Hexatronic Group Aktie

Welcome to the Hexatronic Q1 2026 Report Presentation. [Operator Instructions]

Now I will hand the conference over to CEO, Rikard Froberg. Please go ahead.

Good morning, everyone, and very welcome to this Hexatronic's Earnings Call for the first quarter of 2026. I'm Rika Froberg, Group CEO. I have with me today: Pernilla Linden, our CFO; Martin Aberg, Deputy CEO and Head of Data Center Business Area; and Patrik Johannesson, Head of Investor Relations.

Before we dive into the presentations, just commenting on this beautiful picture that we have here. It's an aerial footage of our flagship site in Hudiksvall, about 3 hours north from Stockholm, where we are today. And you see in the background, you can see the factory. And in the foreground, there's a ship that has docked here, and it's clearly loading submarine cable from the factory. And these are big cables and the only way that you can really transport them is from -- is via ship.

So with that said, let's dive into the numbers and the presentation for the quarter, which was in line with expectations overall. We had revenue of SEK 1.7 billion, which was an organic decrease of 2%. And this decrease was entirely driven by Fiber Solutions in Europe, whereas most other areas saw organic growth.

Adjusted EBITA at SEK 146 million or 8.6% margin, which is sequentially slightly higher than the last couple of quarters. And we see that the strategic shift in our mix continues with Data Center and Harsh Environment now contributing over 60% of adjusted EBITA. And for the first time, the Data Center business in this quarter was the biggest profit contributor to the group.

For Fiber Solutions, we saw a soft quarter revenue-wise, where market conditions in Europe continued to be weak. However, the cost reductions are now coming through and adjusted EBITA margin strengthened somewhat over the last 2 quarters.

Data Center continued strong margins and growth and Harsh Environment again saw good organic growth, but a margin that in the quarter was impacted by some unfavorable product mix. Operating cash flow was modestly positive, which is consistent with our typical seasonality and our net debt saw a slight increase as expected.

Significant events in this quarter. We finished the first phase of our performance improvement program, the phase that was announced already in September of last year. And we made an acquisition in Harsh Environment or rather the acquisition was announced in the quarter, but it was actually closed as of April 1. So it's not included -- JOWO, that is not included in the numbers of the quarter. And we made some leadership changes in Fiber Solutions. So we now have a clear regional commercial structure as well as created global teams for product management and supply chain.

This slide, you've probably seen it if you follow us, we use it consistently because it's an important one. It clearly shows the ongoing transformation of Hexatronic. So we take Fiber Solutions, which was essentially all of Hexatronic a few years ago, and it still continues to be the largest business area in revenue, now accounting in this quarter for 58% of sales and 39% of adjusted EBITA.

Harsh Environment continues to grow and has increased a couple of percentage points to about 17% of sales and including the JOWO on pro forma basis would be roughly 20% of total. And the biggest change is Data Center that's increased to 25% of sales and 46% of our adjusted EBITA. And that, again, makes Data Center for the first time now our biggest profit contributor in absolute terms.

And this shift is important. Of course, it's partially driven by the challenges that we've seen in Fiber Solutions, but the bigger factor is the growth of the smaller business areas that now make up 44% of net sales pro forma. So they're starting to become very meaningful and changing the makeup of Hexatronic as a company. And this gives us increased diversification, but also, I would say, an improved portfolio mix as Harsh Environment, the Data Center have higher margins and higher growth. And as a reminder, we have set a target that these 2 business areas are to account for at least half the business by 2028. So you can see here that it's a target that we feel we are well on track to accomplish.

Diving in then to the different business areas one by one and starting with Fiber Solutions. The sales number, as noted, was weak in the quarter. And again, it really is market conditions in Europe that are challenging. And in this case, we also saw that unusually cold weather in the beginning of the year was an added headwind. Consequently, we had a January that was very slow, some pickup in February and a rather strong March. So there was a positive ramp within the quarter, and we see that continuing with what looks to be a pretty solid April.

If Europe was soft, the U.S., on the other hand, was a positive. And we have now for some time, we have set an expectation, I think, that sometime during 2026 that we will see momentum gradually pick up. And we actually saw that clearly in the quarter. And already in Q1, our organic U.S. sales were growing nicely with a positive trend also exiting the quarter. You don't see that in the North America number, which is an effect of one major customer in Canada that had very low sales in the quarter. But for the U.S., we are now back to growth, which is very encouraging.

It was also encouraging to see that despite a revenue drop year-on-year, the adjusted EBITA margin improved sequentially, and there are 2 main drivers for this. So one is business mix. There was some impact where the APAC business, which is typically higher margin for us, had a strong quarter, but it also shows that the cost reduction program is effective. In fact, we're ahead of plan here, meaning that we saw most of the savings from the initial SEK 110 million on an annual basis. We saw most of that already into this quarter a little earlier than expected.

We also saw some rapid developments when it comes to input costs. Resin prices and fiber prices are both going up. The drivers are different, where resin is really related to oil price and what's happening in Iran and the Middle East. Whereas for fiber, the main driver is really the root cause here is the booming demand for hyperscalers, which means that supply -- it's a supply and demand thing where supply is getting increasingly tight. And we're responding, of course, with price increases, and we are confident that these costs will be fully passed on.

We also see competitors raising prices. However, there might be a temporary underabsorption on the way up. We have -- of course, we have existing contracts and already placed orders that we need to honor. But in totality, we're pretty confident that the cost will be fully passed on, on an absolute basis.

Overall, in terms of market demand going forward, we expect the Europe headwinds to persist, no worse, no better at this point, while the U.S. momentum for growth continues or even strengthens. So in summary, a lot happening in Fiber Solutions, some challenges and increased, I would say, volatility, but also really encouraging to see the expected improvement in the important U.S. market is materializing and also an adjusted EBITA margin that after 5 sequential quarters of decline is now moving in the right direction.

Moving over to Harsh Environment then. Here, the organic sales were strong, 9% growth following the trend from prior quarters. EBITA margin was hampered a bit by unfavorable product mix, and it's mostly defense orders in our U.S. business, where as we have flagged, there's now an impact from the U.S. government shutdown that we saw late last year. This product mix was affecting dynamic cables, whereas the Connectivity segment and the Sensing segments were both performing strongly.

And I think we've said this almost every quarter, but this is a pronounced project business. It's not unusual to have some swings between the quarters, and we need to look at, I think, the full year or the longer-term trends. Still, I think it's fair to say that for this quarter, we're pleased with the top line, but not necessarily with the margin.

And on the outlook, we do see the effects from the government shutdown also spilling into Q2, but not beyond that. Longer term, we're bullish about this space. It's of course, difficult to really predict what will happen geopolitically and the macro outcomes at this point, but fundamentally though, our 2 largest customer segments, which are defense and oil markets, if anything, we expect to be positively affected. For example, there's a lot of optimism about Venezuela becoming a potential market. Still early days, and we're not seeing any orders, but quite a lot of optimism among some of our customers there.

And then JOWO Systemtechnik, and we are absolutely delighted about this acquisition. It's a company with about 100 employees in Northern Germany. And the core business is connectors that you see on the picture here and connector assemblies, and they're sold mainly to defense applications. We see this business as a proven market leader, attractive prospects, both long term and short term. And in particular, it supports our strategy to grow into leading player in connectivity solutions. And we see opportunities to expand this business.

Today, they're very strong in Germany and I would say, Central Europe, but we see that through the broader reach of Hexatronic, we can expand across Europe and potentially worldwide. And with this deal, Harsh Environment business will be approaching SEK 1.5 billion against our stated SEK 2 billion target for 2028. So it's an important step towards that ambition. Therefore, we feel good about this one. The business trend and the momentum is strong, and the deal has a good value too.

And I will now hand over to Martin to give a bit more color on the specific deal and the terms.

Thank you, Rika. So let us have a look at the transaction structure and the purchase price. The acquisition was structured as a share deal, where we acquired 100% of the shares in the business. At closing, which occurred after the end of the quarter on April 1, the fixed purchase price of EUR 11.8 million was paid. And in addition to the fixed purchase price, there is an earnout that is capped at EUR 7.6 million, depending on the future performance of the business, and it is structured in a way that is self-funded from the cash flows from JOWO. The potential earnout is based on the average EBITDA over the next 5 years and will be paid out in the second quarter in 2031.

If we then zoom in on the transaction multiples, the fixed purchase price represents an EV/EBITDA multiple of 4.6x and this is based on the 2025 profitability. Adding the earn-out to the EV/EBITDA multiple, it can increase from 4.6x to a maximum of 7.6x the '25 EBITDA. In order to reduce the valuation risk, we have based the earn-out on a long period of 5 years. It is also based on the average of the accumulated profitability over the full period to avoid the risk of paying an earn-out if a single year have an abnormal profitability level. And finally, in order to achieve the full earn-out, the company has to achieve a strong increase in profitability from where we are today.

If we then move over to the development of our Data Center business area for the first quarter. The first quarter was another record quarter in terms of sales and profitability. And we are pleased with the strong organic sales growth of 20%. Geographically, it was especially a strong U.S. market that drew the strong sales growth.

Looking at the adjusted EBITDA -- or EBITA, it ended up at SEK 73 million in the quarter, which is a record. And the adjusted margin is higher or in line with the last 2 quarters, but it is 2 percentage points below the corresponding quarter last year. And there are 2 main reasons that we would like to highlight behind the slightly lower margin. The first is that our organic initiatives to expand our service offering is loss-making, but we expect that to be breakeven level within the next 3 to 6 months. And the second reason is strengthening of our organization to be able to continue to grow, and that's not only this year, but for several years to come.

Looking at the second quarter, we expect a slightly higher profitability than we had here in the first quarter. And then moving over to our market outlook. Same message as we had last quarter, and that is generally a very high activity in the market. The market is expected to be driven by the hyperscalers or the wider Cloud segment. And if we look at our business mix, the Cloud segment remains the largest segment, followed by the Data Center Enterprise segment. Approximately 30% of our sales is towards customers with similar and high requirements, and this is also a focus of our growth journey in order to have a balanced and resilient business mix.

If we look at our M&A, we are very active and have a strong pipeline with targets in different phases. And finally, to summarize the quarter, our focus is to continue to strengthen our offering and to grow the business organically and by acquisitions.

And with that, I hand over to Pernilla to summarize the financials for the quarter.

Thank you, Martin. So overall, we had net sales of SEK 1.7 billion in the quarter with an overall decline of 10%. Organically, we had a decline of 2%. The strong performance -- the strong organic growth in Data Center and Harsh Environment was not able to fully offset the organic decline in the Fiber Solutions, mainly coming from the EMEA region. We had 2% acquisition-driven growth from our recent acquisition, Communication Zone within our Data Center business. And our most recent acquisition, JOWO will be, as Martin said, consolidated in Harsh Environment from the 1st of April in 2026.

We continue to have a negative effect of exchange rate in this quarter. It's actually minus 9%. And this is more or less all currencies that have weakened compared to the SEK. Adjusted gross margin at 41.3%, which is a similar level compared to prior year. As Rikard said, our initial performance improvement program is finalized within Q1 as earlier communicated. And we have implemented these savings a little bit earlier than expected, meaning that we saw most of the savings within the quarter.

Adjusted operating costs were 29.5% of net sales in the quarter compared to 28.5%, but lower in absolute numbers. Adjusted EBITA of SEK 146 million with an adjusted EBITA margin of 8.6% compared to 9.8% last year. And the EBITA margin compared to last year was negatively impacted by the lower sales in Fiber Solutions compared to the same period of last year as well as some price pressure and unfavorable product mix in Harsh Environment. But noted that the EBITA percent is up from Q4 2025 from 7.2% to 8.6%.

Net financial items of minus SEK 14 million is mainly related to net interest expenses of SEK 28 million, a positive effect of SEK 14 million in other financial items, which is related to revaluation of additional purchase price and acquisition options attributed to both currency effects and changed assumptions. The effective tax rate decreased by roughly 15% points due to the recognition of a deferred tax asset related to nondeductible interest expenses from prior years, supported by available deferred tax liabilities in the same jurisdiction.

If we then take a look at Fiber Solutions, total net sales for Fiber Solutions of SEK 1 billion with an overall decline of 20% organically, a decline with 11%. A decline due to weaker demand in the FTTH equipment, primarily micro duct and price pressure overall in the industry. And that is mainly related to the European organization, meaning Europe declined with 30% due to the weak performance across our primary markets and also that the lack of material submarine cable revenue within the quarter.

North America declined by 18%. But we had -- we are pleased to see that we had organic growth in our U.S. market, but that was not able to offset the decline in Canada and also the negative FX effect. And the growth in U.S. is mainly related to the FTTH business. APAC grew with 28%, driven by all primary markets and were related to some larger projects.

The Fiber Solutions business also then, of course, were affected -- positively affected by the performance improvement program that was finalized during Q1, resulting in adjusted EBITA of SEK 61 million or 6.2%. Profitability was hurt by the lower sales volumes, mainly within byproducts and continued price pressure, partly offset by the implementation of the performance improvement program. Sequentially, we are on the same level and margin increased by roughly 1 percentage point. We had no CapEx investment in the quarter, SEK 9 million or 0.9% of sales, which is mainly related to maintenance.

Harsh Environment. So total net sales for Harsh Environment of SEK 283 million, a decline of 1%, but an organic growth with 9%. Growth driven by dynamic cables and connectivity solutions overall. And as previously communicated, the companies within Harsh Environment have an international customer base and the majority of revenue comes from larger projects, which means that sales and margin can fluctuate between the quarters. Adjusted EBITA at SEK 24 million and margin of 8.5% due to an unfavorable product mix driven by timing of projects and the U.S. government shutdown in 2025. CapEx investments in the quarter of SEK 10 million or 3.6% of sales, mainly related to production and efficiency improvements in our U.S. manufacturing plant.

As Martin said, a record quarter in Data Center with total sales of SEK 434 million with an overall growth of 20%; organic growth of 20% and the acquired growth of 8% from Communication Zone that was acquired in November. That was offset by the 9% negative FX effect. Adjusted EBITA margin of 16.8%, 2 percentage points lower than prior year, mainly due to organic investment to grow and broaden our service offer. CapEx investment in the quarter of SEK 3 million or 0.7% of net sales.

Cash flow from operating activities before changes in working capital of SEK 112 million, negative effect from working capital of SEK 83 million in the quarter. That is mainly related to increased accounts receivable due to a strong end of the quarter, partly offset by the increased accounts payable. Cash flow from operating activities of SEK 29 million, representing 26% cash conversion. And overall, then when it comes to investments, we had maintenance CapEx investment of SEK 22 million, equivalent to 1.3% of sales.

Net debt, which corresponds to net debt, excluding lease liabilities, amounted to SEK 1.7 billion at the end of the quarter, which is an increase of SEK 90 million compared to last quarter. And that is due to the strengthening of the U.S. dollar, just the revaluation and investment in our operations, plus a decreased rolling 12 adjusted EBITDA, leading to a net debt in relation to pro forma adjusted EBITDA on a rolling 12-month basis of 2.2x during the quarter.

Looking forward, we have an earnout connected to a prior acquisition that will be paid out in Q2 2026, which will increase leverage by roughly 0.2%, all else equal. After that, we expect the leverage to come down operationally. At the end of Q1, we had SEK 603 million of cash and SEK 1.1 billion of unutilized backup facilities, which gives us a liquidity of SEK 1.7 billion. So we have a continued solid financial position.

Okay. If I summarize the key takeaways from the quarter. Net sales were down 2% organically, and this decline was entirely caused by the headwinds in Fiber Solutions in Europe. But we turned the corner to reclaim organic growth in the important U.S. market and now with a sequentially improving margin.

Data Center was now the largest profit contributor and again saw strong organic growth and margins. Harsh Environment delivered solid organic growth, and we saw a temporary margin decline here. So all in all, the ongoing transformation of Hexatronic continues with Harsh Environment and Data Center continuously increasing in importance, and they now account for about 44% of sales after the JOWO acquisition. And we have a solid financial position with discipline in both cost controls and M&A.

Finally, a few words on the outlook and starting with Fiber Solutions. We do expect the headwinds in Europe to persist at, I would say, roughly the same level as today, no better, no worse is what we're seeing in the market, but offset by growth in North America. Macro environment is impacting raw material costs, and we are countering with price increases, timing is still to be seen, and therefore, there could be some temporary risk or pressure to margins. If so, we expect that this would be primarily in Q3. So we would come back with an update after the second quarter where we have more clarity.

Also noting here that the submarine business is looking very strong with an order book that is largely full for 2026 and starting to get pretty full for 2027 as well. We're almost at the point where its capacity is the bottleneck more than anything. Timing of shipments is important, they were low in the first quarter. We see a little bit more shipments, but not major in Q2. And the big peak this year will be in the third quarter where we have some large shipments scheduled of submarine cable. And as noted, we saw most of the cost savings already in the first quarter. So we expect these to remain, of course, but not a major step-up in coming quarters.

For Data Center, I think it's a pretty simple story really, continued strength in this business. Demand is good. Order book is good, and we do expect a modest margin increase in Q2. For Harsh Environment, the longer-term outlook is positive. The market is robust, particularly in defense. However, for the same reasons as in Q1, we could see margins to be somewhat muted in Q2 with the normalization in the second half.

And then some overall factor. As Pernilla mentioned, we have seen FX as a major headwind to our top line in recent quarters. That should now start to abate going forward with the exchange rates that we're seeing today. We do expect a slight increase in leverage in Q2, driven by an upcoming earn-out payment. And we do continue to have an attractive M&A pipeline with focus on Data Center and Harsh Environment.

So with that, we'll move over to Q&A section.

[Operator Instructions] The next question comes from Max Bacco from SEB.

Perhaps starting with the cost increases and also the price increases going forward, you said that you expect to be able to fully compensate. Can you give any indication of the magnitude that you expect? How much will prices be increased within the Fiber Solutions segment as it looks right now, if you have anything to add to that?

I don't think -- thank you, Max. I fully understand the question. I don't think we will give a number on that, one there is -- for competitive reasons. But also, quite frankly, we don't know what's happening to oil prices. What I will say and the way I would think about it is the plan and the ambition is to keep gross profit in absolute terms, so in SEK or dollars, the same. We're not intending to increase prices more so that we make more money, but we're certainly planning to pass on 100% of the price increases.

