Solar A/S Aktie

Good day and thank you for standing by. Welcome to the Solar A/S Q2 Report 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, CEO, Jens Andersen. Please go ahead.

Thank you. Welcome to you all to our second Q conference call. Please go to the first slide. Let me provide a brief update on our key strategic priorities and the progress we have made during the period. Starting with Norway. We successfully completed the integration of Sonepar Norge in the second quarter of 2026. The integration has proceeded according to plan and represents an important milestone for the whole Solar Group. Our focus is now on realizing the operational benefits from the combination, strengthening our market position and ensuring that customers and employees continue to experience a seamless transition.

Turning to Kumla. The logistics center has now been commissionized and is fully operational. More broadly, Kumla marks the completion of a significant investment cycle over our logistics network in the core business. That has taken some years and we have heavily invested and expanded and modernized our automation of our warehouses facilities across our Nordic markets. With these projects now largely completed, we have established a modern and scalable logistics platform that supports both future growth and hopefully also improved customer service. As we move forward, the focus shifts from construction and implementation to capturing the benefits through higher productivity, greater efficiency and stronger return on the huge investments we have made.

On the digital side, we have initiated the rollout of a new customer-facing platform. The platform has successfully been launched in our smallest entity and that is on the Faroe Islands just to experience all things equal. And we have so far seen a valuable experience and the feedback we got from the customers has been very promising. We are also progressing the next phase of integration, including the implementation of a new search engine on the existing platform. These initiatives are aimed at improving the customer experience, increase our digital engagement, which are already high and making it easier for customers to do business with Solar.

Finally, a few comments on what we see in the market at the moment. We are seeing early signs of improvement in installation activities, which is encouraging. However, market conditions remain soft across much of the industry and visible on timing of a broader recovery remains a little bit unclear and limited. The main expectation continues to be MAG45, where activity levels remain relatively robust. At the same time, trade continues to show positive momentum, supported by several large-scale projects opportunities across the region. Overall, while we remain cautious about the near-term market outlook, we continue to execute on strategic initiatives within our control. Last but not least, I will tell we have now strengthened our operational platform, advanced our digital capabilities and completed several important investments that position us very well in the market and the coming years.

I will now give the word to Michael for some financial highlights and our guidance. Please, Michael?

Thank you, Jens. Please turn to Page #5. If we take one step back and look at the period we've been, in 2024, we were in an upward trend that gradually moved us into positive territory and this continued into Q1 2025, which you can show in the figure -- which you can see in the figure, where we hit plus 6.5% in organic growth. The remaining part of 2025 was headwind with minus 6.1% in Q4. This gradually turned in Q1 with minus 4.2%, partly due to the harsh winter condition, which mainly was an issue in Norway and Denmark. The turning point was the start of March and this has continued throughout Q2 as expected, which now delivered strong organic growth of 6.1% when adjusted for a number of working days. This resulted in a revenue of DKK 3.4 billion versus DKK 3 billion the previous year. Now please notice that the acquisition of Sonepar in Norway added almost DKK 200 million in revenue in the quarter.

If you look at the growth, we saw positive growth in all main segments and in all main markets. Installation, particularly Sweden and Poland, delivered strong growth with the latter delivering strong double-digit growth. Within the industry, Denmark was the only one who was below last year. So if we take a closer look at this, infrastructure remains challenged, whereas as expected, MRO OEM were more stagnant. We still believe that over time, infrastructure will improve. But currently, the main part of the investments are within high voltage, which to a very large extent, is direct business between the grid owner and the manufacturer of cables. As we gradually move on, we will also benefit from the huge investments that are coming through. In Norway, we also saw a stagnant development with infrastructure and Marine & Offshore. MAG45, as Jens said returned to growth, actually slightly earlier than we initially expected. And we can see that the order pipeline continues to increase, which gives us confidence that the growth will continue throughout H2.

Now please turn to Page #6. Now an EBITDA of DKK 85 million -- DKK 84 million, sorry, Q2 was in line with our expectation. Integration and restructuring costs amounted to DKK 38 million, which was also as expected. So if we compare the underlying EBITDA, it's DKK 122 million, which is slightly above what we saw last year. If you look at the figure, you can see that COGS had a decrease of 1.2% on the margin compared to last year, and this is despite the cyclic inventory gains of approximately DKK 20 million. Of the 1.2%, approximately 25% can be explained by increasing cost to freight due to the increasing fuel cost and we have not been able, as expected, to pass this fully on to the market.

The drop we see is spread across market segments and subsegments. It is our assessment, therefore, that there is a fierce competition in the market, but we also see a minor negative effect from the mix with more low-margin customers, particularly also within projects coming through. Cost initiatives the last couple of years, of course, combined with the growth has ensured that staff costs actually had a positive impact on the margin. As in previous quarters, we can see that loss on trade receivables remains well under control.

Now please turn to Page 7. We take a short look at H1. Then underlying EBITDA of DKK 212 million, we came out slightly below last year at DKK 243 million. A substantial part of this can be explained by the harsh winter conditions we saw in Q1, where particularly in Norway and Denmark were very hard hit. The loss of gross margin was also on the half year substantial as we announced when we gave our guidance despite these additional cyclic inventory gains that we've seen here in Q2. Now despite the headwind we saw in Q1, we managed to catch up in Q2, enabled us to deliver a total organic growth of 0.8%. However, we've not been able quite to catch up with the earnings that we lost in Q1, meaning that if you look at H2, we remain slightly below the midrange of our guidance as regards earnings.

