asia Pacific. The total growth amounted to minus 2.1%, but organic growth was 6.8%. So the positive trend continued for Asia Pacific. Organic growth was mainly driven by good development for Bufab Shanghai, but also improvement for Bufab India. The gross margin in the region improved by 3.1 percentage points, include purchasing savings and active work with value-based pricing in the region. Our operating expenses increased by SEK 2 million year-over-year, primarily driven by negative currency effects.

And all in all, we ended up on adjusted operating margin that improved to 13.7% compared to 12.6% in 2025 -- 2024, sorry. [Audio Gap] about our business in U.S. looks like, and then, I'll go through our mitigating actions and then also the impact we have seen so far due to the tariffs. If we start with our U.S. business then, we have 2 niche companies in U.S. That is American Bolt & Screw that are big in trailer and mobile homes industry. And then we have CSG in automotive.

Our total sales, 12% is in U.S. And if you look from a sourcing point of view, ABS sourced 38% from China and CSG 8% from China. What we have done since the beginning, when the tariffs was implemented, we've been working on passing on the price increases to our customers. We, of course, also prepared ourselves for different types of scenarios and helping our customers in the best possible way by finding alternative sources when needed.

U.S. sourcing is generally not an option in our industry. So what we've done is to reallocate sourcing from mainly China to other countries to mitigate impact due to tariffs for our customers. And what we do also, of course, is continue working closely with different stakeholders to optimize the flow and also minimize the cost for our customers, but also, of course, working with officials when it comes to customs and border control.

When it comes to the impact so far for us, as we could see in our numbers for Americas, we had a positive development on our gross margin. That was linked to good work with pricing, but also linked to short-term effects on our margins in the U.S. due to tariffs. As we have the stock levels, that is not tariffs prices on, and we have implemented our tariffs right away.

As we implemented, we have a positive effect. They have a small impact on our margin in the U.S. But it's also, of course, negative side of this. We see a lower demand as manufacturers are trying to navigate the U.S. tariffs, which are causing some customer plants to slow down their production and also then their demand on C-Parts.

Other aspects that's impacting us is that the buyer market situation in China continues. We see low prices coming to Europe that's helping us on -- from a pricing point of view. And we expect that to continue as situation seems to continue with tariffs also in the coming weeks.

The main risk as we see is actually impact on the global economy. As a company, we feel very confident with our position. We have good control in what we can impact, and we do our best for our customers, and also, of course, for Bufab to manage disruptions in a best possible way. And as we are a big player compared to majority of our competitors, we have a positive scene on the future here and that we will also be able to handle those U.S. tariffs and uncertainty in a good way also going forward.

Then I will take us through a quick summary, talk a bit about outlook and our priorities going forward. If we then sum up the quarter, as I mentioned, I'm overall pleased with our performance in a quite challenging market. We continue to strengthen our gross margin, and we also delivered a strong operating margin despite lower demand in the market. We have in the -- during the year, had several measures to reduce our cost base, and that has given effect, and more to come. We expect continued positive development on our cost base due in 2025, but also in 2026.

If you look at the future, despite the uncertainty in the market, we are optimistic. We focus on things we can control, and that is, of course, continuing to take market shares. A lot of opportunities raises in the market where our customers do the best to lower the cost base. And, of course, consolidation of C-Parts is one way to go. So we do our utmost to continue taking market shares and be active in the market.

We will also continue to improve our margin, of course, focus on strengthening our gross margin. But also then, as I mentioned, continuing working on cost efficiency and cost savings. And then finally, continuing to improve our net working capital and also continually secure a strong cash flow. That was the final slide for today.

I will then leave the floor open for questions, please.

[Operator Instructions] So we start with the first question from Henric Hintze.

This is Henric at ABG. So after 4 quarters of sequential improvement in the organic growth rate, we saw some stagnation here in Q2 around 0%. While yesterday, Fastenal reported quite strong Q2 growth in its Fasteners segment. Now I know they operate largely in a different geography and that your Americas businesses differ in customer exposure. But given that they stated that their Q2 growth was driven not by market improvements, but by new customer signings, I kind of wanted to ask whether you see sort of a point in the near term where you think you will similarly get an above-market level contribution to organic growth from new customer signings, which you have been talking about over the past year?

Yes, Henric. Thanks for the question. Yes, as you mentioned here, we don't really compare the Fastenal numbers in U.S. with Bufab as our exposure in U.S. are very different than Fastenal. They have a broad exposure in the U.S. in trading, while we have 2 niche companies that are strong in RV trailer and then automotive. So it is as comparing apple to pear. So we don't draw that many conclusions out of Fastenal's report.

Having said that, as I mentioned also in the call here, we have a very good feeling when it comes to how we are addressing the market and how we also get new customers coming in. We have in the quarter, and throughout 2025, signed good contracts in industries and with customers that we want to be in the future, where we see sustainable and profitable growth that we are convinced will help us going forward.

So from that point of view, I'm satisfied with the work we have done. And then gradually, I think that will be shown off in the numbers, but that's more linked to our work and what we have done to continue with our work on showing our value to our customers and not that much related to what's going on in U.S., more or less our performance, so to say, globally. So I'm pleased with the performance when it comes to the market and the opportunities that we see out there.

Yes. And can you give any indication of when we should expect this to start coming through on the organic growth level with the customer signings or such because I guess these contracts take some time to ramp up, and you've talked about that previously. So how should we think about the timing there?