As I said, possibly with some timing, right? What we've seen historically is that sometimes on the way up, you're lagging a little bit on the price increases, but you typically make that back on the way down because you can hold on to higher prices for a little bit longer when raw materials come down. So over the cycle, I see it as a net zero sum game, but there could be some phasing, potentially.

Okay. It sounds very reassuring. And then the next question then on the on the Harsh Environment segment, which as you guided for ahead of the quarter impacted by both the weather and then also the government shutdown in the U.S. margins down some 1.7 percentage points year-over-year. Do you expect to see a similar magnitude in Q2 or perhaps less so, on the margin pressure?

Yes, we see that effect also within Q2.

The next question comes from Adrian Gilani from ABG Sundal Collier.

I'd like to use my 2 questions on the raw material costs as well. I guess, first of all, a bit of a follow-up on Max's question on -- can you at least split out how much of the raw material cost line item in the P&L is resins and fiber? And also just since there are many different price indices for these kinds of things, can you give a rough approximation of how much prices are up on the stuff that you buy?

I mean, fiber I don't have a number because it depends so much on which specification on fiber, and it also depends on contracts that are confidential. I think for resin, the rough guidance is that -- at least so far, what I've seen is that it's followed quite correlated with oil price.

So if oil price is up 10%, resin is up 10%. I'm not sure if that will hold in the future. But so far, it seems to be a rule of thumb.

Okay. And how much -- before sort of the price increases started, how much of your raw material cost base were these?

That's not something that we're disclosing.

Okay. Understood. And just the second one on timing impacts. Can you go a bit deeper into the timing impacts and how the purchasing agreements compared to your pricing structure to clients? Like, where is the discrepancy? And is there a particular quarter where you expect there to be a squeeze on the timing effects?

Yes. At this point, I'm not sure that there is a discrepancy. We're working through that at the moment. I think, resin prices is -- it's more or less a spot market. It's a commodity, but there are lead times, right? So it's more about measuring our -- what we have in inventory and what we have on the water, so to speak, versus how quickly we can increase our prices.

The fiber market, both on our -- on the sourcing and on the customer side tends to be a little bit longer contracts.

Okay. I understand.

Adrian, I understand that this is something that's important. Again, I think reality is that there will be some impact to the top line here, which is very difficult to predict because the world changes every day. But again, I do think that it's a reasonable assumption that over time, the gross dollars -- gross margin dollars or SEK will be largely unimpacted.

The next question comes from Fredrik Nilsson from Redeye.

I was thinking about the improvement in the U.S. Fiber Solutions market. Is that both within duct and your fiber systems? And is it current customer increasing their rollouts again? Or is it more new customers coming into you?

It's yes, yes and yes. It's both new customers and also some historical customers that had slow build-out levels last year are coming back with much more aggressive plans now. And it's also -- it's both fiber cable and duct and conduit. And I would say in particular -- recently, particularly in conduit, we've seen very good volume momentum. We have talked about that has been the case for a while, but it's so far been offset by year-on-year price declines. I think that year-on-year price decline is mostly behind us now.

Okay. I see. That's clear. And regarding investments in Data Center, as far as I understand, you are looking for more niche markets perhaps rather than investing more into hyperscalers. I mean, why is that given the very strong growth we see within hyperscalers?

Yes. So I mean, hyperscaler, we have served the hyperscaling market for a very long time, very long relations. We're very well positioned to continue to capture that growth. So we'll continue to focus on that market. What we are saying is that we would like to have a balanced and very resilient business mix. So still, we expect hyperscalers to be dominant in our exposure. But we also would like to broaden the customer base.

And it's to customers with very high requirements and a similar offering. So it's very much in line with what we have been doing and what we're doing.

The next question comes from Max Bacco from SEB.

Two more, if I may.

Of course.

So -- perhaps circling back to the Harsh Environment segment, you said beyond Q2, you expect to be back to normal levels in line with quarters seen previously. But shouldn't we be able to expect some continued margin improvements beyond Q2 year-over-year, driven by underlying improvements in Rochester Cable and then potentially also some operating leverage on volume growth?

Yes, I think that's a fair expectation, and I would have the same expectation. I think given the first quarter, I don't really have that visibility to commit to that here and now, but that would be the expectation.

Okay. Perfect. And then on Fiber Solutions, I mean, you have talked some time about the very strong demand within submarine cables. And you highlighted here that for the book for 2026 and almost for 2027 as well. Do you have any concrete plans to expand the capacity up in Hudiksvall for submarine cables?

It's -- I mean we're looking at different options, obviously. And I think if we have any concrete plans, we will come back and inform the market about that in due time.

The next question comes from Adrian Gilani from ABG Sundal Collier.

Another round from me as well. One question on the Data Center margin. What is it that is changing sort of between Q1 and then into Q2 that makes you confident to guide up the margin again into Q2?

Thank you, Adrian. I mean, first of all, I mean, we mentioned 2 things that impacted the costs for the quarter. And if we look at our organic initiatives, we expect a smaller loss. We expect it to be breakeven in the next quarter or the following quarter and also a mix of projects is what we are expecting.

Okay. And then also one on submarine cables since you explicitly mentioned them in the outlook, which you typically don't, and mentioned the larger orders coming in Q3. Should I read this as something exceptional? And can you give a rough indication on how big these Q3 orders will be since that can be quite lumpy on the submarine side?

Yes. We had a similar peak in Q4 of last year, and we expect that Q3 this year will be at that level or probably a little bit higher than that even. So there's at least 50, if not a little bit more additional sales in that segment compared with Q1 and Q2, and that's pretty good profitability.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Thank you. So we have a few questions also coming in online, so we will read those so that management can answer them.

So the first one is, could the input cost inflation in Fiber Solutions lead to demand destruction, especially if you raise prices 1:1. What does your dialogue around this with customer look like?

I think in the U.S., the market is strong enough that it's not an issue. And keep in mind, these are big construction projects and the material part tends to be 20% or less. So even if there's significant increase to some of the materials, the total project cost doesn't go up that much.

I would be more concerned about that as a possibility perhaps in the European market, which is a little bit soft already. We're not seeing it today, but I'm not ruling that out.

Thank you, Rikard. So the next question is, what do you think about upcoming orders from the BEAD program?

So this is an interesting one and it's been discussed very heavily and back and forth. It's -- by now, it's clear that the BEAD program is moving forward. I think, we're already starting to see some effect of it in the market, but I think it's pretty minor today. However, as of the second half of '26, I expect it to become a more meaningful driver of volumes in the U.S., but also keeping in mind that the BEAD program is one of many factors.

I've said for some time now, I think we should look at it as a cherry on the cake and not BEAD alone will drive the market. I think that there are many other factors that are also important. Interest rate is one of them. A lot of the funding is not BEAD. The majority of the funding is still private and a lot of that is private equity and interest rates are very important.

Thank you for those comments, Rikard. So the next question is, could you put your submarine cable comments into perspective? So we say in the quarter, largely fully booked for 2026 and filling up for 2027. What is the magnitude of such an order book relative to the SEK 50 million delta mentioned in Q4 2025?

Yes. We're deliberately trying not to disclose the exact -- for competitive reasons, exactly how much we're selling and what margins or pricing we have there. So I think I would repeat what I said that it's looking good. We have an almost full order book for '26, and it's quite rapidly filling up for '27 as well.

Thank you for that, Rikard. Next question is, what is the typical lag in terms of margin recovery when you put prices through based on your experience?

I would say, a couple of months.

Okay. Thank you. And then we have a last question also. Can you give a guidance on CapEx, which has been very low now for the last 5 quarters? What's a reasonable expectation for the full year?

So the guidance that we have given when it comes to CapEx is that it would be very low then for Data Center, around 1%, and that's probably what we've been seeing. Harsh Environment, 3% to 5%, which is also where we've been. Where we've been lower is within the Fiber Solutions area. And then we guided over time that it should be around 3%. And what we've said there is, well -- is as well, that we have capacity in many areas. But if we see that we need some more capacity, then we will add that over time.

Thank you for that, Pernilla. There are no more written questions online. So I hand it back to Rikard for some final comments.

Okay. Thank you, everyone, for calling in today, and we will see you again in 3 months' time.

Welcome to the Hexatronic Q4 2025 Report Presentation. [Operator Instructions]

Now, I will hand the conference over to CEO, Rikard Froberg. Please go ahead.

Good morning, everyone, and welcome to this Q4 earnings call from a cold and wintery Stockholm. I'm Rikard Froberg, CEO of Hexatronic, and I have with me, as usual, Martin Aberg, our Deputy CEO; and Pernilla Linden, Group CFO. Also with us today for the first time is Patrik Johannesson, our brand-new Head of Investor Relations.

If I summarize the quarter in one sentence, I think I would say, we are delivering on the plan that we have laid out. Our net sales were SEK 1.8 billion for an organic growth of 10% in the quarter. And this also meant we swung back to 3% organic growth for the full year. Adjusted EBITA of SEK 133 million or 7.2% margin. And we also see that the important strategic shift that we have been talking about for a while now is continuing. Our fast-growing Data Center and Harsh Environment businesses now account for over 50% of group adjusted profits.

Fiber Solutions, which we know operates in a challenging market environment, saw an organic sales decline of 1% and adjusted EBITA margin of 5.2%. Here, we're executing and actually expanding the performance improvement program we launched a few months ago, and we will come back with some more details on this. Data Center saw another outstanding quarter with 62% organic growth and again, strong margins. We also saw strong momentum for our Harsh Environment business area with 15% organic growth and an EBITA margin that was meaningfully improved over last year.

Cash flow was an absolute highlight. You know probably that Pernilla and I have been talking about this as an area of focus and improvement, and we were very pleased to see that the efforts are paying off with an operating cash flow of almost SEK 350 million. And in fact, this allowed us to lower our adjusted net debt ratio to 1.9 despite making an acquisition in the quarter.

And a look at the key events in the quarter. So number one, the performance improvement program launched in September has been rather focused on our European footprint because of the headwinds in that market. We have now also decided to make some adjustments to our American operations and are downsizing one of our factories there to better match the current demand levels. Number two, we're very excited to welcome Communication Zone to the Hexatronic Group as the latest addition to our Data Center business area. And thirdly, we had some large shipments of submarine cable in the quarter. As you are probably aware, we see this as an interesting and attractive segment that we want to grow in. And then finally, after the end of the quarter, we have made some changes to the leadership structure within Fiber Solutions.

Now, the diversification journey that we're on continues. I think you've heard this and probably seen this slide a number of times now. It's an overview of the new business areas and segment reporting that we launched in 2025. And it's reassuring that every time we update this, we see an increased importance of the 2 fast-growing businesses, Harsh Environment and Data Center, that only a year or 2 ago were quite small, but today, in the fourth quarter, accounted for almost 40% of our sales and 60% of adjusted profits. And while Fiber Solutions continues obviously to be very important for us, Hexatronic today is so much more.

Now, moving into the business areas and starting with Fiber Solutions. It was a quarter in line with expectations. We do not see any significant change, not better nor worse, in the market conditions. There's continued softness in the fiber-to-the-home market, which impacts our microduct volumes. However, as we've also talked about, there are offsetting growth opportunities. And as noted, in this quarter, we saw unusually high shipments of submarine cable to the tune of about SEK 50 million higher than in Q3. And this submarine cable is a business that it often has this type of lumpiness with big orders in one quarter. But I would also say, the general and the longer-term outlook here is quite favorable, but there might be some ups and downs in the quarters.

You can also see that currency has become a significant headwind to our top line with almost 10 percentage point impact in the quarter here for Fiber Solutions. It's not unique to Fiber Solutions. There's a similar impact on the other business areas. And I think also it's not unique to Hexatronic, but it's an important factor mostly on the top line. And it also means, while the minus 10% top line here year-on-year for the quarter looks quite drastic, the underlying organic number is minus 1% or relatively flat.

Adjusted EBITA was on a similar level to the third quarter, which was expected. And as we know, fourth quarter and first quarter have lower volumes, which obviously impacts EBITA. But also here, there was a bit of help from those submarine shipments in the quarter.

The performance improvement program, we are on track and expect to largely complete the activities of the cost savings during quarter 1. In fact, we expanded the program. So it also now includes the downsizing of the site in Clinton in South Carolina, where we simply had more capacity than needed. So in essence, we're cutting the size and capacity of the site to give us a better utilization and indirect cost coverage.

The outlook, I think, is consistent with what we have said before. We expect the European market to remain rather subdued during 2026, but we also expect the North American business gradually coming back to growth. This is partly affected by the BEAD program, which we now see gaining momentum and will start to have some market impact as of the second half is what we are estimating at this point.

We also note there was a recent European Commission issue of the Digital Networks Act, which, among other things, called for a switch-out date for copper for all member states. This would obviously be positive for fiber build-out rate, but it's not immediate. It's more of a long-term supporter.

Seasonality is expected to show -- to follow the historical pattern with lower activity in the fourth and the first quarter and possibly some additional impact in first quarter if this unusually cold weather pattern remains, particularly in North America. And while there is softness in fiber-to-the-home, there are, as noted, growth opportunities in the overall fiber infrastructure, notably transport network and submarine cable. We see geopolitical trends, as well as data center build-out, as driving these areas. And the cost savings of the performance improvement program are now with the expansion expected at about SEK 120 million and still essentially full run rate by the end of the first quarter.

Moving over to Harsh Environment. And here, we're very pleased with the performance in the quarter. It's the second consecutive quarter of 15% organic growth. And again, it is ROV and defense spending driving the demand. We saw an adjusted EBITA margin of 11.4%. This was significantly higher than the same quarter last year, but I think that was a rather weak comparable. So, as I've said before, we should also here look more at the long-term trend, and it is favorable with a full year adjusted EBITA margin increase of about 1 percentage point. So things are slowly but steadily moving in the right direction on the margin. We have a lot of work still to do, but we also have quite a bit of runway if we get it right as this is a highly differentiated business. And as always, it is also a project-based business. So individual quarters would show some variability, and we should look more at the year-on-year trends.

Outlook longer term is favorable, and we continue to work on productivity and profitability measures, particularly in Rochester Cable. And we also, in this business area, have still an ambition to make acquisitions, particularly within connectivity.

And with that, we're moving over to the Data Center, which had another stellar performance, and I will hand it over here to Martin Aberg to talk more about that.

Thank you, Rikard. The fourth quarter for the Data Center business area came in strong on both sales and profitability. All our businesses performed well, which resulted in an organic sales growth of 62% in the quarter. And it is mainly the service businesses that [ contributed ] to the sales growth. And geographically, it was a strong development in both the European market, as well as in the North American market. We saw an EBITA margin of 15.3%, and this compares to 12.7% last year. And it was a strong end of the year with installation activities that continued throughout the December month.

Moving over to the market outlook that remains strong. The market is expected to be driven by the hyperscalers that continue to report high CapEx and also very ambitious plans moving forward. If we look at our business mix, the cloud segment is our main customer segment, accounting for roughly 40% of sales. But we also have a strong presence in the data center enterprise market, as well as towards other adjacent segments, which is also outside the data center market.

Looking at the long-term trend, we expect our addressable market to grow at approximately 10% per year. For [ program ] Data Center activities, 2025, the organic sales growth was exceptional. It was at 37%. And going forward, we expect a sales growth that will be more in line with our addressable market. The growth strategy remains with an ambitious M&A agenda and also an ambition to continue to broaden our service offering.

End of November last year, we acquired Communication Zone as Rikard said, which is an installation and service company that is based in Chicago. The company was acquired from the 2 founders, and they will remain in the business and continue to develop our U.S. Data Center activities, together with the existing Data Center team we have in the U.S. market. And the acquisition is in line with our M&A strategy, which is to grow our Data Center activities in the U.S. market and specifically to expand our service business, which I will come back to on the next slide.

But let us first start with some transaction highlights. The enterprise value was just over USD 20 million. That's a potential earnout of approximately USD 3.5 million. And this translates to an EBITA multiple of 6x if the full earnout is achieved. The transaction was structured as a share deal. But in the U.S., when you acquire a corporation, it can be structured as an asset deal for tax purposes, and this gives us substantial tax benefits. So the net present value of those tax benefits amounted to close to USD 3 million, which brings the effective multiple down to a maximum of 5.3x if the full earnout is achieved.

If we then move over to the strategic rationale. The acquisition gives us a strong presence in the Midwest region, and that covers states like Illinois and Chicago -- Illinois and Ohio, I should say. Most of the business is in the Midwest region, but it also strengthened our position through a few national accounts. This provides an interesting growth opportunity for us going forward. Additionally, we also broadened our services through this acquisition.

And then, over to the financial impact of the acquisition. Pro forma, it increases our sales with 13%. Margins, if we would have owned Communication Zone during 2025, would have increased from 17.9% to 18.3%. And lastly, the acquisition was financed with cash and existing debt facility.

And moving over to the strategic rationale of the acquisition. Below is what we presented a year ago when we introduced the 3 business areas. The outlook and ambition was to broaden our service offering by acquisitions. And the background to that is that our existing customers, they have several adjacent service and installation needs like installation of audio visual solutions, indoor solutions and also security solutions like cameras and card readers. And looking at the offering of Communication Zone, they provide all of these services today. Additionally, they also make those services towards other segments, and this provides an important segment diversification, even though Communication Zone's main segment is the data center market. All in all, it's an acquisition that very well met -- or meet our growth strategy.

And with that, I would like to hand over to Pernilla to summarize financials for the quarter.

Thank you, Martin. So total, we had a net sales of SEK 1.8 billion in Q4. That was an overall growth of 1%. Organically, we had a growth of 10%, and growth was driven by strong performance in both Harsh Environment and Data Center, while the Fiber Solutions organically had a decline of 1%. We had 1% acquisition-driven growth from our recent acquisition from Communication Zone within our Data Center business. And as Rikard said, we have a negative effect on exchange rate to this quarter of 9%. It's more or less all currencies that have weakened compared to the SEK.

We had an adjusted gross margin at 37.5% compared to 41.4% prior year. Gross margin was decreased due to continued softness in the FTTH market, price pressure and the typical seasonality, as well as the low capacity utilization and fixed cost coverage within our factories within Fiber Solutions, as well as a small mix effect between our business areas.