Now please turn to Page #8. Now operating activities came out with minus DKK 267 million. If we take a closer look at it, we can see that there is an increase in inventory, meaning that we have not normalized inventory. Now this is, as announced due to the fact that we did additional purchases in Q2 in order to counter the price increases that we saw. We decided to accelerate this further compared to our initial expectations. We see the benefit from this that we have been able to now raise our expectations from DKK 20 million to DKK 40 million in cyclic inventory gains. We, of course, expect the inventory to normalize during H2. If we look at the receivables, we also see an increase and it's simply due to a very strong June compared to March. Short on the investing activities, we spent DKK 79 million, of which the DKK 39 million is PPE. Of this, the main part, DKK 26 million relates to Kumla, meaning that there remains between DKK 20 million to DKK 25 million, and then we are done with the investments in Kumla.

Now please turn to Page #9. If you look at the net working capital, we also see a trend shift, and it started to increase here in Q4. We think this is temporary. We ended on 17.7% versus 15.1% last year. The inventory being a main part of the explanation, which is approximately DKK 250 million higher. And again, bear in mind, this is not a coincidence. It is based on a decision that we have made in order to counter the price increases. If you look at the gearing consequence of this, combined with the investment is that we now see an increase to 5.1%. This is still within our covenants, but of course, it's outside our range. This was expected and the drivers being net working capital, which will normalize over the year than the H2 and similar investments. We expect investments to come down substantially here in H2 now to a normal level, and thereby, the game will start to reduce from now on.

Please turn to Page #10. Now normally, we deal with macroeconomic uncertainty, but the environment we're operating in now also contains geopolitical uncertainty, and we've not really seen any relief of this during 2026. In our most likely scenario, meaning the midrange, we still expect all our markets to post stagnant growth with installation being slightly more positive and industry slightly more negative, MAG being excluded from this. So our outlook reflects a continued decline in gross margin, mainly driven by the pressure of sale prices. So despite the cycling inventory gains, which we have increased now to DKK 40 million, we do not expect this to wear off. We expect the development we saw in Q2 to continue, meaning that the gains are offset by the competition within the market.

We reconfirm our revenue guidance between DKK 12.9 billion and DKK 13.4 billion, which is equal to an organic growth in the range of approximately minus 1.5% to plus 3.5%. And also our EBITDA, we reconfirm to a range of DKK 400 million to DKK 480 million and still approximately DKK 75 million in restructuring and integration costs. As said before, this is a transition year mainly in Norway. And since we're now in all material aspects are done with the integration, we'll gradually doing it to start to see the benefits of the acquisition that we did in Norway, where we expect that it will strengthen the margin for the group going forward. Thank you.

Thank you, Michael. So now it's time for questions. So please, if you have any.

[Operator Instructions] We will now take the first question from the line of Kristian Tornøe from SEB.

Yes. A couple of questions from me. So it seems that your key headache here is the gross margin and this price pressure you referred to. However, I cannot help thinking that now that you are showing decent growth and continued gross margin pressure that you might contribute to this price pressure yourself. Is there an element of that, that you are accepting lower prices to gain volumes?

I think it's a fair point that we are part of the problem, but hopefully also a part of the solution. In other aspects, we also have a lot of projects going on at the moment. And that, of course, also put a pressure on the margin. But meanwhile, also that the freight costs are really a heavy burden, I think that goes for all in our industry at the moment. So -- but it's a fair point that we are part of the problem, at least for a moment.

And you said you're also part of the solution. So how will you get the gross margin up? And maybe firstly, am I correct in interpreting your guidance that you don't expect the gross margin to improve in the second half of the year? And then longer term, how should we expect that you can improve this?

So short term, we don't expect any substantial improvement on the margin. And what we can see is also that the price increases that we see from the suppliers, it takes some time to put them into the market. I think if we compare to the situation in 2022, where we also had substantial gains on our inventory, the situation were different. There was simply a shortage then and a high demand that drove up the price increases. What we see is the driver of the price increases here is cost, it's energy basically. And at the same time, the demand is much softer.

So there seems to be -- and at least what we've seen so far is that people, including us, tend to sell out what we have on the shelves at the old prices that we bought to basically. And first, when you kind of run out of it, then you start to increase prices. This is also why these gains kind of end up in the market to a large extent. So I would say I would still expect a gradually improvement of the margin, but don't expect any miracles, not short term at least.

Fair enough. And then just some clarification. So the DKK 38 million in nonrecurring items in the quarter, they all sit in the non-allocated segment. Is that correct?

Yes, fully correct. It's a lot of the segment note.

Yes.

So if I take DKK 38 million out of that segment, you are at DKK 215 million. Is that the real underlying number? Is that -- I mean, what we should then work with going forward?

To some, it's a bit more tricky than that because -- you have all the costs from Sonepar coming in. And the integration didn't happen overnight. It's a gradual process where we are reducing the number of people in total, not just Sonepar, also Solar people goes without saying. So -- and here, we're talking about people who are in other lines in the segment reporting, people at the central warehouse, for instance, who closed down the central warehouse in [ Halmstad ], but these people were reported as handling costs, but they are out now and they've been that since I think the cleanup was finalized in June. So it's not completely true as such. You have to wait until you get to H2 actually, basically.

Yes, you have the full year effect.

Then you start to see a more correct picture of the running rate.

But just to clarify, so what you're alluding to, that's the synergies essentially the savings. Will they also impact – will they impact the nonallocated segment? Or will they be...

To some extent, because you also have overhead that has been reduced that were in Sonepar. It's clear when you add 2 companies together, merge them, you don't need 2 of everything, which also goes for the overhead cost. So they are also impacted by it.

Fair enough. And then just the initiative on this customer-facing platform. You've launched in the Faroe Islands, which is obviously a fairly small market. So when you sort of go to the next phase and roll this out in larger markets, should we expect that to sort of drive elevated cost again? Or maybe just help me, I mean, put perspective on the cost of that.

I think it's more a question of bringing us on par or above where our competitors are. It holds some clear advantages compared to where are today, but I think it's difficult to put an exact figure on it, what we benefit from it. It gives us some opportunities, but it will be early days. And regardless, you will not see any impact this year that...