Yes, it's a difficult question to answer because in many of the contracts is, of course, linked to the overall market situation and also when they decide to go in with new models and so on and how the macro situation is developing as well. Because even if we get new customers coming in, adding more volumes, there are others that are holding back in some segments. So it's very much a mixed bag there.

What we have said before and still saying is that we are -- we have an optimistic view on the future and that the trend will continue in the right direction from a growth point of view. But, of course, there are a lot of uncertainties out there. So it's very difficult to predict when and how we will see the market coming back as we hope it will do. So uncertainty with the tariffs and the global economy is not helping for many sectors right now.

Okay. Very good. I'll take 1 more question, and then, I'll pass it on. So your gross margin improved again here in Q2, and based on your commentary, it seems to me that you think this trend will continue. You mentioned a strong cost focus, which will gradually yield results through '25 and '26. So firstly here, I was just wondering if you think this will mainly come in the form of gross margin improvements or if you see similar or smaller opportunities on the OpEx level as well?

And secondly, I was wondering to what extent you think your 2026 EBITDA margin target of 14% is dependent if at all on a return to organic growth here in the coming quarters.

Yes. As I mentioned in the call, I mean, we will continue working on cost efficiency. And we have already taken measures actually starting over last year. That's now showing -- paying off, and that will continue. We're not talking about huge impact, but a gradual improvement in terms of our cost base. That's what we're aiming for. Of course, at the same time, as we're taking measures on decreasing our cost base for several companies, we're doing the opposite and investing at the same time, where we see strong potential for good growth.

But all in all, we expect the cost base to gradually go down. And, of course, on the gross margin side, we have delivered, I think, good now in Q1 and Q2, but I expect that trend to continue. We still see potential to further capture the gap that we actually have today in the real value that we provide to our customers and actually show off in the gross margin and combined, of course, with the buyer market that we have in -- especially from Asia. So I expect also the trend to be able to continue. So yes, did you have one more question there? Or was that it?

Yes. And on the EBITDA margin target, to what extent do you think that is dependent on organic growth?

No. I mean, I think it's possible to reach that level without a strong market out there, but, of course, it will help. What we do in Bufab is that we focus completely on what we can control, and that is taking market share, improve our gross margin, keeping cost under control. And then I think we will put us in a very good position for 2026. And then how much tailwind we will get from the market or not, time will tell. But, of course, we will hope to get some support, but full focus we can control and feel confident that we are in a good position to deliver on our targets. So the trend is good as I see it.

Gustav Berneblad, welcome to ask your question.

Now just thinking maybe to build on sort of your comments on the buyers' market here in China. Can you just expand a little bit about the situation and how you view it? And also for sort of prices, I guess, to normalize, do we need a normalization in the market? Or do we actually need a very strong market, so to say, if you understand my question?

No, I don't understand your second question. Can you please repeat?

I guess it's related to overcapacities, right? So -- or correct me if I'm wrong. But do we need just a normalization in the market? Or do we actually need sort of a very strong cyclical recovery in order for prices to normalize, I guess?

Okay. Yes, I will take your first part of the question. And yes, we have seen the buyer's market in China for quite some time. So the price level has been good from China and actually from Asia. And that trend seems to continue. And I think what happened now in U.S. and with the tariffs and the whole situation in those discussions and the high levels of tariffs that we have seen between China and U.S. is actually making this to continue.

So from one part of our business that, of course, positive. But then also, as you also mentioned in your second part there, we have a negative effect for some sister companies in the Bufab Group due to the same consequence to say due to high volumes, especially on the, for example, stainless side that is pushing us for Apex, for example. So there are good and bad, but all in all I would say that the buyer's market situation is positive from Bufab point of view.

And how quick this will change? That's a million-dollar question to answer. I don't have the answer to that. That, I think, is how the macro development and political game will continue, and that will define when and how this will change in the coming quarters and years. So very difficult to tell, and I will not guess on that one.

That's fair. And then just on the Americas, should we expect the margins there to normalize in Q3 already? Or would you expect there to be some sort of support also in Q3?

Yes. That's also a good question, but a difficult one to answer. As the tariffs are changing, more or less, at least the discussion around how they will change is coming up new news every day more or less. So it's very difficult to predict how actually Q3 and Q4 will look like.

I mean, one guess is that some -- sooner or later, we will see some negative impact if we have a more stabilized situation, but it's hard to tell if that will come in Q3 or later on. So difficult to say. So we are following the situation closely, of course, and try to mitigate the impact for our customers and to Bufab investment...

Okay. Perfect. And then just the last one here. I mean, you commented a lot on the cost situation. What are sort of the key items or low-hanging fruits you see here in the coming years to mitigate or sort of lower the cost base?

I don't see any low-hanging fruits. I think this is working with efficiency in the best possible way across the group. And then, of course, also that each of the sister companies that have very solid plans in place on what they need to improve that execute well on those plans. So they differ quite a lot.

And companies that are going through a more tougher time, maybe with lower demand and don't see a quick recovery, they have more work to do on the cost side. Others that are facing a good market and a strong situation, then we'll let invest to put Bufab in a good situation in the longer perspective. So not one answer is more to each of the sister companies, clear plans on how they will drive efficiency and cost reduction where it makes sense, so to say, rather than one-size-fits-all.

Okay. That was all questions today. Thanks, everyone, for joining and wish also a nice day and a nice summer ahead. Thank you.