Adjusted EBITA of SEK 133 million or an EBITA margin of 7.2% compared to 10% last year. And the margin was negatively impacted by price pressure and lower sales in the FTTH business within our Fiber Solutions business, resulting in a reduced capacity utilization within our factories, which was then partly offset by strong development within our Data Center and Harsh Environment. Overall, an EBITA of SEK 37 million or 2%, and that was affected by onetime costs of SEK 97 million; SEK 28 million related to the performance improvement program launched in September, mainly related to Fiber Solutions Europe, and SEK 67 million related to the extended performance improvement program for North America of SEK 67 million. Net financial items of minus SEK 35 million, that is mainly related to interest. And tax rate is mainly affected by nonrecurring items related to the performance improvement program.

So the performance improvement program that we launched in September was focused on European footprint because of the market headwinds in the market. The implementation of the plan is well underway. And for the fourth quarter, we added SEK 28 million as onetime costs, totaling to SEK 230 million, which is in line with earlier communicated onetime costs. Savings on this part is SEK 110 million for the full year, and a full run rate impact is expected to be achieved in Q1 2026, and that is also according to plan. The cash onetime cost is related to severance, facility costs, transition costs and legal costs. Noncash items is mainly related to write-down, intangible assets and inventory.

As Rikard said, we have now also decided to expand the performance improvement program and make some adjustments to our American operations. And the onetime cost for this part is planned to be SEK 67 million and is related to a write-down of fixed assets and the costs [ to downsize of ] the operations. SEK 9 million of the SEK 67 million is related to cash. And the yearly saving is estimated to be SEK 10 million. So overall, the EMEA and North American performance improvement program will give SEK 120 million in savings, and we will have full run rate by end of Q1 2026 and a cash payback in total of 1.1 years.

If we then look at Fiber Solutions, so total net sales of Fiber Solutions of SEK 1.2 billion in Q4 with an overall decline of 10% but organic decline of 1%, decline due to weaker demand of FTTH equipment and price pressure. Major shortfall is within our microduct business, and that is partly offset by a large submarine cable delivery in the quarter.

Europe declined with 11%. That was related to mainly Germany and U.K., and that was partly offset by Sweden due to the large submarine cable delivery. North America declined with 16%. That is mainly related to Canada with a slowdown in the build-out of FTTH, but the conduit business in North America saw good volume growth but low pricing, while year-over-year, there is still a meaningful price decline. APAC had a growth of 11% due to increased project deliveries.

We had an adjusted EBITA of SEK 61 million or 5.2%. And profitability was hurt by the lower sales volumes, mainly within microduct, and then consequently, low capacity utilization and then the continued price pressure. And during the quarter, we had low CapEx investment in the quarter of SEK 10 million or 0.9% of sales, which is mainly related to maintenance.

If we look at our Harsh Environment business, we had a total net sales for Harsh Environment of SEK 310 million or a growth of 5%, of which organic growth of 15%. Growth is mainly driven by the defense and energy sector. And as previously communicated, the companies within Harsh Environment have an international customer base and a majority of revenues from larger projects, which means the sales per geography can fluctuate between quarters.

Adjusted EBITA at SEK 35 million and a margin of 11.4%. We continue to see positive effects from the improved production efficiency in Rochester Cable. CapEx investments in the quarter of SEK 15 million or 4.8% of sales mainly related to production and efficiency improvements in Rochester Cable.

Data Center: total net sales for Data Center of SEK 369 million in Q4 with an overall growth of 59% and organic growth of 62%. Strong development for all units, especially the service business in Europe and North America, and acquired growth from our recent acquisition, Communication Zone. Solid EBITA margin of 15.3%, and CapEx investment in the quarter of SEK 2.2 million or 0.6% of sales.

So cash flow from operating activities before changes in working capital of SEK 148 million. Positive effect from working capital of SEK 200 million in the quarter. SEK 144 million is related to inventory, where we have actively worked to reduce the levels for a period of time. SEK 94 million is related to efficient accounts receivable collection, partly offset by decreased accounts payable. Cash flow from operating activities of SEK 349 million or 235%. Overall CapEx investments of SEK 27 million or 1.5% of sales. SEK 164 million is related to the acquisition of Communication Zone. And group financing activities is related to amortization and lease liabilities.

Net debt, which corresponds to net debt excluding lease liabilities, amounted to SEK 1.6 billion at the end of the quarter, which is a decrease of SEK 124 million compared to last quarter due to positive cash flow and positive FX effect of SEK 27 million, partly offset by decreased adjusted rolling 12 adjusted EBITA, leading to a net debt in relation to pro forma adjusted EBITA on a rolling 12-month basis of 1.9 during the quarter. Given the strong operational cash flow in the quarter, we were able to reduce our interest-bearing net debt. However, looking forward, we know that working capital has a seasonality effect, which might elevate the leverage ratio somewhat during the next couple of quarters. On top of that, we have an earnout connected to prior acquisitions that will be paid out in Q2 2026, which will further increase the net debt. After that, we expect the leverage to come down.

At the end of Q4, we had SEK 661 million of cash and SEK 1.1 billion of unutilized backup facilities, which gives us a liquidity of SEK 1.8 billion. So we have a continued solid financial position.

Okay. I think it's time for me to sum things up. Again, in the quarter, we showed that we are delivering on the plan. Organic growth was 10%, and adjusted EBITA margin, 7.2%, in line with expectations. We see continued market challenges in Fiber Solutions, where our performance improvement program is on track and expanded. Data Center had another impressive quarter with phenomenal growth, and also Harsh Environment, strong growth and margin compared to last year. Cash flow was excellent, allowing us to reduce the net debt and slightly reduce our leverage. That was the quarter.

If we move on then to talk a little bit about the full year, as we're wrapping up on 2025, let's take a look at that and also how we're trending towards the targets that we set earlier this year. And as you know, these targets, we decided to set them by business area. So starting with Fiber Solutions. Of course, we know that's been a tough year, but we are taking resolute actions to adjust the cost base and also pivot the business towards growth beyond fiber-to-the-home. The main headwind here has been microduct volumes, but we see interesting growth opportunities in other product areas like submarine cable. We know we have more work to do for sure, but we have confidence in our plan to turn things around, and we will start to see a real effect of the cost savings in coming quarters.

Harsh Environment, the full year, we had a very respectable organic growth of 11%. Still a ways to go to the SEK 2 billion revenue target. But with double-digit organic growth and an ambition for acquisitions, I think we're on our way. Adjusted EBITA margin improved by almost 1 percentage point, and it all came from the improvements in Rochester Cable, where we have been very focused on operational efficiency.

And last but certainly not least, Data Center has continued to over-deliver. With the latest acquisition of Communication Zone, we're now at a run rate of about SEK 1.5 billion, well on track to the growth we're targeting and with margins that are actually exceeding the target.

So, all in all, 2025 has been an intense year with challenges as well as successes. We feel that we have a credible plan, and now it's all about continuing to deliver on that plan. I hope you will join us on that journey in 2026 and beyond. Thank you.

I think we open with that for questions.

[Operator Instructions] The next question comes from Max Bacco from SEB.

Well done in the quarter. So 2 questions from my side then, perhaps starting with the Data Center segment. I mean, you were very clear during the presentation that you expect continued growth momentum during 2026, although more in line with perhaps the underlying market growth. But looking at the profitability, I think you came in just shy of 18%, looking at full year 2025, which is, as you said, above your target of 15%. So looking at 2026, do you -- when you say continued growth momentum, is that also relevant for earnings? Or do you see perhaps that profitability will come down from the very high levels seen in 2025?

Thank you, Max. So, as you rightly mentioned, I mean, 2025 was a very strong year, and we expect a more normalized sales growth for 2026. In terms of earnings, I mean, we are in a very good position. We are -- we acquired a company that has a similar profitability level, but we're also taking on some investments in the organization. So we don't guide on the profitability, but we are not saying that it will -- we will see that we have a further margin expansion. So we keep to our -- what we have guided before long term that we will be at 15%, but a strong outlook for '26.

Okay. Understood. And then, the second question relating to the Harsh Environment segment. You mentioned in connection with the Q3 report that depending on the length of the government lockdowns in the U.S., you might have some impact on order intake and then on sales from Q2 2026. Do you have any update on that?

We have seen some impact of that, Max. Also, as I mentioned, the cold weather in the U.S. has had some impact in January. But we still have -- there's still a couple of months to go in the quarter. So I think it's too early to say whether it will impact the quarter or not.

Okay. But for Q2, specifically, 2026, do you foresee any impact extending to Q2 as well from the government lockdown? Or is it more a Q1 thing?

I think it's more a Q1 thing.

The next question comes from Fredrik Nilsson from Redeye.

I want to start with the working capital. You had a solid performance here in the quarter, and I noticed that you mentioned seasonality. But if we're looking at underlying seasonal adjusted numbers, do you see potential to improve the working capital relative to sales further?

I will take a first step and then I will hand over to Pernilla for more color. But there's always opportunities to further improve, and we're not stopping here. But I think we have done all the lower-hanging fruit, and we've done the -- it gets progressively more difficult from here. And then, yes, there is a bit of seasonality as well. We want to make sure that we are ready for an expected seasonal ramp-up when you get to the summer half.

I think you have covered it all. Normally, we build some stock for managing the Fiber Solutions' higher sales in Q3 and Q4, and that you can expect also this year.

Okay. Great. And regarding the expected improvement in Fiber Solutions in the U.S., does that include the duct and conduit that's unrelated to your fiber-to-the-home offering, if you understand what I mean?

No. Can you clarify that?

Yes. I mean, you sell to companies building power lines, for example, the part of the duct and conduit that's unrelated to the fiber.

You're right. In the conduit business, we have some utility business, but it's a minority of that business, and it's not a major impact. I will say, if we look at the conduit business overall, we continue to see volume growth. But as Pernilla mentioned, year-over-year, it's price decline that is squeezing there.

Okay. So you're mainly talking about the fiber-to-the-home then, I guess, in that expectations of improvements?

Well, that is -- yes, the BEAD program is focused on fiber-to-the-home, and this is where we see a robust market that we expect we will start seeing some growth gradually over the year.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

So we have one written question here. So one, taking a step back, what makes you categorize sales in Data Center versus Fiber Solutions and Harsh Environment into Data Centers? And -- I'm sorry, Data Center and Fiber Solutions -- have there been any reclassification in sales between Fiber Solutions and Harsh Environment into Data Centers? And then three, top line has been performing very strongly in Data Centers with organic growth of 62%. Should we expect a similar organic growth rate in 2026?

Can you take that?

Yes. Okay. So the background why we categorize sales into Data Centers, Fiber Solutions and Harsh Environment, that is basically how we are organized today in the business, so mirroring that. In terms of reclassification in sales between Fiber Solutions and Harsh Environment into Data Center, [ that has ] not been anything basically. Top line has been performing very strongly in Data Centers with organic growth of 62% in Q4, [indiscernible] organic growth rate in '26. For the full year, we had 37% organic sales growth. And as we said before, I mean, we expect it to be more towards the addressable market that we see. So around 10% is [ the addressable ] market long term.

And on the question on how we classify, it's mostly by the customer that we classify, not by the product. And as always, there's no change to the classification. But of course, there are some customers that might be slightly present in both, especially when we sell through distribution. But I think it's largely by customer segment.

So apart from these, are there other drivers of the expected return to growth in Fiber Solutions in North America?

We want to take market share, of course. We talked about some of our main customers, for different reasons, placing much lower orders in 2025. That was one of the reasons why we had a soft year in North America. And we see now at least one of them is beginning to ramp up their build-out rate again.

Two questions on Fiber Solutions. What positive impact was realized in Q4 from the cost saving program? And should we expect a revenue decline quarter-on-quarter in Q1, given the large submarine cable sale in Q4?

So let me address this way. We don't disclose the cost savings in the quarter. It was rather insignificant. There was some, but it was rather insignificant in Q4. It will start to be significant in Q1, but it will not be the full amount in Q1. It will be full run rate as of the end of Q1. And then, revenue decline, I think we expect a similar seasonality in Q1 and Q4 as what we're typically seeing. And then, I did talk about the lumpiness character of the submarine cable business. And in Q4, it was about SEK 50 million higher than what we will expect for the submarine business in Q3 or Q1.

Okay. I think that was the questions. Thank you, everyone, for listening in, and thank you for your interest and for your questions. Have a good day.

Welcome to the Hexatronic Q3 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Rikard Fröberg. Please go ahead.

Good morning, everyone, and very welcome to Hexatronic's Third Quarter Presentation for 2025. I'm Rikard Fröberg, CEO of the Hexatronic Group. And with me today, I have Martin Åberg, Deputy CEO; and Pernilla Linden, Group CFO.

As always, we start with an overview and introduction to the company. Hexatronic today, it's a global business with about SEK 7.5 billion in turnover and roughly 2,000 employees. We are a connectivity business, providing our customers with solutions for a wide range of communication applications, and it's all centered around fiber optics. Our business is organized into 3 business areas: Fiber Solutions, Harsh Environment and Data Center. The majority of our business today is in Europe, North America accounts for about 35%, and we have a smaller but growing presence in Asia Pacific.

Now going right to the highlights of the third quarter financials. And I would summarize as overall, the quarter was in line with expectations. We saw SEK 1.9 billion revenue, which was an organic growth of 2% and adjusted EBITA was SEK 146 million, corresponding to a margin of 7.7%. And our strategic shift towards high-growth businesses continues with Data Center and Harsh Environment now generating more than 1/3 of sales and over half of the profits. Our Fiber Solutions business area is still challenged by softer market conditions in the FTTH or fiber-to-the-home segment. This business area came in slightly below our expectation at 5.4% adjusted EBITA margin, which reinforces why we're moving swiftly with the performance improvement program currently focused on reducing our costs.

On the other hand, we saw better-than-expected performance, again, I should say, in Data Center. This business grew 39% organically and landed at almost 17% EBITA margin. Also, for the Harsh Environment business, it was a very solid quarter with 15% organic growth and some clear improvements in the Rochester Cable unit, where we have been laser focused on operational efficiency.

Last but not least, it was good to see that cash flow came in strong as we expected with 117% cash conversion, which allowed us to reduce our net debt and keep the leverage ratio around 2x.

A few key events that were announced in the quarter. First, as already mentioned, we launched step 1 of the performance improvement program for Fiber Solutions. This step includes some hard cost savings totaling around SEK 110 million, mainly from rightsizing our organization and actually closing 1 duct factory in Netherlands. It will be followed by additional and more long-term efficiency initiatives within sourcing, plant productivity as well as investments for growth.

Secondly, we introduced financial targets by business area, and I will come back to those in a minute. And we were excited to roll out a major new product innovation in our Viper Ease product. This is an upgrade to the popular Viper family of micro cables. With Viper Ease, we are introducing actually new to the world technology, which allows a tangle-free and grease-free installation. May not sound like much, but it actually saves over 50% of preparation time for the installer. So, this is a launch which is very much in line with our strategy to be leading in innovation and particularly where it helps our customers improve their productivity and therefore, their total costs.

I'm also happy to share today that we have hired a strong Investor Relations leader. His name is Patrick Johannesson, and he will join us in January.

Now going to the financial targets then. And if I recap those, they were already communicated in September, and there are two sets of targets here, the 2028 top line ambition and an EBITA margin target. Both these targets are now set by business area, and they replace our prior financial targets, which were stated on group level. These new targets are now aligned with how we run the business and also with our segment reported, which started earlier this year, and they do showcase that our business areas have slightly different prospects, both when it comes to growth and margin. We have a strong growth agenda for both Harsh Environment and Data Center with an ambition to be 2028 of SEK 2 billion for Harsh Environment and SEK 3 billion for Data Center. And this would roughly double the size of these 2 businesses combined and make it about 50% of Hexatronic total sales.

We also see that Harsh Environment and Data Center are highly differentiated offerings that we feel should be making 15% EBITA margin over time. In fact, Data Center is currently slightly higher than that, while Harsh Environment still has some way to go. The Fiber Solutions business has some segments with high differentiation, and I think submarine cable is a great example of this.

But we also have primarily on the duct and pipe side of the business, a little bit lower level of differentiation. And therefore, we see that an EBITA margin of 10% over the business cycle is more realistic. As noted, given the current trading, this is where we still have quite a bit of work to do to get back up to that level.

And if you take one step back and think about where this takes the company in a few years' time, it's clear that the Hexatronic of 2028 and beyond will look quite different from the Hexatronic of the past. We will have almost half of the revenue from Data Center and Harsh Environment and probably more than half of the profits. This is a journey that we're on, which started some years ago, and we are now taking steps to accelerate.

Same format on this slide but really zooming in on the actual performance in the quarter. And it illustrates quite clearly that diversification journey that I just mentioned and the direction of travel. We can see that Fiber Solutions is still 65% of the revenue. Harsh Environment has grown from 15% a year ago to 17% in this quarter, and Data Center has grown rapidly from 13% to 18% of total. But moving to the EBITA, the shift becomes even more substantial. The 2 smaller business areas already today account for close to 60% of the EBITA in the quarter. And of course, that is driven by their strong performance, but also obviously by the relatively lower margin of Fiber Solutions in the quarter. But the bottom line here is that this trend towards diversification is good for the business and it's something that we expect to see and that we want to see. Again, we expect the higher margin in Data Center and Harsh Environment to prevail. So even as we are very focused on improving the margins in Fiber Solutions, we expect longer term that the Data Center and Harsh Environment should contribute 50% of group profits, if not more.

Now moving on to take a closer look at the business areas, and we will start with Fiber Solutions. Sales in the quarter were down 14% year-over-year, and about half of that decline was simply FX translation, where our selling currencies have weakened against the Swedish krona. While we're down year-on-year, if we look sequentially, we see that flat -- sales have been flat now for about the last 3 quarters. Geographically, we saw declines in both Europe and North America. APAC was slightly down in SEK but saw modest growth in local currency.

The volume shortfall, particularly in microduct is causing under-absorption in our factories and therefore, some margin pressure, and this is why we have decided to close one of the duct facilities. Looking ahead, we expect the market situation to remain similar to today in the next one or two quarters. There's still some overcapacity in the market, and it will not go away immediately. But at least for the U.S. market, we expect volume growth in 2026.