Not at all, no.

If we might have some more data, we can disclose when it come up next year. But right now, it's simply too early days. And we cannot use the Faroe Islands you clearly pointed out, it's a very small area. But there are some good impact from it, but the figures is simply too small for that we dare use them as a basis. So we need more transparency before we can share anything with you.

Fair enough. I was equally thinking sort of implementation costs. So should you roll this out in say, the Danish market, should we expect a quarter or 2 with elevated cost as a consequence?

No.

No. We already have taken a part of it. So I don't expect that.

Fair enough. So obviously, what I'm with several questions trying to get at is that Q3 should be a fairly clean sheet and going forward.

Close to. Q4 should be.

Q4 should be. Q3, we still have a minor cleanup activities in Norway and also we need to clean up the old central warehouse. So that's -- but it's...

But within a few months, it's done.

Yes.

All right. Sounds good. And then just my last question here goes to your net working capital and financial gearing. Where do you expect that to go at the end of the year?

If we do a 10,000 foot -- we take a 10,000-foot look at this. We have like -- I think it's DKK 2.3 billion in debt right now. We expect inventory to normalize that you bring in at least DKK 250 million. You'll have a seasonal effect between DKK 300 million to DKK 400 million, say, for the sake of a rationale DKK 350 million. The P&L will bring in, but there's some money as well. But there's also going to be some investment still. It's not like it's going to be 0. So that's going to bring in, I don't know, DKK 100 million, DKK 150 million, I would say-ish. That will bring the debt down to around DKK 1.6 billion, which equals like, I think, 3.5, something like that.

So we're still a little bit above.

Still slightly above. But I think -- I mean, this is a very high-level guesstimate based on what we have disclosed and what you know if you've been looking at Solar sometimes, you'll end up around 3.5, I think it's a fair guess.

That makes sense. And I guess that also means that in terms of you to start sort of increasing the payout to shareholders, we probably need to wait another year.

I think that will be -- it's a Board decision, and this will be based, of course, not only on the historic development, but also on the expectations for 2027. So it's way too early to make any clear assessments. But of course, you will not see payout ratios of what you saw in '22, '23 and '24, but let's see.

I would now like to hand over to Dennis Callesen for any written questions.

We have received 2 written questions so far. The first one goes, you're maintaining the EBITDA guidance of DKK 400 million to DKK 480 million despite EBITDA of only DKK 143 million in H1. What specifically gives you confidence that the underlying business can deliver the significant step-up in EBITDA in H2? And how much of that improvement is volume-driven versus margin driven?

Yes. Again, if you do a 10,000-foot calculation from 10,000-foot distance, you can see, yes, it's true we ended DKK 143 million. But first half were affected by one-off of DKK 69 million. We had very harsh winter condition that costed us between DKK 20 million to DKK 30 million, meaning that the underlying performance was like DKK 240-ish million, not taking into consideration the ramp down in costs of Sonepar. So we leave that out. Now if you take DKK 143 million and you add DKK 240 million to that, that brings you in the DK 380-ish million, right? That's still a way to go.

Then you know there is seasonality in the costs. And staff costs, mainly the main driver being holiday -- provision for holiday basically maybe a bit too simple, but when people take leave in H2, we release the money from the provision for holiday, whereas when they have -- when they are on leave in H1, it's a lot -- to a large extent, it's holidays, which means it's paid by Solar. Traditional, this brings in DKK 40 million to DKK 50 million. That's the delta. So if you add these figures together, you actually end up around DKK 425 million to DKK 440 million. It is all other things equal, I know the world never is that. But that gives you an idea about why we feel fairly comfortable that this is within reach, I would say.

Second question. Q2 showed a 6.1% adjusted organic growth which is a significant improvement from Q1. How much of this reflects a general improvement in underlying demand and how much is simply a recovery from the weak winter conditions?

I would say the weak weather conditions hit us very hard in the first half year. And I don't believe that we will see that we will catch that up. We have to understand that then people at least should do overtime, and they don't, at least not in the Nordics. So I think it's postponed more or less forever or it's in front of us. So we need to catch up in other ways. And then what we see, as Michael also stated, that we saw a pretty okay catch-up from -- or pick up in March. And so far, we have seen the same pattern. So don't expect that what we left in the first Q that we will get that for free because I think simply we are pushing that in front of us, so to say if you understand what I mean.

No further written questions. Okay.

Then I think we will say have a nice day to you all, and thanks for listening in. And if there's any other questions, you're always free to call one of us. So bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Solar A/S Q1 Report 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jens Andersen, CEO. Please go ahead.

Thank you. Good morning, and thanks for joining us today. I will focus my update on execution and progress across a few key areas: integration of Sonepar, customer platform, our operations in Kumla and then finally, also some growth segments where we see increasing activity and relevance for Solar. After that, I will give the word to Michael, our CFO, who will give you some insights into our financials.

Let's start with the integration of Sonepar Norge. Overall, the integration is progressing ahead of plan, both operationally and commercially. Execution is strong, and collaboration between teams is working well. Importantly, we already see synergies taking shape. Operational efficiency are improving, and the commercial side, we are seeing positive momentum from leveraging combined capabilities and customer access. From a financial perspective, we now expect integration costs to be DKK 10 million, lower than originally planned. This reflects disciplined cost control and a very pragmatic approach to integration.

Turning next to our customer-facing digital platform. We are approaching an important milestone with our new platform scheduled to be launched on our smallest entity, that is Solar Faroe Islands, during June. This launch marks a concrete step forward in a broader digital strategy. The platform is designed to simplify how customers interact with Solar. It enables an easier buying experience, supports better visibility and allow us to engage customers in a more consistent and scalable way. Beyond the initial launch, the platform is a key enabler for cross-selling, higher customer engagement and more digital end-to-end customer journey. Just as importantly, it provides a modern, flexible foundation that can be rolled out and expanded across additional markets over time.