And here is a look at our different product segments within Fiber Solutions and how they developed in the quarter. We don't disclose the size of each, but here, they're listed roughly in order of size. And in total, these categories represent about 80% or so of the sales in Fiber Solutions. So, first is microduct, where we have seen a clear decline in demand. This is driven by the market shift within FTTH from really building homes passed, which use a lot of microduct towards connecting customers to existing networks. This is a shift that we have talked about before, and we see that trend continuing.

Conduit, the second category, it's a little bit of a mixed bag. It's actually showing double-digit volume growth, but has significantly lower prices compared with a year ago. And then if you go down the list, the rest of the portfolio all shows green, fiber optic cable in general and submarine cable in particular, has a growing trend that we expect to continue. So, the negative is, of course, that the microduct and conduit segments are challenged, and this is where we have some underutilized capacity today and obviously, the focus of our performance improvement program to address. However, we also see that there's underlying growth in all the other categories.

Now we're moving over to the Harsh Environment business, and it was a really solid performance here in the quarter. Revenue organically up 15% and EBITA margin came in at 11%, well in line with expectation. We were pleased to see that the dedicated work at Rochester Cable is starting to pay off. In the quarter, Rochester saw a slight margin improvement sequentially over Q2 and a meaningful improvement over last year. So, things are moving in the right direction. It will continue to take time, as we have said before, but definitely in the right direction.

A slight watch out here is the U.S. government shutdown, which means a few of our customers are not able to place orders right now. This is more of a timing effect and because of lead times, it could impact Q2 next year if it's not resolved soon. And I want to make the usual reminder here that this is a heavily project-based business, so we actually shouldn't put too much weight at individual quarters, but more at the overall trend. And that trend is positive. We see healthy market and stable demand primarily in offshore energy and defense.

And with that, we will move on to Data Center, which saw again a very strong performance in the quarter. I will hand it over to Martin to tell us more about that.

Thank you, Rikard. We closed another strong quarter, as Rikard said, with 39% organic sales growth. We saw strong performance across our businesses in the quarter. Over the last two years, we have focused on growing our service business, which continues to be the main growth driver, and this is both in Europe and in the U.S. market. If we look at it sequentially, we are slightly down from the second quarter. The second half of the year is always lower and especially the fourth quarter, and this is due to fewer working days in December.

In terms of EBITA, margin increased 2.3 percentage points to 16.9%. And the margin expansion we see in the quarter that has actually been throughout the year is fully attributed to scale with OpEx as a percentage of sales decreasing compared to the previous year. The gross margin is slightly down compared to previous year.

If we move over to outlook and starting with market, we have the same view as we communicated last quarter with continued strong demand. And this is especially among the larger players in the hyperscale and colocation segment or the cloud segment, but we also expect continued solid demand from the other market segments where we're active. We will continue to broaden our service offering. Earlier this year, we strengthened our U.S. organization with installation of security systems, audiovisual solutions and also wireless networks for indoor environments. We have also recently expanded our electrical offering in Europe, and this is to become an even stronger partner to our customers. And as we discussed in our Investor Update in September, acquisitions will continue to be a strong focus going forward, and this is important to achieve our 2028 sales target.

And finally, we continue to see the seasonal pattern where we have a slower second half and especially the fourth quarter due to the fewer working days as just mentioned. So, this is a slide that we presented at our Investor Update in March early this year. Looking at the sales breakdown from Data Center business area, we have a balanced business that we're actively working on to diversify even further. And in terms of our capital allocation, service is, as we mentioned before, is the key focus. So, this will continue to grow at a higher rate than our product sales, both organically and from acquisitions. Today, it's almost a 50-50 split between the service and the product sales, but the balance will then slowly shift towards more services.

If we move on to look at customer sales breakdown, we have a very healthy sales. Roughly 40% of our sales is towards the cloud segment, and this is the main growth segment that I just mentioned. When we look at independent market studies, this segment is expected to have an annual growth rate of plus 15% over at least the next 5 years. And the remaining 60% of the sales in the business area is quite evenly split between enterprise data centers and other end markets. And this market is growing at mid-single digits, and we have a strong focus to continue to grow this 60% of our business. It is lower growth rate in that segment, but it's very diversified and a very stable customer base.

And then finally, on customer concentration, where we have our 10 top customers accounted for roughly half of our sales. The focus here is, of course, to continue to broaden and diversify our customer base. So, all in all, focus is, of course, to leverage on the strong market growth that we have in the data center space, but equally important to continue to diversify the business in terms of offering end customer segment as well as the customer base. And with that, I hand over to Pernilla for the financial overview.

Thank you, Martin. So overall, we had a total sales of SEK 1.9 billion in Q3. It's an overall decline of 3%. Organically, we had a growth of 2%. Growth was driven by strong performance in both Harsh Environment and Data Center, and that was partly offset by the decline in Fiber Solutions. We had a 1% acquisition-driven growth from our recent acquisition, Endor within our Data Center business. And next quarter, the Endor business will be included in the organic growth.

We also had a 6% negative effect from exchange rates this quarter, more or less all currencies in the group having a negative impact, but primarily due to a weaker U.S. dollar, Korean won, Aussie dollar, and sterling. During the quarter, Hexatronic has recognized SEK 202 million of nonrecurring costs linked to the performance improvement program launched in Q2. The program is mainly in the Fiber Solutions business area, and nonrecurring cost is related to severance costs, facility costs, write-down of tangible assets, inventory, and transition costs. Adjusted for the nonrecurring onetime costs in the quarter, adjusted gross margin were at 37.5% compared to 43.1% in Q3 2024. The 5.6 percentage points lower GP is mainly related to price pressure as well as lower capacity utilization and fixed cost coverage within our factories within Fiber Solutions but also mix of our different business areas.

Adjusted operating costs were 26.2% of sales in the quarter, which is lower than last year of 27.8%. And the reduced operating cost is mainly related to lower freight costs, explained by the reduced freight costs from Asia, but also lower cost of external services. So overall, we had an adjusted EBITA of SEK 146 million or 7.7% compared to Q3 last year at an EBITA level of 11.8%. Actual EBITA, including nonrecurring one-time costs of SEK 202 million at minus SEK 56 million or minus 3% EBITA. Net financial items of minus SEK 9 million, that was mainly related to net interest expense of SEK 31 million, but also other financial items that include revaluation of additional purchase price and acquisition options with a positive of SEK 20 million.

Tax rate during the quarter amounted to minus 35% compared to 29.5% in Q3 2024. And the tax rate this quarter is mainly heavily affected by the nonrecurring items related to the performance improvement program. And the negative tax rate is explained by the fact that the group recognized a tax expense in connection with a negative profit before tax. The cost has arisen in countries where the group currently has no taxable profits. As it is currently not possible to assume with reasonable certainty that these tax losses will be utilized in the future, it's not possible to report any deferred tax assets. If we exclude the one-time effect here, we are more or less in line with the last quarter.

During the quarter, Hexatronic announced a performance improvement program, mainly, as I said, in the Fiber Solutions business area with consolidation of manufacturing footprint, organizational alignment in Europe, and then with an increased focus on selected growth areas. The total cost savings are estimated at SEK 102 million, and the net effect on EBITA at SEK 110 million on an annual basis. And this will be realized starting from the fourth quarter 2025, be fully realized by the end of the first quarter in 2026.

Nonrecurring items are estimated at SEK 230 million. But now in the third quarter, we have recognized SEK 202 million, and those costs are related, as I said before, to severance, facility costs, write-down of tangible assets, inventory, and transition costs. And the remaining communicated nonrecurring items for the program are expected to be reported in the fourth quarter.

If we then take a look at the Fiber Solutions, we had a total sales of SEK 1.2 billion in Q3 with an overall decline of 14%. Organic, we had a decline of 7%, and that is mainly due to the weaker demand of the FTTH equipment business and price pressure. Europe declined by 7%. And for this quarter, that is mainly related to Sweden and Finland, and that was partly offset then with growth in Germany and U.K. North America declined with 26%, and it's related to Canada with a slowdown in the build-out of FTTH, but also our U.S. business. The conduit business in North America saw good volume growth, but with low pricing, where we -- year-over-year, there's still a meaningful price decline. APAC declined with 3% but increased in local currency.

Adjusted EBITA of SEK 66 million or 5.4%. Profitability was hurt by the lower sales volume, mainly within Microduct, and also then low-capacity utilization and continued price pressure. Within Fiber Solutions, we realized SEK 190 million of nonrecurring items in Q3. EBITA then for the quarter of minus SEK 124 million 10% compared to 12.6% last year. And we also had then low-capacity investments during the quarter, SEK 10 million for the quarter or 0.8% of sales, which is all related to maintenance.

If we then take a look at Harsh Environment, total sales for Harsh Environment of SEK 314 million, a growth of 8% or organic growth of 15%. And growth is mainly driven by the defense and energy sector. And as we previously have communicated, the company within Harsh Environment had an international customer base and the majority of revenues from larger projects, which means that both quarterly sales and sales per geography can fluctuate between the quarters.

Adjusted EBITA at SEK 35 million and a margin of 11%. We continue to see a positive effect from improved production efficiency within Rochester Cable. CapEx investment in the quarter of SEK 13.2 million or 4.2% of sales, mainly related to production and efficiency improvement in Rochester.

Let's move over to Data Center then. Total net sales for Data Center of SEK 334 million with an overall growth of impressive 43% and an organic growth of 39%. And I'm especially pleased to see that we have strong development for all units, but especially in the service business in Europe and North America. And we continue -- contribution from the acquired business is in line with our expectations. So, a solid EBITA margin at 16.9%. And CapEx investments in the quarter is low at SEK 3.7 million or 1.1% of sales.

If we then move over to cash flow. If we're looking at cash flow from operating activities before changes of working capital, we had SEK 132 million. We had a positive effect from working capital of SEK 22 million. Inventory was decreased by SEK 68 million, mainly in the Fiber Solutions business area, but offset by lower accounts payable, and that is mainly due to the focus of reduction of inventory. Accounts receivable has increased with SEK 22 million during the quarter, mainly due to customer mix, but increase in operating liabilities of SEK 46 million is mainly due to prepayments from customers related to the Harsh Environment business area. So, cash flow from operating activities of SEK 154 million or 117%. Total CapEx investments in Q3 of SEK 27 million or 1.4% of sales, and mainly maintenance investment and production efficiency improvement investments in Rochester Cable.

Group financing activities amounted to SEK 33 million, which is related to amortization of lease liabilities. Interest-bearing net debt, which corresponds to net debt, excluding lease liabilities, amounted to SEK 1.7 billion at the end of the quarter. That is a decrease of SEK 96 million compared to last quarter, and due to positive cash flow and positive FX effect of revaluation of our loans of SEK 19 million that was partly offset by the decreased rolling 12 adjusted EBITA, leading to an interest-bearing net debt in relation to pro forma adjusted EBITDA on a rolling 12 months at 2x during the quarter. At the end of Q3, we had SEK 596 million of cash and SEK 1.1 billion of unutilized backup facilities, which gives us a total liquidity of SEK 1.7 billion. And we have a continued solid financial position.

Okay. Time for me to wrap things up. First, again, as a summary of the quarter performance. Organic sales growth of 2% overall and adjusted EBITA that landed at SEK 146 million or 7.7% margin. Our Fiber Solutions business continues to operate in a rather challenging environment, particularly for fiber-to-the-home and Microduct. The performance improvement program there is up to speed and fully on track, and we booked one-off costs associated with this of about SEK 200 million in the quarter.

Data Center and Harsh Environment, strong results and double-digit organic growth, now accounting for more than half of group profits. Our cash flow is healthy, generating SEK 154 million operating cash flow, which corresponds to 117% cash conversion. And our net debt was slightly reduced to SEK 1.7 billion.

In terms of the outlook, starting off with a reminder of the seasonality that we typically see, where Fiber Solutions usually has lower activity in Q4 and Q1. This is simply weather-related. Data Center is slightly different, with a lower second half and stronger first half, as we heard from Martin, and we expect these patterns to remain.

Looking at the business areas for Fiber Solutions, we expect the market situation to stabilize. And by stabilize, I mean, no real improvement is expected in Q4, but also not expecting conditions to get worse. Of course, remembering that seasonality effect. The performance improvement program here will continue to ramp up as planned, and we will see full run rate of the cost savings by the end of Q1.

For Data Center, simply put, we expect a good growth to continue in Q4, just take the seasonality in account. And then going into next year, continued strong development, but also keeping in mind that the comps are getting significantly higher, so percentage growth likely to be somewhat moderated. And also, for Harsh Environment, more of the same, I would say. We expect stable robust development here. The margin trend should be slow and gradual upward with some quarterly ups and downs because of the project nature of the business.

Last but not least, we are still focused on executing our M&A pipeline, primarily in Data Center and Harsh Environment, where we see compelling opportunities for value creation. And I have said now a number of times that we want to make one or more deals this year. I think that is still the ambition. But obviously, there's less year remaining by now, and it always takes two parties to make a deal. So, it's not entirely in our hands when it will happen, but the pipeline is promising, and we continue with that ambition.

So that wraps up the presentation part of the session today. And with that, we will move on to Q&A.

[Operator Instructions] The next question comes from Adrian Gilani from ABG Sundal Collier.

For my first question on Data Center, as we have spoken about before, you've chosen to set the margin target of 15% over the cycle. And that's, as you mentioned, below where you're currently at. So, with that in mind, how long would you say that the current margin levels in Data Center could be sustainable?

Thank you, Adrian. It's Martin here. So, this will very much depend on our M&A pipeline, obviously. So, we see nothing that is trending downwards today, rather the opposite where we have. We're growing the business at quite a flat gross margin and good scale effect. So, it's always difficult to assess what the margin will be long-term, but it will be a function of the M&A pipeline, I would say.

And then on the CapEx, before you've said that we should expect CapEx at 3% to 4% of sales. You're now on track to come in quite a bit below that. But does this mean we should expect higher investment pace in next year or will you rather keep the current pace?

Okay. So, we are at this stage now at a lower, you are right, and that is mainly because of the Fiber Solutions, we are only maintenance investments. If we're looking at the Harsh Environment, we are between the 3% to 5% that we have already communicated, and we are also on the Data Center where we have communicated. When it comes to Fiber Solutions, as we talked at the Investor Update, there will be specific investments in some areas going forward where we see that we have possibility to have a good growth. But for now, it is lower due to that we are only doing maintenance.

I think, Adrian, this is tied to also the performance improvement program right now is very much focused on rightsizing and lowering our costs. The next stage here is to invest for growth, and we have areas that we've talked about. We see, for example, the submarine cable business is growing. We have online, and we're starting to get closer to the full utilization of that line. So that could be the type of investment that could come. And then that would be a step-up, of course, in the CapEx rate for Fiber Solutions.

The next question comes from Fredrik Nilsson from Redeye.

I want to start with the growth you saw within Fiber Solutions in Germany and UK. What is driving that growth? And do you believe it is sustainable?

I would say that the major reason for that is that the market has been lower for a period of time, as you know, and then you have lower comparables. So, we have in this quarter a slight growth. So, the market has stabilized somewhat.

And next question from me. I mean, considering the strong data center market, have you seen any increase in valuations of potential M&A targets?

So, what we target are the small and midsized open management owned businesses. And in that part of the market, we're still talking about the same valuations. Then of course, we can see some transaction between private equity and similar that are priced significantly higher. But on the private small size bilateral discussions, it's still in the same valuation range.

[Operator Instructions]

I think we had a couple of written questions coming in.

There are no more phone questions at this time. So, I hand the conference back to the speakers for any written questions or closing comments.

So, we have one question here. Could you elaborate a bit on what is happening in Fiber Solutions North America in general with minus 26% sales growth? Additionally, Dura-Line reported yesterday, stating that it see strong volume growth within Duct. Are you seeing the same? What are your thoughts on Fiber Solutions North America going into 2026?

Yes. Good question, and there's quite a lot there. So let me try to unpack it. Starting with our decline in North America. It's a few different factors that are working together. So, the first one is exchange rates, right? I think that's 6% or 7% in the quarter with the U.S. dollar weakening. And then the second effect is a decline in volumes primarily microduct that we've seen. And it's important to remember, it's North America. It's not just the U.S. There's some decline in the U.S., but actually a more drastic decline in Canada, where the building for now of homes passed has more or less stopped. There are some new rules that the government is trying to push in Canada that if you build a network, you have to allow access to your competitors and all the majors are saying, well, in that case, we're not going to build anything. So, we'll have to see how that situation develops. And for the last two quarters at least, we've seen very, very low activity in Canada.

And then the third aspect of this is the conduit business, and this relates a bit with Dura-Line. Here, as we have talked about, we are seeing actually volume growth is quite healthy. It's volume growth. But we are comparing with a year ago when prices were significantly higher. So, building on that, if I then compare with Dura-Line, they came out with what I consider to be a strong result. They reported yesterday but well done by them. I think we match from what I can see, if not exceed their volume growth, but we're not matching their margin. And I think I don't know exactly, of course, with Dura-Line, I believe that they have higher capacity utilization. They are the market leader. I believe that on the back of that, they have higher capacity utilization and also stronger pricing with a few accounts. So that was a good result.

There are others in the space that we know are having a harder time. And there's -- recently, there was a public disclosure from Atkore that they're doing a strategic review. And if you read between the lines, my interpretation is that they're looking to get out of the business and because they are struggling in that business. You can find that it's publicly available.

What's your perspective on the bid opportunities in the U.S. for 2026? It seems the program is finally gaining significant momentum. Are you and your partners ahead of the curve in preparing for this with your customers?

I'd like to think we're always ahead of the curve. And it is -- I think I agree, it looks like it is coming in 2026. I don't think it will be January 1, the tap is turned on 100%. But gradually during 2026, we do expect to see the impact of that. That's one of the reasons why we are expecting better development in North America next year. Also, the tax incentives in the Big Beautiful Act could be quite powerful for CapEx investments as well. So yes, we are seeing the same signs, and it seems also that there -- at the end of the day, there will be a reasonable split between fiber and other technologies in the BEAD program.

Okay. I think we have no more questions. So, thank you, everyone for calling in. And for those of you who are in Sweden, I hope you enjoy a well-deserved and action-filled sports break next week.