Let me now turn to operations and especially to our new distribution center in Kumla. Operations have been ramped up as planned. AutoStore is now operating, and the long-goods systems are ready for operation and currently being loaded. This has been a complex and important transformation, and execution is tracking well. At this point, Kumla is handling more than 2/3 of Solar Sverige's total order volume per day. We remain on track for the warehouse to take over all distribution in June. Kumla is a critical cornerstone in strengthening our logistics platform in Sweden. It supports high efficiency, improved service level, better scalability and ultimately better customer satisfaction. Over time, it will also support margin resilience by improving cost efficiency and throughput.

Next slide, please. If we look at the growth areas or segments, we see, and I think others are seeing the same, the defense industry and critical infrastructure. We continue to see that the defense industry construction and related critical infrastructure, this is a segment where requirements for reliability, documentation and security are particularly high. In this context, it's worth noting that Solar is already ISO 27001 certified, and that plays an important role as it supports confidence in how we handle information and operate securely. This strengthens Solar's position as a reliable partner in projects involving sensitive infrastructure and security requirements.

The next one we are working with at the moment is data centers, and it's particularly small- and medium-sized projects. Demand in this segment continues to grow, driven by increasingly needs for local capacity, resilience, uptime and information security. While much attention is often given to large hyperscale facilities, we see attractive opportunities in small and midsized projects where flexibility, logistics and standardization matters. Solar is well positioned to support these projects, and we see already now that orders are coming in through small and midsized data centers.

Last but not least, we have a special focus on what we call small installers or small installation contractors. We call it smart price customers. The new initiative is simply to do it as simple as possible, to work with Solar, so a simpler pricing, faster onboarding and an even more digital approach and an easier customer experience. This is to aim and reduce complexity, improve accessibility and make it easier for smaller contracts to do business with Solar.

Before I give the word, I will summarize our priorities. Integration is ahead of our plan and delivering synergies faster than expected. Our logistics and digital performance are scaling as intended, and we are seeing increased activity in important segments such as defense, critical infrastructure and data centers. And at least, we are sharpening our customer proportions to support long-term growth. We remain focused and disciplined executing, strong customer relations and hopefully, over time, sustainable value creation for our shareholders.

Thanks for your attention and look forward to your questions. But now I will give the word to Michael. Please, Michael.

Thank you, Jens. Let's turn to Page #6. Now Q1 was quite a roller coaster quarter. We started out weak in January, and that was known when we came out with the guidance, followed by an even weaker February, where we came down to minus 7.4%, in negative growth. And then things started to turn. So we ended in March with minus 0.8%. And if you take Solar Polaris out of the equation, which makes things more comparable, we are actually growing with plus 1% now. So the turning point that we saw materialize late Q1 has continued into April as expected, but also the fierce competition -- price competition regime has also continued. Now this resulted in a revenue of DKK 3.3 billion versus DKK 3.2 billion last year. Now please notice that the acquisition of Sonepar Norge added approximately DKK 175 million. And in addition, there is a minor positive FX effect as well.

If we look a bit at the segments, Installation saw positive growth in both the Netherlands and Sweden and Poland, whereas the other faced headwinds to some degree, but not something dramatically.

Within Industry, we came out a bit worse. Industry, particularly Poland, where -- in the Industry, only Poland managed to deliver positive growth. And if you look at the subsegments within Industry, you see quite a scattered picture. Infrastructure saw close to minus 30% in Q1, particularly in Denmark and of course, in Norway, which is the -- where we have the strongest position. The harsh winter was particularly evident within this segment. Marine/Offshore was also negative, both in Denmark and Norway with minus 10%, which was slightly more than we expected. It should, however, be noticed that Marine/Offshore, to a large extent, is driven by projects, of which there were very few in Q1. MRO also came out slightly negative. MAG45 were also in negative territory as in line with our expectations. We still expect MAG45 to return to growth, mainly in H2 due to an increasing order pipeline that has continued to strengthen throughout the quarter but also continue to strengthen here in Q2.

Now please turn to Page 7. Then EBITDA of DKK 59 million in Q1 was in the low end of our expectations, mainly due to the harsh weather where integration and restructuring costs actually came out as expected. So it is the underlying performance. Regarding the guidance, I'll comment on this a little bit later. If we look at the underlying EBITDA, which is equal to DKK 90 million, this was below our expectation. And as I mentioned just before, it can mainly be explained by the headwind we saw within infrastructure due to the harsh weather, which simply put a stop to all work in the soil where you can simply not put cables in. We do not expect any catch-up effect from this. So what is lost, remains lost.

If you look at the cost of goods sold, we saw a decrease of 0.9% compared to last year, of which a minor part can be explained by increasing cost of freight due to the increasing fuel cost. The drop we saw were mostly pronounced in Denmark, but -- and if you look at them, it's spread out across segments and subsegments. It is our assessment that this is due to a very fierce price competition in the market, but there's also an impact from negative mix with more sales to low-margin customers, particularly in the Netherlands.

Regarding freight, we have not yet seen the full effect of the increases in fuel prices that we have seen. I'll comment a little bit more on this when we come to the guidance. Cost initiatives mainly done last year ensured that there is only a minor dilution of the margin due to cost despite the headwind that we saw in the quarter. Loss on trade receivables remain well under control.

Now please turn to Page 8. Operating activities came out with minus DKK 173 million. And if we take a closer look at this, we can see that there's actually an increase in inventory which is in line with our expectations. Due to the transition where we merged Sonepar in Norway with Solar, now we have increased the inventory in the Norwegian part of the business with approximately DKK 75 million. As Jens also mentioned during the integration, we're well prepared now for the transition. We have started also to do tactical purchases to counter not only potential price increases, but also potential shortage. As of the end of March, we have not seen any major impact on the inventory value due to this, but it will start to materialize here in the coming months.

Now given that the additional purchase is only done within A-tiers, and that is the fast-runners. And only typically up to max 3 months of additional sale, we think that the risk here is fairly limited and we also think that, to a large extent, if you look at the inventory as at the end of June, there will be a limited impact. The increase you see in accounts receivable of DKK 401 million is due to the normal seasonality, December versus March.

Now if we look at the investing activities, we spent DKK 111 million. Of these, DKK 62 million can be referred to our new central warehouse in Kumla. There remains approximately DKK 150 million, and we've done and over, and you should expect this to materialize the main part of it here in Q2. And you can say that will be the finalization of the huge investment program that we have seen, meaning moving into H2 territory, you'll see a normalization of our investment and therefore, also an improvement of our cash generation.

Please turn to Page #9. Now if we look at net working capital as an average for the last quarters, we have seen a slightly reduction of it. This did not materialize here in Q1. And the reason is, of course, that the ramp-up we've done in Norway. All other things equal, we will, when we are on the other side of this, start to see a continued reduction. So if we kind of take out the DKK 75 million we invested in Norway, and there is a small impact already from the tactical purchases, we still think that the inventory is slightly on the high side compared to what would be the optimal level.

Now looking at the gearing, we see an increase from 2.8x to 4.2x. And it is, of course, without our range, but it is as expected, and it's well within the lines of the covenants within our debt financing.

Now please turn to Page #10. Now in general, the macroeconomic uncertainty increased throughout '25. And I think it's fair to say that the start of '26 did not offer any relief actually on the contrary. Now in the most likely scenario, the midrange, and we stick to what we said before, we expect still our markets to be stagnant in '26 with Installation being slightly positive and Industry supported by MAG, although might be slightly negative. So compared to Q1, an improved run rate. Solar Polaris delivers to a major solar park, with an expected total revenue of DKK 275 million, will positively affect '26, and it will start to kick in during Q2.

Our outlook for '26 reflects a minor continued decline in gross margin, mainly driven by the ongoing price pressure we see. But compared to previously, we have now increased our expectations to cyclical inventory gains up to DKK 20 million compared to our initial expectation. This is due to these price increases, mainly within oil-based products, but we can see that it's also spreading out to other categories that we expect to come in the coming months.

Revenue. So we confirm the revenue guidance we had before with DKK 13.15 billion as the midrange. And if you calculate with the growth we saw in Q1, you need approximately 3% organic growth for the year to go. Please note that our reference point in Q1 was fairly strong, whereas the quarters that followed last year were substantially softer, and you can return to the figure, which we've shown on Page 6, in order to see the development. So that makes it slightly easier.

In EBITDA, we still expect an outcome between DKK 400 million and DKK 480 million, now including DKK 75 million in restructuring and integration costs versus previously DKK 85 million. The latter can be split into approximately DKK 40 million to integrate Sonepar, DKK 20 million to relocate to Kumla and approximately DKK 15 million in restructuring costs. This is basically unchanged with the -- except that we changed Sonepar due to the strong progress we have seen.

Now despite the weak start where we ended at the low end, we still think we can manage to catch up, mainly due to the factors that mentioned above regarding less cost to integrate, but also increased cyclic inventory gains. As regard increased cost for transportation in March, we only saw a limited impact of it. We expect this to continue in the remaining part of the year to go. We cannot -- that's not the assumption, at least, expect to carry all of this into the market. We will need to absorb part of it within Solar. And this has been taken into consideration. But then again, as I said at the -- before, there are quite some uncertainty on this point, but we tried to incorporate the things that we can quantify the way we see things now.

If we look a little bit ahead, you can see that the Sonepar acquisition currently dilutes the margin with approximately 0.7%. But of course, moving forward from the end of the integration, and that will be done here in H1, we expect this to turn and it will be able to strengthen our margin.

Thank you.

Okay. Thank you, Michael. Then it's time for questions.

[Operator Instructions] And your question comes from the line of Sebastian Grave from Nordea.

It's on the inventory gains here that you alluded to, Michael. Maybe I missed it, but could you maybe just talk around again the DKK 20 million number here that you floated in the guidance section of your report, compared to an inventory position of around DKK 2 billion, I think it doesn't sound like a lot, to be honest. So maybe just talk around the dynamics and the assumptions baked into this number? And also, could you clarify, to what extent, these DKK 20 million, is this a firm number baked into your full year guidance? Or how should we think of it?

Well, first of all, bear in mind that in the estimate, there is what we will call a normal level of these gains already. So you can say this is additional due to the price increases that we see coming. And of course, there's quite some uncertainty. So it's not a bulletproof figure as such because I understand if you measure it against the total inventory value, you get to this consequence. But you need to look into that. This is still within a fairly limited range of products that we see. And you should also take into consideration into what extent can we pass this on to the market. That will be -- that will vary from market to market from product to product and from segment to segment.

So you should see it as something that came in on top of what we had in our estimate year to go before. And there's always some underlying normally. Normally, we expect prices to increase between 1% and 2%, but now we expect them to increase substantially, and we've seen that. So that is the rationale for -- it's an incremental increase to what we already had in the books, and it's a narrow assortment. It's not widely. It may spread out. We do not know that yet if we get, I think it's called second wave inflation because there is basically, you can say, energy in all products to a larger or lesser extent, but that has not really materialized yet.

And then again, if you look back to 2022, I think the situation here is slightly different because in 2022, what happened there, and there, we had very huge additional gains, above what we would say our normal level, there was simply an imbalance between demand and supply. That made this happen. I think that's not the case here, to the same extent.

That was a long answer. I hope it made a little bit of sense.

No, I really appreciate the color. And thank you also for the reference to '21, '22. That would have been my follow-up questions because obviously, if you benchmark the DKK 20 million that you guide here compared to back then, I think it was more than DKK 200 million in '22. I think it's quite a substantial difference. But it's a fair point.