Welcome to the Hexatronic Investor Update September 2025 presentation. [Operator Instructions]

Now I will hand the conference over to CEO, Rikard Fröberg. Please go ahead.

Good morning, everyone, and once again, welcome to beautiful Stockholm and this investor update. I'm Rikard Fröberg, CEO of the Hexatronic Group, and here is the purpose of the session today. So first, we want to provide more insights into the 3 business areas that make up Hexatronic of today. These business areas were created earlier this year and is the way we manage and run the business. As you will see, fiber optic communications is a common denominator, but there are important differences between the business areas. And as we know, the Fiber Solutions business is currently the one that is challenged with difficult market conditions, and we are, therefore, launching today a performance improvement program, and we'll give specifics about its content.

Finally, we're also introducing new financial targets now by business area to replace our previous group level targets. With me today, I have Deputy CEO, Martin Åberg; CFO, Pernilla Linden; and Head of Harsh Environment, Jakob Skov.

Here is the agenda, and we're already into the first point, which is an introduction. Then we will go to Fiber Solutions, followed by Data Center and Harsh Environment. Last, I will do a short wrap-up, and then we will take your questions.

So I've been here now for about 6 months in role. And of course, initially, there was a sharp focus on just getting to know the business, our customers, investors and employees, of course. But rather soon, it became clear to me that we have some really exciting opportunities in our business. We also need to make some changes, particularly when it comes to Fiber Solutions business. And we announced in July a necessary performance improvement program. And today, we are here activating this program and starting the implementation.

And as I look at Hexatronic and where we are today, there are a few key insights and reflections. Clearly, Hexatronic has enjoyed strong growth and success for a number of years up until about 2023, but then the tide kind of turned, and we now need some course corrections. And I view the creation of the business areas as a critical step on that journey. The business areas all have different needs and opportunities. And by organizing ourselves this way, we can better focus on each of them.

Two business areas are very much on track with strong performance, strong value creation potential that really could transform this company. But the third one, Fiber Solutions is in a turnaround situation. We have been very focused on the FTTH or the fiber-to-the-home market. And for a long time, that market served us very well, but now it's challenged. So we need to adjust our cost base to this new reality. And also, we have to find new sources of growth. And that's exactly what the performance improvement program is designed to do.

Two words that you will hear repeated throughout the presentation today are diversification and differentiation. So first, diversification. Now we will, of course, continue to serve the FTTH segment. But if we look at the longer-term horizon, there's an opportunity for Hexatronic to build significant positions in Harsh Environment and Data Center, which we think can be about half the business by 2028. Also within Fiber Solutions, we have opportunities to diversify beyond just fiber-to-the-home.

Second is differentiation. And historically, I would say that Hexatronic has driven differentiation primarily through innovation and a strong system selling approach. Again, we will continue with this, of course. And in fact, on innovation, I feel that we can accelerate. We will deliberately expand and invest in the part of our portfolio that has higher differentiation. And actually, we're now also taking some steps to reduce capacity in the more standardized segment. So with this approach, we can also gradually shift or move our business blend or the center of gravity towards the higher differentiation, which always tends to have more stickiness and also higher margins.

And of course, this is a journey. And in fact, we're on that journey already. If we go back a few years to 2021, Hexatronic was pretty much a pure-play Northern European fiber solutions business. Today, 1/3 and growing of our business is the new businesses. And if you do the math on our new financial targets, you will quickly realize that by 2028, we could be about 50-50 on revenue and more than 50% on profits from Data Center and Harsh Environment. So that's a very different company from the Hexatronic of 2021 and even today.

And if we take a look now at the new financial targets, you will see that we're setting a higher margin target for Data Center and Harsh Environment and Fiber Solutions. And again, this is driven by their level of differentiation being higher than Fiber Solutions. You'll also probably notice that the 15% EBITDA target for data center is actually slightly lower than where we have -- where we are today, where we have been trending in recent quarters. And certainly, we don't want to lower our margins, but this is a longer-term target, over a business cycle. And we're currently putting a fair bit of resources for organic growth into that business, which we feel will pay off long term, but in the short term, is a bit of an investment.

For Harsh Environment, it's the other way around. We're not yet at the 15% margin level. Also here, important to note is a longer-term target. And we feel that with the nature of that business, we should be able to get to 15% over time, but it is a step-by-step plan. And also for Fiber Solutions, we're currently trading lower than this target, and we'll cover shortly what needs to happen to close that gap.

The second financial target is the 2028 top line. This does include M&A growth, which has always been an important driver for Hexatronic. And you will see again that we have an ambition to grow both Harsh Environment and Data Center substantially, which will, in turn, gradually drive up the blended margin of the group.

So now with that introduction, we will be heading on to the section covering Fiber Solutions. And let's start with a recap of the portfolio that sits within Fiber Solutions. So the biggest share here is the FTTH and transport network products. And while there is some product overlap between the two, the easiest way to think about it is that the FTTH or fiber-to-the-home is the last mile, the fiber-to-the-home or the last mile, right? And the transport networks is more the middle mile and the backbone, typically larger cables, higher fiber counts, the motorways of data network, if you like. And it's currently that transport network market that sees growth, driven by the need to connect data centers around the world, while FTTH is clearly quite soft, particularly in Europe.

Then you have submarine cable, which is a smaller business, but highly differentiated and showing good margins as well as growth prospects. Conduit and pipes is perhaps the least differentiated part of the portfolio, and this is unsurprisingly where we see quite heavy price pressure. And then we have some currently smaller segments rounding out the portfolio with instruments, tools, wireless products and training.

Sorry, wrong way. Let's go this way. So as a consequence to the current FTTH market softness, we saw a clear decline in demand after the boom years in 2022 and '23. And then there seemed to be a bit of a stabilization. But unfortunately, and somewhat unexpectedly, there's been a renewed decline in demand in recent months, and that brings us to where we are today. So we're starting at about SEK 5.2 billion revenue on a run rate level, and we have set a target to reach SEK 6 billion by 2028. This is about 4% annual growth, and we see that most of that growth will come from the U.S. market organically. In fact, we expect Europe to be rather flat.

On the margin side, we target 10% EBITDA over a business cycle. Today, we were at 6.4% in Q2 after 4 consecutive quarters of margin compression. And this margin decline is troublesome. And clearly, we have a lot of work to turn this around, and that work starts today with the performance improvement program, targeting SEK 110 million of EBITDA improvements through hard and direct cost savings. And this SEK 110 million corresponds to for Fiber Solutions, about 2% of EBITDA margin. So based on where we are today and that savings, you can see that we will close a fair chunk of the gap, but not all. And the remainder of that gap, we plan to close from operational excellence initiatives such as procurement savings, scrap rate reductions and things like that. These savings are more long-term oriented and will be gradually captured with start in 2026.

Let's take a look at the program in its totality. It has 3 main components: One, cost savings from consolidating the footprint; two, operational excellence; and three, growth initiatives. So I would call it like one is short-term and hard cost savings, followed by more medium-term margin and productivity improvements and then growth. And zooming in on the first component in those cost savings, we are today announcing that we plan to close the plant in Netherlands, a factory called Weterings and consolidating volumes in Europe in our facilities in Sweden and Austria. This will give immediate cost savings and also benefits in higher volumes and better loading for the remaining lines.

We're also restructuring and rightsizing the broader organization across Europe, both blue collar and white collar. Some smaller unprofitable business will be discontinued. And in total, these actions correspond to a workforce reduction of about 120 full-time equivalents.

I will now hand over to Pernilla for some more specifics on that part of the program.

Thank you, Rikard. So the performance improvement program Phase 1 called consolidated footprint consists of savings in total of SEK 122 million and an EBITDA effect of SEK 110 million. The EBITDA impact from the cost reduction activities is compared to the cost levels the first half of 2025. And the program consists only from sustained savings, so no short-term savings. The program is linked to Fiber Solutions and is mainly in the EMEA region. The program includes the planning of the closure of the Netherlands manufacturing plant called Weterings. And we also consolidated volumes then to our other manufacturing plants in Sweden and Austria as well as we are rightsizing our other manufacturing sites, commercial and back-office teams.

Overall, 2/3 of the program is linked to FTE reductions. In total, 120 FTE is affected. We have indirect labor of savings of SEK 58 million, SEK 26 million of direct labor and then the rest is related to reduced facility costs, other cost, depreciation and then offset by some discontinued business, mainly related to the closure of Weterings.

In summary, the performance improvement program Phase 1 called consolidated footprint consists of a total EBITDA effect of SEK 110 million. The cash effect, the cost of the program is SEK 125 million and the noncash effect of SEK 105 million, totaling to a total cost of SEK 230 million. The onetime cash effect of SEK 125 million is mainly related to severance costs, facility costs and transition costs. The noncash onetime consists mainly related to tangible assets and inventory related to the consolidation of the manufacturing footprint in EMEA. Overall, the cash payback of the program is 1.2 years, and the materialization of the program will gradually take effect with full run rate impact end of Q1 2026.

And by that, I will hand over to Rikard again.

Thank you. Moving on then to the second component of the program, which is operational excellence. This is slightly more long term in nature and will target reductions in scrap rates, improved yields, sourcing savings as well as reduced working capital, mainly in inventory. We're not disclosing a specific number here. But to give you an idea, I would describe it as this is the way to close the remainder of the gap after the SEK 110 million of direct savings.

And last but certainly not least, we have targeted growth initiatives to get the Fiber Solutions business back to growth. Let's take a look at where we see the main ones. Starting with the FTTH market. This graph shows that some of our core markets are beginning to become mature. The Nordics, except for Finland, have been there for quite a while. And while there's still solid business to be had in those markets, the rate of fiber build is more driven by things like new construction and infrastructure. U.K. is also beginning to see this shift with 70% now of homes passed and a clear trend towards homes connected rather than homes passed. However, the U.S. has a lot of build to do and remains our biggest growth opportunity within Fiber Solutions, both from market growth and from share gains as we are a quite small player in the U.S.

Germany remains at low levels, but hasn't really picked up and probably needs some trigger, maybe a political change for that to happen. We've been waiting for that and others have as well. We haven't really seen Germany pick up pace yet. But at some point, that is bound to happen.

However, while it's clearly then a mixed picture for the FTTH outlook, there are some adjacent segments with growth opportunities. Main ones listed on this slide with the most imminent ones on the left-hand side. Starting with submarine cable, while it's not very large today, it's a concrete and immediate opportunity for growth where Hexatronic is well positioned. Same with transport networks. It's a market that Hexatronic traditionally has put a little bit less focus on, but we're shifting that, and we start to see a growing pipeline of opportunities here.

Wireless is a segment that is forecast to show growth in coming years from an overall densification of networks, whether it's 5G, fixed wireless or other. And then there are some interesting plays in security applications and electrical utilities, but these are more long term for Hexatronic.

And let's take 1 minute and just review in a little bit more detail the submarine cable opportunity. These are cables manufactured in our flagship plant in Hudiksvall, Sweden. They are not the transatlantic cables, but rather for short and medium distances such as connecting Sweden and Finland, for example. We see good demand and growth in this segment. It's fueled by an overall increase in data traffic, but also factors like security concerns and build-out of windmill and wind energy. So this is an area that we expect to grow and invest in.

And an important enabler for growth in Fiber Solutions is innovation and product development. Innovation has long been in Hexatronic's DNA. However, I think in recent years, it has stood back somewhat as a lot of resources have been so focused on capacity expansions. So here, we have an opportunity to now reboot and put once again more focus and more resources to true product innovation. I see opportunities to accelerate both the innovation process and also the commercial launch process with an objective to cut the overall lead time from idea to market quite significantly. And I actually wanted to share today an example of a recent innovation that I think is great. It's about Viper. Micro cables is one of our core brands, and it's been around for a while now. But we recently launched an upgraded version.

And while it may not look all that different, it's actually a significant improvement for the end user. In this case, that's the installer. This is the first to the world dry micro cable, which means it doesn't have any of the typical grease that's needed to protect the fiber on the inside. Therefore, you can install it without wiping off the grease. This saves time and avoids a rather messy operation. In addition, there's a protective yarn inside, which on the new version sticks with the cover. When you strip the cover off, it sticks there, again, saving time for the installer who doesn't have to manually remove it.

So if you do this -- if you're an installer, you do this every day, all day, it's quite a big change. And for me, this is a great example of innovation. And let's see if we can review a video that actually demonstrates this.

Can we get the video, please?

[Presentation]

All right. So you saw here clearly illustrated on the left, significant reduction in the time for the installer. So really addressing an unmet customer need and therefore, improving the customers' productivity and the total cost of installation. This is classic Hexatronic. And so wrapping up then for Fiber Solutions. To summarize here, we will reclaim the profitability where; one, we're taking actions to reduce cost to the tune of about 2 percentage points of EBITDA margin; two, operational excellence initiatives to drive margins further over time; and three, investments in growth and innovation. With this plan, we're targeting 10% EBITDA and SEK 6 billion of sales.

That wraps up things for Fiber Solutions, and we move on to Data Center and Martin.

Thank you very much, Rikard. Today, I will provide an update of the data center business area. We'll talk about our offering with an emphasis on the services side, talk about our financial targets that we are introducing, talk a bit about the state of the market, outlook going forward and also conclude with, okay, what is our strategy to really achieve those targets going forward.

So looking at the financial overview. Over the last 3 years, we have established a platform for growth. I will come back to that, but we have a very strong geographical presence. We have a strong offering and so on. So over the last 3 years, we have grown this platform to SEK 1.2 billion in sales or more than $120 million, and this corresponds to an average annual growth rate of 46% throughout this period. And the majority of this growth that comes from acquisition, I would say, roughly 70%, but it's also a very strong organic growth rate. The business has been very profitable throughout this period. And over the past 3 years, it has been -- the EBITDA margin has been in the range of 13% to 18%, last 12 months at 17.3%.

So moving over to our offering. So we are in a unique position to provide specialty ICT services to the data center builds. And this is both for the U.S. market and the EMEA market. The core of this is to design and build the data center IT infrastructure, and that is really working hand-in-hand with our customers for the installation in the first phase, but then continue after the installation is complete, and this is what we call Smart Hands or day 2 services. And here, we typically work a few years with the customers. In some cases, the teams has been around the data centers for more than 5 years.

Moving over to the product side of it, connectivity. This is our bespoke fiber optical assembly and patch panel solutions for end users. The products are designed and produced in the U.S. and we have this local production, we can really have short lead times to the customers to provide them with the products they need. Containment, that is our hot and cold air product offering. Every data center needs this product range. And what we do is that we have the capability to design, produce and manufacture this product offering, and this is both in the U.S. and in EMEA.

And finally, the LAN offering. This is supply of copper-based systems for commercial products. It's end-to-end structural cabling, panels, cabinets and wallboxes. So it's a full turnkey solution for our customers. We mainly focus on the Italian market, but it's also international sales outside Italy.

As you can see, we have a combined products and service offering, which today is quite evenly split between services and product sales. And main growth potential we see within services, where we address both the hyperscale and the colocation segments. And this is really the segment of the market that is expected to have the highest growth rates over the next 5 years.

Here we zoom in on our different services. So we start from the top with the fit-out services. And for us, this is really where it starts, the installation of fit-out. Typically, we have an in-design cycle here that can last for several months. And then from our design, we can then transfer an empty space or a white box to an operational ready data center.

And then moving on to the professional services, I talked about the managed services. So when the data center operational ready, we have these managed services or what we call day 2 services. This is to support our customers, and they have daily cabling and engineering requirements throughout the life cycle of a data center. So here, we really, really can support them for a long period of time.

And then relocation. After some years, the customer needs support in upgrading the infrastructure. Typically, it is after 3 to 4 years of time. The hardware has then taken a number of generations and with more processing power, you would like an upgrade. And this is where we can support our customers with the upgrade, and we can do it at their site or we can help them relocate to a different geography.

And over the past 6 months, we have also increased our focus to 3 new business or service areas. And those have been traditionally, to a smaller extent, addressed mostly then by sub-suppliers. And those 3 new areas are electrical, physical security and indoor wireless. Okay. So that is basically our services side.

So to summarize the service side, we have a very sticky position with our customers. So we help them from the initial design phase through installation and then we support them for several years throughout the data center life cycle. And then when they need to upgrade or relocate, we help them there as well. And now by strengthening our focus on adjacent installation and managed services, we become an even more strategic and integrated partner to our customers. And this is super important with the high build rates and expansion our customers are doing. So they are more dependent on having strong partners.

So if we move over to our breakdown of revenue. Overall, we have a clear focus towards the data center end customer segment, but we are very well diversified in terms of our offering and also our customer base. So close to 50% of our sales is today services. And the other 50% is quite evenly split between connectivity and LAN that we just talked about. And then we have the small containment part that is an interesting growth opportunity for us, both in Europe and in the U.S.

If we look over to the breakdown of end customers, 40% is roughly to the Cloud segment and 30% to the Enterprise segment. So 70% in total of our sales today is towards the data center market.

If we look at the customer concentration area, our largest 10 customers today account for roughly 50% of our sales. So we have a good diversification in this business unit as well. So looking at where we are present today geographically. So we are established on the 2 main key markets, and that is North America and Europe. And looking at the latest [indiscernible] report, those 2 geographies account for roughly 70% of the world market. And when they forecast up until 2029, they see that those geographies will account for roughly 70% at that point in time as well. So with the strong growth, it is really in our existing home market that we see that it will have strong growth.

In terms of split of sales, 62% Europe, 36% U.S. and as discussed, quite evenly split between services and products. So continue to focus where we are present in our home markets. So today, we're introducing 2 financial targets for the data center business area, one for sales and one for profitability. And starting with the growth target is to grow sales from SEK 1.2 billion to SEK 3 billion until 2028. And this corresponds to approximately a CAGR of 30%. To put this in perspective, over the last 3 years, we have grown 46% annually sales.

The first half this year, we have not made any acquisitions in the data center business area, but we have been growing with 24% organically. All in all, the strong market outlook that I will come back to that we see throughout this decade makes us confident, and this is also combined with a very actionable M&A pipeline that we see that we will hit this 2028 sales target.