It's a very different scenario, yes.

Yes. And could you maybe elaborate a bit on the -- then the discussions you have had with some of your customers? And I mean, the ability to pass on these increases because it seems like you have to maybe give in and as you say, also absorb some of this yourselves. I mean maybe some more color to the dialogue and dynamics here?

Let me give you, and this is for illustration purpose. If you normally sell a product for DKK 100 and you make 20% on it, that means you're left with 20% in profit on it. Now the price goes up to DKK 120. Our underlying assumption is that we cannot -- we will still be earning 20% on it. But you can see, in percentage, it doesn't go up because if you took the same percentage and added to the DKK 120, my earnings should increase from 20% to 24%. It didn't. We don't necessarily expect that. We may be left with something in between. That's the underlying assumption. I also said it will vary a lot from market to market, what happens.

And also -- yes, Jens, do you want to...

Yes. I'm saying that still the demand for products is there. But of course, it's weaker than it were back in 2022, where we saw a lot of shortage and also a lot of hamstring. That's not the case at the moment. So I think I support Michael, that the fierce competition compared to a stagnant market is not -- then you cannot put everything out in the market. It's simply impossible. As we see it right now. It can change in 1 month or 2, but that's our predictions right now.

So you might be right that we were conservative, but mainly -- it's our best guess [indiscernible] right now.

It's a good thing to be a slightly conservative in the equity market, my experience.

Yes, but don't underestimate the uncertainty here before you deem us way too conservative.

Yes. No, no, I get it. It's a fair point. And maybe a follow-up question on the activity levels that you see. I mean, do you have any examples of customers who have sort of canceled projects in the wake of increased energy prices and material prices? Or what do you see on the activity level here, sort of -- yes, on an underlying basis?

It's always a difficult question to answer 100%. We do not hope, but I think the sum of major products is lesser. But on the other hand, there's a lot of smaller projects. So hopefully, that will be materialized over the coming months. But of course, the price for bricks and isolation material is increasing like hell due to the price. So you might see a stop and hopefully a go-effect again when things will normalize. So there is a risk that something will stop for a period or at least be postponed.

But we also see some benefits from it. I mean we can see that the sale of [indiscernible] is gradually gaining more traction.

Yes, it's coming up. It's coming up. So I think there is a risk that something will be postponed, that's for sure.

[Operator Instructions] There seems to be no further questions at this time from the phone lines. I would like to hand back for any written questions.

We currently got 5 written. The first is, how is Sonepar Norge integration progressing in the Q1? Are you on or ahead of schedule? And what are the early KPIs on synergies and market reactions from customers, suppliers and competitors?

I hope I already answered the question. At least we are on track or beyond our original plans, and the synergies we are measuring is also tracking as expected. So I hope -- and so far, we haven't seen any negative reaction from customers. On the other hand, we have seen positive reaction from a part of our suppliers, I would say. So I think that answers [indiscernible].

Perfect. Yes. So Solar Polaris is delivering DKK 275 million to a single solar park project in '26. Is there a pipeline of similar projects? And do you see your project business as a structural growth leg rather than a one-off contributor?

I would say, like this, we cannot disclose our pipeline, but I would also say that we do not have a similar size-wise projects coming in as the one we're working at, at the moment. But as we all know, sustainable electrification is again on the agenda. It was more or less closed down for 2 years. Now it's coming up again. The access to the grid is also a problem because the grid, at least, in certain markets are overloaded. So even though there are projects, there is a risk that the grid cannot allow us to connect. But at the moment, we only have, size-wise, this big one. And then we have a lot of smaller ones. But summing up, the big one we have now is the only one.

Third question. You are operating in a market that are soft across the board, and your '26 guidance reflects an assumption of broadly stagnant conditions. History shows that downturns tends to accelerate consolidation and separate the strong distributors from the rest. My question is this, are you approaching the current environment as an offensive opportunity to take share, deepen customer relationships and position for the recovery of the near-term, primarily to protect the margins and manage the balance sheet back with the gearing target? And consequently, what would it take for you to shift from one mode to the other?

Thank you.

Yes, it's true that the market we look into right now is a bit soft, but I would still say, if you look a little bit ahead, we're not overly concerned. As Jens also said electrification will be a key driver. Previously, it was mainly due to reducing the CO2 footprint, but now it also has a strategic importance in order to ensure that we get less dependent. And bear in mind that we have quite a strong position within infrastructure. And I think then, okay, currently, they are investing in high voltage that we have a limited role to play, but soon, they'll move into mid-voltage and low voltage. And then we'll have a substantial role to play. So we're not overly concerned.

Now looking at the consolidation part, I mean, I've been in this now for 26 years, and I've seen nothing else, but consolidation. It's been going on at least for 26 years I've been around. So I'm not sure whether this is going -- maybe it's accelerating. I don't know. It's an open question. I think we will take part of it where it makes sense. We did acquire Sonepar in Norway, and it was not a brand-new idea to us. We have actually shared this with you for many, many years, been wanting to buy Sonepar in Norway. So that was -- but there was -- always with these things, you need both a buyer and a seller in order to succeed. So it's difficult to plan, but we have a close monitoring of the market, and we have a list of things we potentially would find interesting in case the opportunity should occur. And for good reasons, we will not share that list.

Now in terms of the financing that was also a part of the question. Yes, it's true that we currently are above our target gearing. We still expect that this will start to normalize after the summer and continue to do so, so that we, during next year, we'll get back within line. And at the Annual General Meeting, we actually got a renewed permission from the shareholders, through that we could also potentially do a capital increase of another 10% if the need should arise.

So I think we are in a good position to manage. And should, say, for the sake of the rationale, something materialize already in Q3, even though we are above the gearing, we would take a look at it. We have very good relations with our financial sources. So I think we have a huge portfolio of opportunities in front of us here as well.

That was a long answer again, but it was a long question, I would say.

That's right.

Fourth question. One of your Danish competitors recently bought a cable distributor, and cable seems to be your unique selling points. How do you think that this will affect your already somewhat sluggish sales in Denmark?

I would say -- we are talking about GME. We know them already. They are servicing the same customers we are servicing with the same assortment and with the same -- or not the same, but at least some cable knowledge. So for us, it is simply not an M&A target. And another -- saw that differently, which is as the market is. But it only explains that consolidation is going on, like Michael explained, we did in Norway. Someone did the same in Denmark. But for us, we already have the knowledge. We already have the assortment, and the customers are already served by Solar. So for us, it was a no-go in this case.

Fifth question, which countries are the data centers and other growth initiatives primarily located in?

I think it's spread all over. But for sure, we are very strong in our infrastructure footprint in Denmark and in Norway. But of course, we can also serve the Dutch and the Swedish market. But I think particularly Denmark and Norway is our -- there, we are strongest at least when we look into to infrastructure, of course, cable-wise because it's not only about infrastructure, that way around. We also have a specialized team within data in Denmark and partly also in Norway and Sweden. So I think we are -- in the Nordic, at least, we have a decent footprint to take in the mid- and small-sized data centers, our part of it.

The final question. Does Solar lose or gain market share across different segments? How is Thermonova performing? What are the earnings expected for Thermonova in 2026?

There's no single answer to that question.

At least if we turn back, we doubled the number of sold units entities -- products last year or solutions last year. So we doubled from '24 to '25. Of course, the energy crisis right now should increase demand for Thermonova solutions. But again, we cannot disclose that on this call. We can -- of course, follow us during the next quarters. But so far, we have won quite a lot, mainly in the Solar business. And then Thermonova for a moment is a little bit weaker in the export share, but that can be changed in 1 or 2 months. It's very early days in 2026. But at least we have won some good, strong orders also to the defense industry with Thermonova, by the way.

And regarding the market share, first of all, data is what data is. And what's the market? That's always the question. But based on what we know, we know that in some countries, we are actually gaining market shares in the country as a whole, but there's also -- we can also find subsegments where we clearly are losing market share. So again, it's a mixed bag when you look into. There's not one answer that is a silver bullet here. So some places winning, but we are clearly also, I think, losing in some subsegments.

But the infrastructure part where we really saw the headwind, let me just -- let me just make that absolutely clear. That has nothing to do with loss of market share, just for the avoidance of doubt.

No further questions.

Okay. Then we will close the call for today, and thanks for listening, and have a nice sunny day. Bye-bye. Bye.

Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Solar A/S Full Year Report 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jens Andersen, CEO of the company. Please go ahead.

Thanks a lot. Welcome to this Fourth Quarter webcast for the Solar Group. Together with me here in Vejen, I have my colleague, CFO, Michael Jeppesen. Our agenda for today is, I will present some high-level statements on our recent acquisition in Norway and the consequences in year 2026 and beyond. Then I will give you some insights into our approach to create long-term value by transforming our business platform to new heights. And then I will hand over the word to Michael, who will present our 4Q results, of course, also the results for year 2025 and our guidance 2026. And at the end, as always, there will be a question-and-answer session.

Despite headwinds in 2025, we reached key milestones that will shape the future of Solar. The acquisition of Sonepar Norge is for us a major step forward in strengthening our position in Norway and be a Tier 1 company in the Norwegian market. It will expand our reach, create economy of scale and enhance our distribution network.

When the merger is finished, we will offer a broader portfolio of products and deliver even greater value to the common customers of both Sonepar and Solar. The integration is already taking shape and will be completed mid-2026.

Following the acquisition of Sonepar Norge, 2026 will be a transition year for Solar in Norway and therefore, also for the Solar Group. This, in combination with the expected restructuring costs, dilutes the EBITDA margin for Solar Group by approximately 0.7 percentage in year 2026. But from 2027 and onwards, we expect the acquisition to strengthen the margin as we can utilize the gain of DKK 700 million extra revenue with a very low cost to serve as we have installed AutoStore in Norway.

Next slide, please. We continue to invest in digital transformation, upgrading platforms to deliver a seamless future-ready customer experience. Our enhanced digital solutions will provide greater transparency, efficiency and convenience, ensuring that we remain competitive in an increasingly digital marketplace. These investments go beyond technology. They are about delivering a better customer experience, but also enabling data-driven decision-making across the business and segment in solar.

Logistics modernization is another cornerstone in our current strategy. The construction of our state-of-the-art logistics center in Kumla, Sweden is progressing better-than-expected and will be fully operational mid-2026. This facility consolidates our operations into one automated setup in Sweden, improving service levels and supporting sustainable goals. It represents a significant leap forward in automization and efficiency, reduces complexity, lowers cost to serve and enable faster, more reliable deliveries. But most importantly, it also marks our final major investment under the current strategy. And from 2027 and onwards, we expect to return to a normal investment level of below 1% of our revenue.

So to summarize, year 2026, that marks the ending of a long transformative journey in the Solar Group with huge investment in all our [ CVs ] and upgrading to SAP S/4HANA on all our platforms and finally, a brand-new digital universe towards our customers and other stakeholders. And I dare to say that creating long-term value requires a mindset that extends beyond quarterly cycles and support the strategic direction of our business. We consider the above as just that.

Now I will give the word to you, Michael. Please, Michael.

Thank you, Jens. Please turn to Page #6. Q4. If we start by looking a little back, we gradually in 2024 returned to a growth path, and this continued in Q1 2025, where we reached 6.5% in organic growth. However, the trend changed, and we saw increasing headwind during 2024, resulting in minus 6.1% at here Q4. This resulted in a revenue of DKK 3.1 billion versus DKK 3.2 billion the year before. The acquisition of Sonepar, Norway added additional DKK 46 million revenue in December.