If we move over to the profitability target, the target is 15% EBITDA over a business cycle. If we look at LTM, last 12 months until June, we were at 17.3%. And over the last 3 years, we have been at plus 15%. So we are today above this target. We have very healthy margins on both products and service side and slightly higher on the product side. We have our own branded, very limited third-party products, so a healthy margin on that. And also on the services side, we provide very critical services to the data center. They invest massively. So there, we can also charge a premium compared to different end customer segments with the same type of services.

So all in all, looking at our existing data center business, it is today performing above the profitability target, even after adjusting for a few products with higher-than-normal profitability. So we are confident in the profitability target. And this also gives us room for acquiring services businesses that we typically, on average, see are at 15% or just below.

So moving over to the market outlook. Here, we have 4 data center market segments. The numbers are from the most recent [indiscernible] report, and that covers the period from '25 to 2029. So if we start from the bottom and talking about the on-premise enterprise customers, the traditional data centers. And this is data center owned and managed by the end customer, the customer itself. So these are typically client-heavy CapEx, a bit slower technology path. And this market is expected to grow at single-digit growth rates.

The higher growth segment of the market is the off-premises or the Cloud segment. And here, we see a transition from on-premise to off-premise, and that is for the reasons just mentioned. And this is where the colocation data centers come into play. They also refer to as multi-tenants. So multiple companies can share the same building. So it provides good scalability. They share power, they can share cooling, Internet connection, physical security and all infrastructure you need. So basically, what they do is that they move into an apartment, but they bring their own service.

So depending on what the needs you have as a customer, you can move into a 1-bedroom apartment, a 3-bedroom apartment or a 5-bedroom apartments. It's scalable in that sense. If the customer decides he needs the entire building, renting all apartments, then it is really a hyperscale lease market segment. So -- and finally, hyperscale own, this is what you read about in the news. It's a very large data center. They are typically owned by companies, Microsoft, Google, AWS, Oracle and the likes.

And to conclude, for more than 10 years, we have been working as a close partner to several of these cloud players. So this is the part of the market that is expected to have the highest growth rates for the next 5 years or throughout this decade. This is an important market for us because it accounts for 40% of our sales. So we have a good exposure here, and we see that we'll continue to grow in this segment.

So in terms of growth, to continue on that, we look at it from 2 different perspectives. First, our offering and then the customer segments. So with regards to the offering, we see the main opportunity within the services side. Here, we are addressing the fast-growing cloud, as I just described, and we have done that for more than a decade.

And our main service today is what we talked about initially with the ICT services. And we will continue to grow and serve our customers with ICT services, but we're also focused to increase our share of wallet with our customers. We're doing this by increasing our focus on those adjacent services that are requested by our customers and that we already today partly serve for subsuppliers. And these are the services that I mentioned, electrical, indoor wireless, physical security.

And recently, we have made a strategic initiative to grow this side of the business by recruiting more than 30 new and skilled experienced colleagues for this initiative. We have had a very strong start, but we expect to be loss-making on this initiative with SEK 1 million to SEK 2 million per month in the second half of the year and turn it to breakeven early next year. And we expect it to be quite a substantial opportunity already for 2026.

On the end customer dimension, 70% of our sales today is focused to the data center market. And this will continue to be our key focus going forward. But that said, we'll also continue to focus on our other 30% of the market. And this is important for our diversification, especially when we talk many years ahead. And the same services are requested for these end customer segments. And we will really focus on the niches that has the highest requirements where we still can enjoy good margins. An example of that is high-end customer offices and demanding industries, just to take a few examples.

So if we move over to M&A, we will continue with our low-risk approach to M&A, work in our existing markets, acquire businesses that we know about, that are having similar offering as we are having today. We see that they are trading today or the sales price in the market is roughly 5 to 7x EBITDA. We will focus still on the small midsized segment of the market, so say enterprise value typically below EUR 50 million. And we'll continue to have this approach where we get aligned interest with the entrepreneurs, with the selling management teams and also cap the downside using earn-out structures.

So if we're looking more on the -- what we are searching for. And as we said, I mean, we see the main growth opportunity within the services side. And the reason being also on the M&A is that some years back, there was a very high consolidation wave on the product side for data centers. And we still see that it's super fragmented on services, both in the U.S. and in Europe. And we have conducted a structured search, and we have more than 200 companies on that list at different stages.

So to summarize where we are and the opportunities we see ahead of us. And the market -- it's a strong market. And as long as we can see, we see it as continued to be strong at least throughout this decade. And if we look at our mix, 40%, as I mentioned, was in the really high-growth segment, and then we have also an Enterprise segment that is lower growth.

But if we look at the business mix, we see the addressable market is expected to grow at approximately 10% per year. We have in the past successfully gained market shares, and we see with the entrepreneurial team we have today, we see that we have good opportunities to continue to beat the market.

But if we look at the financial targets, the majority of the sales is expected to come from acquisitions. And over the last 2 years, we have built a strong M&A pipeline, and we have several ongoing discussions at different stages, and we have ambition to close deals this side of the year. Industry peers trading at 5 to -- or trading -- industry multiples, I would say, at 5x to 7x EBITDA. It is really accretive to earnings. And what's also attractive in the data center business that is very asset-light. We're talking about net working capital to sales of 12% to 14% and CapEx levels of approximately 1%.

And finally, we're introducing financial targets for the business area. The sales of the SEK 3 billion in '28. We're confident to achieve this with the strong market growth we see and with the M&A pipeline we have today. And the same with the 15% EBITDA margin over the business cycle. We are today 2% above this if you look at LTM numbers, but also taking into account that we focus on acquiring services business that might be at 15% or slightly lower. So we have some headroom there as well.

So all in all, we are in a good position. We have established on the main markets that is forecasted to have strong growth for the foreseeable future.

So with that, I would like to hand over to Jakob, that is Head of our business area, Harsh Environment.

Thank you, Martin. As Martin said, I'm having the pleasure of heading Harsh Environment. And today, I'll talk about the 3 units we have built within Harsh Environment, the markets we're in with a dive on the RV segment, financial targets and growth. We are mainly in the offshore applications, as you can see here on the nice picture.

Let me start with an overview. It consists of the 3 business areas: Dynamic Cables, Connectivity and Critical Sensing. In critical sensing, we still have a legacy business into the backbone network. And since our last presentation, we've actually seen an uptick in activity, mainly driven by the bespoken data center build-out around the world.

The strategy for us is to capitalize on the know-how and deploy that into growing sensing business areas. Our value proposition is a capability to enable very accurate temperature guidance to our customers. Such a guidance is depicted here on the lower right. It is a system that can actually give a very precise temperature profile of a steel caster. We have installations worldwide and consider ourselves as the market leader in fiber optical sensing in the steel caster segment.

Installing such an optical system drives the need for not only fibers, but also fiber connectorized solutions. So there's a very close link with the connectivity unit. The connectivity unit serves all our main markets being defense, industry and energy. Here, we act as the trusted adviser to mainly OEM companies. Our strength is in the optical understanding of how to combine optical cables and often 2 very different connector types from 2 different suppliers. It could, for example, be a radar system in Norway being installed or upgraded on a destroyer from a British manufacturer. Each of them, we are the missing link, helping to connect seamlessly those 2 systems.

And over the years, we have grown a profound close relationship with key customers. So we act almost as an integral part of the customer's design cycle. Our expertise is the design of such solutions in harsh environments like a critical radar system. Finally, to the left, we have the largest unit, Dynamic Cables. They are called umbilical cables because they act as multifunctional cables, carrying energy, data and often a third function being, for instance, fluids. You can see such a cable down here to the left.

They work as a working cable. And unlike conventional cables that are laid out, these are actually read on, read off multiple times. Such a read on, read off is what you can see up to the left corner, where it is a part of a RV system. The yellow robot is called a working class ROV, and these are the workhorses in multiple types of offshore applications. They are used in all parts of the life cycle from exploration to decommissioning. And I will come back a little bit later in a deep dive on those markets.

The business unit is dominated by the Dynamic Cables. It currently generates more than 80%. And those working cables are, as just said before, mainly deployed in offshore installations, but also increasingly in defense and connectivity has grown relatively quite a lot in defense.

If we look at the customer segment breakdown, we are still dominated by energy either directly or indirectly, but seeing an increasing activity in both defense and industry. Those markets are characterized by very long life cycles. We often see 8 to even 10 years or even further, if it's a submarine, up to 20 years of deployment and design wins. We have a very broad customer base. And even though a substantial part of the sale can be characterized as project sale, we have a high degree of recurring customers having almost the same top 10 customer concentration.

Having said that, we do have more and more new customers coming on board, making the concentration amongst the top 10 going down from 50% to 40%, enabling us to have an even stronger and more diversified portfolio to grow from in the years ahead. Long-lasting designs are especially seen in the RV markets. And if we look at the RV markets, we are in all the markets depicted here being oil and gas, renewables, infrastructure and so forth. These RVs are in subsea construction, underwater inspection, maintenance, asset monitoring as well as environmental monitoring. RVs are used in many offshore applications in the defense and recently even more to monitor the critical infrastructure.

Recently, we also see an uptick in the trench and power market. The trench and power markets are being deployed in offshore renewables and infrastructure build-out and also driven by the high growth in offshore data cables. Trenches drive an increasing demand for specialty umbilicals and can be directly correlated to the increase of offshore cable laying activity.

If we look more into how the market is divided, you can talk about new builds, service and maintenance and asset and operator owners. We play in all 3 subsegments, and I've mentioned a few of the main customers here -- operators. In terms of cable consumption, the largest part is being deployed in the service and maintenance segment. However, being designed in, in the OEM segment does give you a head start when the cables must be serviced. We supply across all 3 segments and aim to be the preferred choice within the service and maintenance area.

The largest of the 3 is the service and maintenance market. And just last week, Oceaneering was awarded a 4-year contract by Petrobras. Petrobras and their massive build-out is expected to drive a substantial part of this growth in this area over the next 3 to 5 years.

And speaking of growth, we've definitely grown mainly by the acquisitions of the 2 large acquisitions in 2023 being Rochester Cable followed by Fibron. With the pause of acquisitions in '24, we've been in a steadier period of organic growth as well as improving our profitability in the acquired businesses. We are trailing at SEK 1.2 billion currently, and we are trailing around 10.5% EBITDA. It is a project business. And in general, you can expect to see larger swings quarter-over-quarter than what we've seen in the last 3 quarters.

Our focus going forward is on leveraging that we have manufacturing sites in both Europe and in the U.S., which enables us to better service international customers. And with those 2 manufacturing sites, we are well positioned to capture the anticipated growth in the defense markets. And in the defense market, especially in connectivity, we have a very strong foothold in the Nordics as well as having an assembly setup in the U.K. and we wish to grow both organic by following our large accounts internationally and inorganic with a geographical focus being in a close proximity where the service setup is the competitive edge here.

Like for data centers, we are introducing 2 financial targets for the harsh business area, growth target and a profitability target. The target to grow is to reach at least SEK 2 billion in the year 2028, which corresponds to a CAGR of 16%, it is both organic as well as inorganic. It will be a combination of organic sales growth and acquisitions.

Looking at the EBITDA target of reaching 50% is ambitious. However, the main levers here is getting Rochester business up in gear, which I do believe is manageable as well as driving business even more towards the defense and the high-margin industries. And then top it with acquisitions, we should be able to trend towards 15% no later than in 2028.

A sustained growth within Harsh Environment is believable when looking at the main markets we serve. We actually see no shortage in the energy demand. And even if the geopolitical situation changes to a more peaceful world, which would lead hopefully to lower oil prices, there is an underlying very strong growth demand in energy. These cycles are very strong and along the installed base of offshore sites does require continued maintenance.

In the defense, our cable and connector sale is mainly driven by the Naval build-out worldwide. It is a sector that is the second largest investment area for the military budgets and the upgrade, replenishment and recent announcement of many new build-outs does signal a very strong growth ahead of us.

In the industrial area, Rochester has a very strong North American position, and we see a quite positive trend in the current business environment in North America. As well as in general, as stated also in our last call, we continue to see more industries embracing the intrinsic value of fiber optics in the harsh environments.

And to support our growth, we will have ambitions to acquire businesses in all 3 areas with the bias of strengthening our cable harnessing and connector businesses, especially around the defense and industrial area. That market is a highly fragmented market space, both in technology, size and geography and is very suited for acquisitions for us. We have an ambition to acquire 1 to 2 companies aiming to better have a geographical coverage as well as portfolio expansion.

Defense and industry markets are favoring high mix, low volume and highly complex sales processes. And thus strengthening with acquisitions, it fits very well with our sweet spot and our stronghold of today.

And looking ahead, we do have a strong market outlook. The underlying demand in the energy sector remains very strong in the foreseeable future. And if we look at the defense market, I've highlighted just 2 programs here being AUKUS. It's a joint initiative between Australia, United Kingdom, United States. It's a program that will run beyond 2040 and amongst other initiatives, encompasses upgrades of new builds of submarines for all 3 countries.

And recently, Norway announced an order for British destroyers, and we believe Sweden and Denmark are expected to follow suit. We are well positioned with local presence and sales to the prime contractors in Norway, Sweden, U.K. and the U.S. as well as having a sister company in Australia. As stated earlier, Rochester is well on its way with efficiency targets we have set forth. And from a profitability standpoint, it might not quite be there or in line with our targets. So it will remain our focus in the next year.

It's a multipronged approach where we invest in both people, equipment and modernizing the infrastructure, and we are well on its way. In connectivity, we expect to follow the growth of our defense primes, and we've been working with them for many, many years. We will also capture new industries while they embrace the intrinsic value of these hybrid solutions. We'll try to strike the balance between the 2 business units, Dynamic Cables and Connectivity, and that implicitly implies that our acquisition targets will mainly be within the connectivity sphere.

I have a very positive outlook. And with these words, I'll give the final remarks back to Rikard.

Thank you, Jakob. And all that remains for me now is to wrap things up, and then we will go to take questions. And these are the key points that I hope you will take away from the session today. For Fiber Solutions, due to the current headwinds, we're taking decisive actions to consolidate and take out significant costs, but also go after growth. The capital needs going forward are relatively low. So we turn this business around and then drive for maximum cash flow. And this cash flow can fund some really exciting growth opportunities in the harsh environment and data center space. And if we're successful here, it can really transform what this company could be in 3 years' time. And we hope that you want to join us on that journey.

With that, I think we'll thank everyone for tuning in, and we will move to questions. And I know that we have had some questions come in already electronically.

Sure. So we have one question here. Any more details what happened in Fiber Solutions during Q2 2025. Based on peers reporting, the softness seems to be more related to Hexatronic, than a market issue. Any improvement during Q3?

Okay. So a lot there. I don't think we have any more details on Q2 today than what we said at the time. I would disagree -- when we look at the European market, I don't agree with the notion that it was Hexatronic. I mean we know from many discussions that we have, this is a tough market. I think -- maybe in the U.S., it's a little bit different, especially we see there that the transport network market is quite strong, and we have some peers who are more positioned to that market having quite positive momentum and also positive outlook. And as I said before, we are shifting some focus there. We haven't seen it in our numbers yet, but we have a pipeline and an outlook there that is building and that's making me hopeful for 2026. And in terms of if we see -- there was a question, do we see an improvement right now? No, we don't. It continues to be a rather challenged market.

The second question then, in Fiber Solutions, do you expect any lost volumes for production plant closed down and FTE reduction?

Yes. I think the similar question came a couple of times. So yes, but it's not that material because there is -- and I'll hand it over to Pernilla to comment on the numbers, but there's some irrigation business in the factory in Netherlands that we don't intend to move. And then there's also a small business in Germany that we are exiting.

I'll say, up to SEK 50 million.

Less than SEK 50 million in top line. And in the EBITDA impact that we have given is a net number for any margin that was there.

Yes. What M&A assumptions have you included in the financial targets in terms of acquisition multiples and sales growth per segment driven by M&A?

So if we start with the M&A multiples, I mean, throughout the last 10 years, we have seen multiples being roughly 5 to 7 that we are doing and peers are doing. So we expect it to be in that range going forward as well. And that is also the conversations we're having today. It's quite narrowed in to that range.

In terms of M&A, and we have not separated organic and M&A-driven growth, but we expect a substantial M&A growth, especially within data center, but also within the Harsh Environment side.

If you could continue on the M&A agenda, how is M&A agenda intended to be financed?

To be financed. Yes. So we have a leverage today that we think is rather comfortable. So there's room to go a little bit higher there, especially if we see that short term, it's the right thing to do. But clearly, this is where the turnaround of the margin in Fiber Solutions is so important, both from a cash flow perspective and also from a net debt-to-EBITDA multiple perspective. So we need to focus on that. We need to keep a close eye on the next 6 to 9 months. Beyond that, I think that we will quite significantly start to delever from the cash flow generated by the business.

So what is the time line for the financial targets regarding profitability, especially on Fiber Solutions and Harsh Environment?

So starting with Fiber Solutions. The first step of that program, the SEK 110 million, Pernilla, we've said that we will start to see some small effects in the last quarter of this year. And then as of Q1 of 2026, we will see most of that. The next bucket is the operational excellence. I would expect that to start kicking in during 2026. And then for Harsh Environment, I think I will hand over to Jakob to provide some color. But as we have said a couple of times in this presentation, it will be a gradual process to increase. I think it's also important to remember, it's a project-based business. So separate quarters can go a little bit up or down. But I would say on an annual basis, if we see a percentage point or 2 of margin improvement in a year, that would tell me that clearly, we're on the right track, and I would be quite satisfied with that. It's not going to happen overnight. Anything to add, Jakob?

No, you're spot on. I expect at least to be there by '28.

So then postponing fiber optic cable manufacturing in the facility in South Carolina to 2027. But at the same time, ambition is to grow and diversify the customer base in the U.S. and Canada. How does that make sense?

Yes. So we need that facility to focus. If we're really going to get the operational improvements, we need to focus on yield rates improvements and scrap rate reduction, that kind of stuff to, at the same time then introduce a new and slightly different type of manufacturing, we think would be a stretch. We also now have more certainty on the tariffs. And when we see the -- at the tariffs, it wasn't as bad as it could have been, combined with the relatively low volumes of that specific cable that was intended for production in the short term. I think it's quite manageable.

I think you have partly answered this question before, but we'll take it again. You assess Europe fiber on the market as low. Is it due to competition or lower demand?

It's the combination, right? So clearly, there's been -- we added capacity quite significantly a few years ago and so did many others. So a lot of capacity added and then the demand did not keep up with that. So I would say it's both. It's an imbalance of demand versus available capacity.

Which type of data centers does Hexatronic focus on? Hyperscale owned, leased colocation or enterprise?

So today and over the last few years, we've been working on all those 3 segments. I would say where you see most growth today and where also our focus is the colocation or hyperscale leased. And the background to that is that when you build a large data center today, it takes time to get permit for power and so on. So many different actors has decided to build a colocation space and the larger players like Microsoft, Oracle, AWS and so on have decided to rent that entire space. So that is really where we are seeing the growth in the market now. It's a big focus for us.

Let's see. So it appears reasonable to infer that you estimate the addressable market for data center will grow by 10% to 11% in total based on the data you provided. Based on this, one could assume that approximately 2/3 of your 30% CAGR ambition might be driven by M&A activity. However, do you also anticipate capturing additional organic market share to complement this growth? Or is it focused primarily on acquisitions?

I mean, we don't disclose this in any detail. But of course, over time, it's always difficult in many years to beat the market. I would say, I mean, historically, in the first half of this year, we have had clearly outperformed the market. We're doing strategic initiatives, as we mentioned, but I believe we're investing more than many of our competitors. So we expect to be a bit higher than market. But clearly, a significant portion of the sales to reach those SEK 3 billion will be from acquisitions.

What are the main reasons behind the much more cautious long-term outlook for FTTH compared to just 1 year ago?

Yes. So I wasn't here a year ago. I based the outlook on what we're seeing in the market today. I think we have to be realistic about the rate of volumes that we're seeing today and also the outlook for the next 12 months.

So how large market share of the Harsh Environment market does Hexatronic have?

It's a difficult question because it's so fragmented, but we are in those areas that I just mentioned today, RV in the top 3 area. We don't disclose market size -- share.

From the 11 states that have come the furthest in BEAD, I note that 74% has been allocated to fiber, more than additional fears of 50% early in the summer. Is your outlook on BEAD more positive now than relative to when you reported in Q2?

I think it's -- maybe not more positive, but a little bit more clear. It seems to me that BEAD will move forward during 2026. It seems that, yes, fiber will be a substantial part of it. There was some speculation that at some point that maybe BEAD would be entirely scrapped, maybe it would all go to satellite. That doesn't seem to be the case. But we've also been clear that I think we said 80% of the build in the U.S. is privately funded. We need to base our strategy on capturing the privately funded market. And if and when BEAD comes, it should be icing on the cake and not something that our strategy hinges on. But yes, I do -- today, I do expect that BEAD will start coming into the market sometime during 2026.

I think that was all from what we have received -- questions that we have received.

Okay. So I will wrap it up then. Thank you to all the speakers and particularly, thank you to all our investors and listeners today.

Thank you.

Welcome to the Hexatronic Q2 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Rikard Froberg. Please go ahead.

Good morning, everyone, and welcome to Hexatronic's Second Quarter Presentation for 2025. As always, we start with a very brief reminder of who we are. Hexatronic is today a global business, supporting customers around the world with products and solutions needed for fiber connectivity and the ever-growing communications needs. We sell products and solutions under the Hexatronic brand and a few other brands as well, and we manufacture in 18 production facilities across 9 different countries. Our turnover is about SEK 7.5 billion annually, and the business is organized in 3 business areas: Fiber Solutions, Harsh Environment and Data Center.

Moving on to look at the quarter that just closed. We had a sales decline of 6%, which was entirely explained by currency headwinds. This is mainly the SEK strengthening against our key selling currencies like U.S. dollar and euro. Overall profitability also saw a year-on-year decline with EBITA margin landing at 8.9% in the quarter. And it was the Fiber Solutions business that caused this profit decline. We saw a weaker-than-expected quarter in both Europe and particularly in North America. On the other hand, our Data Center business overperformed again with another record quarter of very strong growth and profitability. And the Harsh Environment business area also had very solid results, in fact, all-time high with double-digit organic growth.

Our cash flow, which you may recall was negative in the first quarter turned positive as expected with a 74% cash conversion. This contributed to keeping our net debt leverage constant at a rather comfortable 1.9x. So all in all, we were, of course, disappointed by the underperformance in Fiber Solutions, but we also take away a number of positives elsewhere in the business.

Here are a few key events that were announced during the quarter. In April, we refinanced our bank debt, maintaining the key terms and conditions from our previous agreement. We were also very pleased to see our climate targets approved by SBTi, and we renewed a 7-year contract with one of our very long-standing customers, which is Chorus in New Zealand. And then 2 recent events after the end of the quarter. As the performance of Fiber Solutions was weaker than expected, we issued a profit warning together with preliminary results about a week ago. And as response to this weakness, we have initiated a performance improvement program to address those challenges.

Here is an overview of our portfolio with the 3 business areas: Fiber Solutions, Harsh Environment and Data Center. Fiber Solutions is still the largest business, now about 65% of total sales, and the 2 other are roughly 17% to 18% each, slowly but steadily growing their share of total. However, if we look at the EBITA, it's a different and pretty significant picture. Data Center was almost on par with Fiber Solutions in second quarter. And if you add Harsh Environment, these 2 businesses are now generating well over 50% of Hexatronic profits in the quarter.

And we can draw 2 conclusions from this. One is we want to see and we expect to see Harsh Environment and Data Center continue to grow their share. This is primarily where we are investing. This is where we see strong growth opportunities, especially the Data Center is a high-growth asset-light business that we see a lot of value creation from. Harsh Environment is also on a positive trajectory, and we continue to invest in this business as well. And the second conclusion is that clearly, Fiber Solutions is underperforming. We are at 6.4% EBITA in the quarter, which is not where we should be. So I consider this now a turnaround situation. We have invested quite heavily in this business over the last several years, and we are just not seeing satisfactory returns on those investments in the quarter. And that is, of course, the reason we are -- we have initiated a performance improvement program, which we will come back to.

So if we move on and start by taking a little bit closer look at Fiber Solutions. We saw lower-than-expected demand in Europe and in particular, in North America. In the U.S. and Canada, we have a handful of key customers and for different reasons, most of them placed low orders in the quarter. In total, North America was down 23% year-on-year, which was a disappointment, especially since we are aiming to grow in this important market. Our conduit business in North America, so this is the Blue Diamond Industries, we actually saw good volumes but low pricing where year-on-year, there's still a meaningful price decline. Profitability in Fiber Solutions then was hurt by the lower volumes, by price pressure and also to an extent by the business mix as North America is traditionally overrepresented as a profit contributor.

Going forward, here, we expect the market in Europe to continue to be rather challenged during the remainder of the year. It's a market currently characterized by some overcapacity and competition for volume, and we know that other companies are also struggling here. In North America, the market outlook is better, and we're working very hard to broaden our business and customer base and get back to growth. And as mentioned, we have initiated a performance improvement program across Fiber Solutions. Based on where we are, there's a need to adjust our costs, but it's also about shifting resources to where we see growth opportunities and broaden our focus beyond the FTTH segment. And that actually leads me to the next slide.

What we see here is an overview of the different product segments within Fiber Solutions. It's a slide that we have used before, but it's slightly updated. And there have been some questions about market share and whether we're losing market share, especially in the light of some data points and some peers that have a more positive view than our recent performance. And to answer that question, we really need to look a bit more granular at the business mix within Fiber Solutions.

So on the upper left-hand side, this is the fiber to the home or FTTH last mile segment. This has traditionally been Hexatronic's focus area. It's where we have the majority of the business within Fiber Solutions. It served us well for a number of years. But it is at least in Europe today, a market that is still a bit challenged. The growth in the market -- there is growth in the market. It's really coming mostly from the upper right-hand corner, which is the transport and interconnect segment. This is more the backbone of the fiber optic networks, and there's pretty strong growth here driven primarily by the data -- the rapid growth in Data Center. And we are capturing the Data Center growth inside the data centers. We're capturing that in our Data Center business area. The connection between data centers and the infrastructure is within fiber solutions. And this is an area where traditionally, Hexatronic has not had a very big position. We have some business in places like Scandinavia, for example. But here's an opportunity that we could tap more into this growth in the future that we're not really today.

In the middle on the upper side here is the conduits and pipes. So again, this is the Blue Diamond Industries business mostly. And here, we see actually strong volumes, but we see rather low prices still in this business. And then there are some smaller market segments on the bottom here. So we have the submarine cable business. It's more of a niche segment, very good growth prospects and healthy margins in this one. And same for wireless, and then we also have some smaller segments, instruments and tools to round out the portfolio.

So I think -- for me, the conclusion is that the biggest markets are the top left and the top right. And we are at least currently stronger in the segment that doesn't really show the big growth today. There is growth in North America in the fiber to the home, but this is, for us, a smaller business than the one in Europe.

So moving on then to the next slide and the next business area, which is Harsh Environment. Q2 was a good quarter for this business area. In fact, we saw all-time high sales and EBITA with organic growth of 10%. This was on the back of strong project delivery. And as a reminder, this is a largely project-based business. Therefore, it's important to look at the longer-term trends rather than just individual quarters. Nevertheless, we're very happy with the quarter performance. And importantly, the trends here are favorable. We see strong investment into the defense and offshore energy markets, and we expect this to continue.

As we have described before, we continue to focus on margin improving activities, including some CapEx investments in the Rochester Cable business in the U.S. Next and last, but certainly not least, business area is Data Center. And once again, it's a star performer, and I will hand it over to Martin Aberg, our Deputy CEO, and also the leader on that business area.

Thank you, Rikard. So we closed a strong quarter with 35% organic sales growth. Actual sales in the quarter grew 38%. It was negatively impacted by currency, but fully compensated for by the carve-out from Endor that we closed end of last year. Sequentially, it was at a similar level as the previous quarter, which was a record quarter. We have high growth numbers across the business units, but the service market in the U.S. and Europe showed the highest growth in the quarter. In terms of EBITA, it was a record quarter with SEK 72 million or a margin of 20.8%. This is 2 to 3 percentage points higher than our expectations, and this was due to a few larger projects that came in at higher margin than expected.

Moving over to the outlook. As presented during the investor update in March early this year, the Data Center market is expected to show strong growth throughout this decade, especially the Cloud segment that according to independent market research is expected to grow at a sales CAGR of plus 15% from 2025 to 2029. Looking at the second half of this year, we expect continued strong growth year-over-year, keeping in mind that the first half is a stronger period than the second half of the year, and this is due to vacation periods in August and December. We continue to focus our M&A activities towards Harsh Environment and Data Center and have a very healthy pipeline, especially on the Data Center side.

This is a slide from our investor update event, where we talked about further diversifying our Data Center business, both in terms of applications and in terms of segments or end customer markets. Today, we are mainly strong in the cabling services in Data Centers, and this includes design, product management, installation and day 2 services. But during the quarter, we have continued to broaden our indoor services by recruitment within adjacent service areas such as audiovisual, wireless and also security solutions. And security solutions is typically installation of CCTV cameras, access control and video management systems.

In terms of segments or end customer markets, we're also winning more businesses for all the different applications on the left-hand side, and this is towards other markets than data centers. This being hospitals, schools, commercial buildings. Those customers require the same services as our Data Center customers and allow us to further diversify our customer base and market exposure. Further diversification on applications and segments, and this is an important part of the Data Center business unit strategy, both organically and in our strategic acquisition pipeline.

And with that, I hand over to Pernilla to summarize the financials of the quarter.

Thank you, Martin. As Rikard said, we had a total net sales of SEK 1.9 billion for Q2 with an overall decline of 6%. On the other hand, organically, we had a decline of 1%, and that is explained by the weaker-than-expected performance in Fiber Solutions, partly offset by the record quarter for both Harsh Environment and Data Center. And we had 1% acquisition-driven growth from our recent acquisition, Endor within our Data Center business. And we had 6% negative effect on exchange rate for the quarter, primarily attributed to a weaker U.S. dollar, Aussie dollar, New Zealand dollar and Korean won.

If we're looking at our gross margin, our gross margin decreased to 40.1% compared to 42% in Q2 2024. And the reason for that is the weaker-than-expected performance due to lower demand in our FTTH equipment and price pressure within our Fiber Solutions business. And the weaker demand was noted in both North America and Europe and as well as our low capacity utilization and fixed cost coverage in our factories within Fiber Solutions. Operating costs were 27.6% of net sales in the quarter, which was in line with Q2 2024. And the reduced operating cost in absolute numbers is mainly related to lower freight costs, explained by decline in net sales within Fiber Solutions and lower cost for long-term incentive programs.

Overall, we had an EBITA of SEK 169 million or 8.9% compared to Q2 last year of 11%. Net financial items of minus SEK 31 million, that is mainly related to interest expense and tax rate amounted to 30.3% in the quarter compared to 33.1% prior year. The lower tax rate is explained by a higher portion of deductible interest expenses. And earnings per share for the quarter at SEK 0.38 compared to SEK 0.44 last year.

So if we look at Fiber Solutions, our total Fiber Solutions had a sales of SEK 1.2 billion in Q1, with an overall decline of 16%, as I said before, due to the weaker demand of FTTH equipment and price pressure. Organically, it was a decline of 9%. Europe declined with 12%, and that is mainly related to lower performance in Germany, Sweden and U.K., but also in Finland, noted that Finland had a record quarter last year. So it was still a good performance in Finland.

North America declined with 23%, and that is mainly related to Canada with a slowdown in the build-out of FTTH, but also our U.S. business, where some of our customers have placed lower orders. As Rikard said, the conduit business in North America saw good volumes, but very low pricing, where year-over-year is still a meaningful price decline. And APAC finally declined with 8%, but increased with local currency, positive development both in Australia and New Zealand.

We had an EBITDA of SEK 138 million. It's a decline with 40%. Profitability was hurt by the lower volumes, low capacity utilization and continued price pressure, but also by the business mix as North America is traditionally a higher price and margin market. We had depreciation of SEK 59 million or 4.8% of sales. And depreciation in percent of sales has increased by 0.6% compared to last year, and that is mainly due to that we had lower sales. We had low CapEx investments in the quarter, SEK 16 million or 1.3% of sales, which is mainly related to maintenance.

So if we go over to our Harsh Environment business, overall, we had a sales growth of 4% in the quarter, but with an organic growth of 10%, and that is driven by our defense business and the energy sector. And as we previously communicated, the companies within Harsh Environment have an international customer base and a majority of revenues from larger projects, which means that sales per geography can fluctuate between quarters. We had an EBITA of SEK 40 million and margin in line with prior year at 12%. Sequentially, increased profitability and some positive effects from improved production efficiency in Rochester Cable. CapEx investments in the quarter of SEK 9.3 million or 2.8% of sales, and that is mainly related to production and efficiency improvements in Rochester Cable.

If we then look at Data Center, total net sales for Data Center at SEK 344 million with an overall growth of 38% organically, a growth of 35%. It's a strong development in all units, but especially the service business in Europe and North America. And contribution from the acquired businesses is in line with our expectations. We had a strong EBITA margin of 20.8%, although 2 to 3 percentage points higher than expected due to a couple of larger projects with strong margin. CapEx investment is light in the data center business for us. So we had CapEx investments of SEK 3.7 million or 1.1% of sales. Cash flow from the operating activities before changes in working capital of SEK 176 million. Overall, a negative effect on working capital of SEK 45 million.

Accounts receivable has increased with SEK 35 million during the quarter, mainly due to higher sales and customer mix, offset by increased accounts payable. Inventory has increased with SEK 62 million, mainly due to the lower sales within our Fiber Solutions business. But overall, cash flow from operating activities of SEK 131 million and a positive 74% cash conversion. Total CapEx investments in the quarter of SEK 30 million or 1.6% of sales, and that is mainly maintenance investment overall.

Interest-bearing net debt, which corresponds to net debt, excluding lease liabilities, amounted to SEK 1.8 billion at the end of the quarter, which is a decrease of SEK 121 million compared to last year. And that is mainly due to repayment of loans of SEK 32 million and a positive FX effect of SEK 70 million. And that was partly offset by decreased rolling 12 EBITDA, leading to an interest-bearing net debt in relation to pro forma EBITDA on a rolling 12 basis, which is a key ratio that reflects our existing bank covenant. And that is stable compared to the last quarter at 1.9x. At the end of Q2, we had SEK 518 million cash and an unutilized backup facility of SEK 1.1 billion. which gives a liquidity of approximately SEK 1.6 billion, and we have a continued solid financial position.

Okay. Thank you, Pernilla. And if we move on to the summary. So as a summary, again, of the quarter performance, sales were lower by 6% and pretty much all of that was FX driven. EBITA declined in the quarter and landed at a margin of 8.9% of sales, and this was entirely driven by 1 of our 3 business areas, Fiber Solutions. The other 2 business areas both saw record results in the quarter, but not enough to make up for the shortfall in Fiber Solutions, which is the largest of the 3. Our cash flow was strong, generating SEK 131 million, a 74% cash conversion rate, and our net debt leverage was unchanged.

So moving on to the outlook. If we start with Fiber Solutions, the market expectation here is a little different by geography. Europe, we do expect to remain quite subdued, and we do not see a significant improvement in this market in 2025. The U.S. market is showing growth and also the new tax bill, the one big, beautiful bill provides for additional incentives to build infrastructure. So it's early to see, but it should be a positive. We are aiming here for recovery in this market, but we also know that we're still quite dependent on a few larger customers and their build plans. And in Canada, our main customer there expects to continue the year on a low project level.

For Hexatronic specifically, we expect the EBITA margins in Q3 to be in line with Q2 for Fiber Solutions. We have initiated a performance improvement program, but do not expect it to have any material impact in Q3. Data Center, good growth expected to continue with the usual H1 versus first half seasonality. And for Harsh Environment, the third quarter sales are expected to be in line with last year. We saw strong organic growth in this quarter, but as noted, there's a bit of volatility each quarter that this is a very much project-based business. And then finally, we are still focused on executing our M&A pipeline, which is robust and quite exciting. It is focused on Data Center and Harsh Environment. And we do maintain the ambition here to close one or a few deals before the end of the year.

Last slide then before we move on to Q&A. So we are planning an investor update on September 11. There will be a virtual presentation similar to the update that we held in late March when we introduced the business areas and the segment reporting. We will present here an updated strategy and status for all 3 business areas. And we will also provide details of the performance improvement program in Fiber Solutions. And this will be 2 parts. So it's obviously cost and productivity improvements, but it's also investments and strategies for growth in that business. And we will also, at this point, we will introduce financial targets per business area.

So with that, I think we conclude the presentation part and move on to the Q&A.

[Operator Instructions] Jacob Edler, your line is now unmuted.

I just have a first one on the sequential development in Fiber Solutions here in Q2. It was 1% negative organic growth in Q1 and now minus 9% despite, I would say, peak seasonality here. Maybe just some more color specifically, why did we not see the EU seasonality pick up? And also secondly, North America very weak. Can we get some more color maybe per region, volumes versus price? What was the main issue on these 2 regions?

Yes. Thank you, Jacob. I think that the main surprise here really was North America. This was where we have seen for the longer perspective, we've seen growth in that market that we were expecting that to continue and it didn't. Like I said, there are really 2 factors here. One is on the conduit and pipe side of things where volumes are actually strong. It's just that prices are lower and particularly when we look at it on a year-on-year basis, that has an impact. But then for the legacy Hexatronic U.S. and Canada business, we've seen that there are a number of larger customers who placed lower orders and have slowed down their build rates in the quarter.

Okay. Great. And then maybe getting to BDI then on the conduit side. I mean, we've seen, as you said, the price pressure for some time. I'm just wondering more long term, we've seen some changes to BEAD and other public stimulus programs here recently. We know that you have a large competitor in the U.S. being Dura-Line. How concerned are you about the mid -- long-term price pressure aspect here in BDI specifically?

I think long term, this will balance out. If you follow Orbia, you know that Dura-Line have been going through some tough times as well. It looks from the outside like they turned a little bit of a corner last quarter. And clearly, there are -- volumes are increasing in the market, but we're still at a point where those volumes are absorbing existing capacity, I would say. But once that balances out, then I think that will have a positive impact on the pricing as well.

Great. And then maybe my second last question. On the guidance in Fiber Solutions, you've said similar margins in Q3 versus what you reported. What does that mean for Q4? Because typically, you have a bit this favorable seasonality there? And how much should we expect could be offset by the improvement program you're announcing in September? Should we be a bit cautious on Q4 margins as well? Or anything to say there?

So the seasonality effect, we expect to be similar as before. We're not giving guidance at this point on Q4. We're giving guidance on Q3. And then obviously, we have the update in September where we can provide more color and more updates.

Okay. Great. Great. And last question is just coming down to Data Centers. Obviously, a very strong performance here, both in Q1 and Q2. What I've noted though is that maybe even more in Q1, but Endor seems to have had a quite strong development. Has it been related to any project -- final project settlements that are not returning? And can we get any indications on what type of margins we've seen on these orders that you've been talking about?

Sure. Generally, Endor has performed stronger than our expectations so far. It's been a good integration and the ambition is that we should also sell more of our offering through them. But as you rightly put it, it's a lower-margin business than the rest of the Data Center business. So I would say it's a sub-10% EBITDA business on the Endor side. So it's mainly contributing on the sales in the first half of the year.

Max Bacco, your line is now unmuted.

Perhaps the first question, returning to the first question of Jacob on the customers in North America, both in Canada and the U.S. that placed lower orders here in the quarter. And you did mention during the presentation, Rikard, it was for a number of different reasons, but perhaps if you could mention a few of those reasons. What are the customers saying? Why are they slowing down so suddenly?

Yes. So it's -- in one case, it's trouble with getting the right permits for the build-out, at least that's what they're telling us. There was another customer that was a bit overstocked. So they had purchased too much in the prior quarters. And then there's one customer that is going through -- they have recently done a major acquisition, and they have come up on their financial leverage. So they're very focused on cash flow right now. They need to delever and therefore, they're slowing down their build-out. I hope that answers your questions, Max. So those were some examples for 3 of the main ones.

The next question comes from Adrian Gilani from ABG Sundal Collier.

I'm your moderator today, and I will do a little bit of refreshing. So wait a little and we will get back to the phone questions shortly.

Let's come back to Max as well and see if that answered his question and whether he had additional follow-up questions, please.

Adrian Gilani, your line is now unmuted. The next question comes from Fredrik Nilsson from Redeye.

There might be an issue at my point, but I haven't heard anything in the last few minutes. I guess it might be the same for the other participants by the phone?

Yes. It seems that we have some technical issue. We weren't able to get back to Max, and we were not able to get a question from Adrian. Did you -- Fredrik, did you hear my response to Max's question?

No, I did not. But I can hear you now.

Okay. So if you didn't hear it, I think most people didn't hear it. So let's repeat the answer then. So Max asked about some specific examples of why we've seen some of the main customers in North America place lower orders. And I responded that in one case, it was as simple as they had overpurchased a bit in prior quarters. So they ended up with an overstock situation and had to slow down for that.

And in one other example, at least what we're hearing from the customers that they are struggling with getting the permitting on time for their builds, and that's held them back in the Western U.S. business. And a third example was a customer that has gone through a major acquisition or merger, and they're in a situation now where they have taken on financial leverage, which they are very focused on reducing their financial leverage. So cash flow is an immediate priority, and therefore, they have slowed down on their CapEx and build-out for the season.

Did that come across, Fredrik?

Yes, yes, it did. To me at least, yes.

Okay. Thank you. And did you have a question also?

Yes, yes. I'm interested in some kind of update for your long-term outlook for fiber to the home. I mean, in the last few years, you've been quite optimistic about the long term despite some short-term hiccups. So it would be interesting to hear, are you less optimistic about that going forward? Is that the right interpretation? Or what's your outlook there?

I think this is one of those questions that we will come back in September and address, Fredrik. I think right now, we will share what we have shared that in the short to medium term, we continue to see growth in that market in the U.S. in particular, and rather flat in Europe.

Okay, I see. And also, you touched upon it for the duct business, but the revised BEAD Program, to me, it seemed to be a lot less in favor of fiber because of the very low requirements. What's your view on that? How will that change the demand for fiber in general, although you have a limited exposure to the BEAD fiber deal in general?

Yes. I think your guess is as good as ours and anyone's. Even talking to the experts, they have quite different views on this. So it remains to be seen. I think if you listened carefully to what's coming from the administration and read between the lines, there was for a while a strong push towards alternative technologies, whether or not that was related to certain individuals linked to the satellite industry, I don't know. But it seems to be a little bit different to lately. There's -- BEAD seems to be landing somewhere in the middle that it's technology neutral, but there's a concept of prioritized build-outs. And at least the industry -- some industry interpretation of that is that, that will need to go to fiber and that there's a strong case that will go to fiber.

So the experts that I've talked to expect that there will be slightly more of fixed wireless and satellite, but there will still be a chunk of fiber into that program. But interestingly also, very recently, was the one big, beautiful bill announcement. And it's still early days, but the tax incentives to build out and to be able to immediately depreciate and deduct CapEx for fiber build-out there looks to us like it could be a pretty big deal and it's something that could perhaps more than BEAD boost investment into fiber build-out.

The next question comes from Adrian Gilani from ABG Sundal Collier.

Yes. I missed a couple of questions as the call cut out for me, so I apologize if any of these are repeats. But on the outlook statement for Fiber Solutions, you mentioned unchanged conditions in Europe, and then you simply write that you're working to increase sales in the U.S. Should we read that as you're expecting sales will be higher in the U.S. in coming quarters or not? Because the wording on that is a bit uncertain, I would say.

I think that's a fair observation, Adrian. We are working hard to that. We are hopeful that it will happen. But to be honest, we -- I would have thought the same for the second quarter. So we're a bit cautious on that outlook.

Okay. So your expectation is that these specific customers are keeping their sort of cautious view on fiber rollouts?

Some of them will.

Okay. Understood. And then for the second one on the performance improvement program, I'm sort of struggling to understand whether it is a cost-cutting program or not since on the one hand, you mentioned cost reductions as part of it. But then you also say it includes investing in new growth areas, which, I mean, would cost money on the other hand. So are you able to say that the net effect of this is a lower cost base? Or do the new investments cancel out the cost reduction?

No. The net effect will be lower costs, but we will take some cost savings and redeploy. I mean it's a case of -- I don't know how to translate, I would say, in Swedish, [Foreign Language] at the same -- so accelerate and break at the same time, and that's always a fine balance. But for sure, it will not be a zero-sum game.

Okay. Understood. And perhaps a final one on Harsh Environment. I know you've been clear that it's a bit of a lumpy business and you shouldn't necessarily look quarter-over-quarter. But if you expect flat sales year-on-year, that would imply quite a big drop from the Q2 level. So is that just explained by timing of orders in the specific quarter? Or is there an underlying component of a slowdown in that as well?

No, it's exactly the timing, right? So we're happy with this quarter, but we also want to be transparent that there is a lumpiness here, and it was probably a little bit favorable in this quarter. And if it's unfavorable next quarter, then we shouldn't panic about that. The underlying trend here is good, it's solid. The market is there. And as you know, there's a lot of investment going into defense industry right now. So that certainly is a driver as well as offshore energy.

The next question comes from Stefan Ward from Pareto Securities.

I'd like to ask a couple of questions on your investment plans. It looks like CapEx has come down quite a bit over the year. How should we think about the CapEx level going forward? And what will you prioritize between -- if there's no growth, you seem to see not that much growth opportunity ahead. Would it be more reasonable for you to amortize the debt rather than invest if we can't see any growth?

So let me answer on the priorities and the strategy, and then I trust Pernilla will comment on the numbers. Where we see CapEx? So we have, as you know, Stefan, we've invested quite heavily for a few years in capacity in Fiber Solutions. So we're well invested there. We have plenty of capacity. There could be segments, and this would be segments adjacent but sort of outside of the fiber to the home where we would still invest for capacity and growth. As an example, we see the submarine cable business as a business that is growing and where we have a certain fixed capacity. But largely, the big lump of investment in Fiber Solutions, I think, is behind us.

For Harsh Environment, we continue to invest. Some of this investment is for growth. Some of it is simply to bring Rochester up to standards. So it's a combination of necessary maintenance investment and some that will improve productivity and growth. And then the data center business, we know is rather capital light. So we don't foresee big investment. We don't need big investments in CapEx in that business. So where this all leads us, Pernilla?

No, what we have earlier communicated that overall, approximately 3% to 4% for the total company, where Harsh Environment is more like 3% to 5%. Fiber Solutions, 2% to 3% and Data Center 1% to 2%. And overall, then 1% to 2% is maintenance. That was what we communicated -- have communicated earlier as well.

And on your question -- sorry, just because you asked about paying down on the debt from the cash flow. Of course, in the short term, that's an option. I think the more exciting option here is to continue on the acquisition. We do see a big opportunity, particularly in Data Center to create value from the combination of organic and acquisitive growth there. And the targets are out there. The valuations are reasonable. So this is an area where we certainly would like to further accelerate.

I have a couple of follow-on then. On the CapEx side, the figures you mentioned, Pernilla, are those to be characterized as maintenance levels? Or are there any growth initiatives in those CapEx levels?

Yes. So as I said, 1% to 2% is probably maintenance out of that. And there are specific areas like Rikard was saying, if there's something outside the FTTH business, we could do that. But this is also then over a medium term, our guidance. We are lower at this point overall.

Okay. Then a follow-up on the Rochester. So I think we've been -- it's been going on for quite a long time, the efficiency improvements in that business. Shouldn't you been able to improve that efficiency more rapidly? I think the acquisition, when was it concluded, it was in mid-2023 or something, if I'm not mistaken.

Yes. So as we also earlier communicated, this has definitely taken longer time than we expected, and that has to do with that it was heavily underinvested overall, not just the cable when it comes to maintenance. And Stefan, one of the reasons for taking longer time is basically that it takes more or less 1 year when we have ordered a new machine for maintenance updates before we get that. So it has taken us longer time than we initially thought for sure.

I would also like some color on Rikard's comment on not losing market share because all the signals that I see is that there is volume growth in -- especially in the North American market. And the guidance from sector peers looks also to me at least more aggressive than what you are describing. So how -- I mean, how can you not lose market share if you lose revenues of 23% in the North American business?

Well, what I can say quite confidently is we're not losing -- we haven't lost customers. We haven't lost accounts, right? But maybe I didn't do a good job of presenting. But you're right, Stefan. There's growth in the market and the bulk of that growth really is in that backbone segment, the high fiber count and the data center interconnect business. This really is driving the market right now, and it turns up in some of our peers in their numbers that have -- and they have much heavier exposure into that business. We're not big in that business, particularly in North America.

Okay. Any comment on, I mean, the signals that we've got from AT&T following this bill that was passed a couple of weeks ago, they raised their fiber rollout ambitions. It looks like they're increasing activity in the market. Is there any way that you can sort of participate in that, in their fiber expansion plans? Or how do you view that development?

Well, never say never. But today, we are not really present with the Tier 1 builders. We have had -- right or wrong, we've had a strategy for a while to focus on the Tier 2 and Tier 3, the altnets. But I think you're right, the Tier 1 networks are expanding, and they have reacted positively to these tax incentives. Again, I would expect if it's positive for AT&T, it should be similarly positive also for our customers, but it's a little bit early for us to see the effects of that.

Can you also give an update on volumes and price for -- especially Germany and U.K. and the European would be helpful also, please.

I think Germany is the market that is toughest in Europe price-wise, at least of our main markets. Volumes are okay, but pricing is quite challenging. The U.K. is a little bit better. Also in the U.K., we have a couple of key customers that have slowed down their build-out. And I think one of them we may have disclosed previously who is a customer. I'm looking around the table here, no? No. Okay. So we're not disclosing that. But there's, again, pretty specifically for a couple of customers are slowing down their build-out. And also, as we have talked about before, what we're seeing, particularly in the U.K. is a shift from focusing on homes passed to homes connected.

And you cannot participate in the homes connected...

We do, but the SEK or dollar or pound sterling per home is lower for the home connected than for a home passed.

But do you still see -- do you see -- for Hexatronic, do you see growth opportunities in these 2 sort of key markets for Europe? Or do you think that penetration rates will stay at the current levels?

Well, the penetration rates will go up. I think the question is, will the number of additional homes passed and homes connected per year increase or not? It's very hard to say. In the short to medium term, we have a view that this is a rather mature market.

[Operator Instructions] The next question comes from Jacob Edler from Danske Bank.

I just had one follow-up. I appreciate the picture you had on the Fiber Solutions portfolio, so to speak. But I don't know if you're able to do it at this point, but maybe it could be a pointer to September, if you could provide some percentages of how much of the business actually is within last mile conduit and pipes, yes, et cetera, interconnect networks. If we just could get some color on that and maybe also specifically for EU and the U.S., that would be nice to get an update on those percentages at some point.

Yes. Point taken, Jacob, if you saw, we had indicated Hexatronic, whether it was high or low or medium, we hear that it would be requested that we would give some specific numbers. I think we'll have to think about that if we want to expose that or not.

Okay. Cool. Maybe a last question while I have you on the line. We just talked about the volume and price in the EU with Stefan, but can you just give some color on volume and price for the U.S.? Can you say anything on how much the price pressure actually is within BDI right now or something, some more color?

Yes. So it's a little bit different picture between the different businesses, the 2 main ones being BDI and Hexatronic U.S. Hexatronic U.S. pricing is fine, I would say. Here, it's more a matter of getting back the volumes. For BDI, volumes are fine, but prices are quite low. And again, we're not seeing prices -- we're not seeing market prices deteriorating on a month-to-month or quarter-to-quarter level. But here, we are comparing with last year. And clearly, prices have settled on a lower level than they were a year ago.

Yes. Okay. But when you say volumes are fine in BDI, do you mean up year-over-year? Or how should I...

Yes. Yes.

Okay. Cool. So taking out some FX, there is some pretty hefty price pressure, right? Sure. I mean with the 23% decline and then adjusting for FX, there is some notable price pressure year-over-year, right?

Yes.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Okay. So let's move over then to some of the written questions that we've got. The first question is, can you describe the offering in Data Center? How much is product versus service? And who are your main competitors in this segment? How big can your Data Center segment become over the next 18 to 24 months? Martin?

Sure. So if we start with our offering. On the product side, we have connectivity solutions that being fiber optical assemblies and network products, patch panels, ODF and similar. We also have containment, and that is really passive airflow management designed to reduce energy. And lastly, we have local area networks cables, and that is really cabling data video and transmission, typically for commercial buildings and campuses. So this product offering, we have that predominantly serving enterprise and colocation market today.

On the services side, we have ICT services, and I briefly touched upon that before, design installation and mostly for hybrid scales, but we offer that also for colocation and enterprise customers. If we look at the split, plus 50% today is on the services side, and that is where we see the main growth going forward. And on your -- and really looking at the competition side of it on your question is that on the services side, it's really fragmented. So it's ideal to be a part of that consolidation, and that's why we also have a very interesting pipeline of potential candidates for acquisitions, both in Europe and in the U.S.

And on your question, how big Data Center can be over the next 18 to 12, 24 months, we will -- in September, we'll discuss part of this when we get back to the -- also providing financial targets per business units. We'll come back on that question.

Okay. Let's continue with one more question within the Data Center business. Data Center consume a lot of electricity. Can you see any problems with this with the continued expansion?

I think that is a correct observation. And in certain parts of the market like the U.K., we see that and in some regions in the U.S. But basically, what we see, we don't see any real issues in terms of expansion. It's more that new regions are addressed, like the Nordics is a key interest and also change also in the geographies in North America. So still very interesting area still to continue on this expansion.

And then another question here. With Fiber Solutions well below 10% margin, it looks unrealistic for the company to reach its EBITA margin target of 15% to 17%. Can you please help how we should think about the medium- to longer-term margin potential for Hexatronic?

Yes. So again, this is something that we will come back to in September when we will introduce financial targets by business area. As you observed here, Stefan, the different business areas today have different margins and different dynamics as well. So we actually think that longer term, it's more relevant to look at it specific for business area than necessarily Hexatronic average. So we will come back and clarify and provide guidance and details on that in September.

Okay. Looks like we are done with the questions. Thank you, everyone, for calling in, and hope to see you again on September 11. Thank you.