If you look at the segments, in general, installation saw positive organic growth in Denmark [ saw ] just above. Sweden and Poland, we saw organic growth within installation, whereas the other markets faced headwind. Only in Sweden and Poland did we manage to see growth in industry. The others were below 0. You can take a closer look at this at a segment basis, particularly infrastructure in Denmark faced strong headwinds with 2-digit negative growth. We see a shift in the customers' focus moving more towards investments in high voltage, which means we short term will not benefit from this as we're not active in that part of the market. It goes directly. We do, however, over time, to benefit from these major investments that is being done in the grid, but you should not expect any change to this before late '26 or we might even have to move into '27 before we start to see a reverse trend where we can go back to growth. So it's not that we are losing customers and not move to anyone else, but their focus has moved. Their investments are in other areas.

Marine & Offshore was stagnant in general. It was growing in Denmark, but we were losing in customer -- we were losing revenue in Denmark. Similar picture, could we say for OEM. MAG45 was also faced by substantial headwind. This is mainly driven by a few major customers who have revised their expectation downwards throughout '25. So it's not that we have lost them. They've simply just reduced their manufacturing and thereby the plants where MAG is serving them, they purchase less from MAG45. MAG actually managed to onboard new customers. So they are broadening the customer base, but it's a long journey before we start to see the impact of it.

If we now turn to Page #7, with an EBITDA of DKK 205 million Q4 was above our expectations, due to other operating income of DKK 74 million related to the gain of our sale of the warehouse in Halmstad. I'll comment on the guidance a little bit later and explain what went better than anticipated. Looking at the underlying EBITDA of DKK 146 million, it was actually slightly below what we delivered last year.

Cost of goods sold, we did see an increase of the underlying margin of approximately 0.2% compared to last year, but this can in all material aspects, be explained by Solar Polaris, where the major project they had in '25 came to an end. So we did not see the diluting effect that they have on the margin, whereas we had that in '24. So it's -- and similar, as you may remember in '24, we managed to collect additional bonuses here in Q4. We actually managed to do the same here in '25 at the same level. We do not disclose these as a part of the normal business, so they're not shown separately.

In addition, we managed to accelerate the integration of Sonepar, meaning that we move forward costs of DKK 11 million. Approximately 50% of the 0.8% negative impact you see from staff can be explained by this. Regardless, we'll, of course, continue to have a strong focus on cost in order to ensure that it remains on a downward trend in order to support our guidance for 2026, which also includes cost initiatives. Loss on trade receivables remains fully under control.

Please turn to Page 8. If we take a short look at the full year of 2025, it came out with a reported EBITDA of DKK 501 million versus last year's DKK 646 million. If we make it a comparable basis, we see DKK 503 million in '25 versus DKK 505 million (sic) [ DKK 585 million ] in '24, meaning that the underlying performance is, yes, it's below, but less than what just meets the eye. There's no doubt that the challenges we faced with our margin as the competition became more and more fierce, we were not able to reverse this trend in 2025. And that, of course, played a significant impact on the result. We more or less managed to offset the headwind on a cost basis, and we only saw a diluting effect of 0.1% and 0.4% on external operating costs and staff cost, which given the organic growth we saw, the negative organic growth is in our assumption, an acceptable performance.

Please turn to Page #9. To make a short follow-up on our guidance from 2025, it becomes a bit difficult because there are so many points of references here. And try to bridge the difference between the DKK 460 million and the DKK 501 million, we made -- you can say that mainly -- that is the impact from the sale of Halmstad, which adds DKK 74 million, which were not a part of the guidance, although the building has been for sales as we announced back in 2023. So that leaves us at DKK 427 million, meaning minus DKK 33 million compared to our guidance. This difference can in all material aspects be explained by the accelerating of the integration of Sonepar in Norway, which added DKK 11 million, additional bonuses of DKK 10 million and then DKK 12 million is actually less performance compared to what we thought initially when we gave the guidance.

So what went better in 2025 than we initially expected? We were faster at vacating and selling the central warehouse in Halmstad and the fact that we could vacate it earlier was actually the key to the sale of it. Have we not been able to do that, we have not been able to sell it.

Our new logistics center in Kumla is ahead of schedule. And you can say the integration in Norway is also ahead of plan with the first initiatives already being implemented in December, where, as we also announced when we closed the deal, did not expect us that we will be able to reach that. We did not expect anything to happen before this year.

Cost initiatives delivered as expected. What was less than expected was that the development in the market and consequently, we had to revise our guidance downwards and which also had a negative impact on the underlying earnings of the company.

Please turn to Page #10. If we look at the cash flow in Q4, there are a few major things that sprang to your eye. First of all, we had a positive impact from operating income of DKK 430 million. And if you look at the right side of the slide, you can actually see where these origin from. The DKK 353 million is the seasonal effect from receivables, which -- and they reverse here during Q1. Inventory was actually slightly up, but these were a decision -- a tactical decision in order to optimize the bonus agreements that we have with our suppliers. So it did not happen by chance. It was a decision we made. So consequently, you can say that the current inventory level is slightly above what we would consider the optimal point given the current activity levels. We expect this to normalize during Q1.

If we look back again on the right side, you can see that we invested a lot. Net investments were DKK 52 million when adjusted for the acquisition. We invested in total DKK 131 million in PPE, of which the DKK 117 million relates to Kumla. We managed to sell the last of the central warehouse Halmstad, which brought in DKK 124 million. Looking slightly ahead, you can see that approximately DKK 125 million remains, and then we're done with the investment in Kumla, which means, as Jens also emphasized, we return to a lower and a normal investment level at the 1% or below.

Please turn to Page #11. If we look at the net working capital as an average for the last 4 quarters, we see a continued reduction, albeit the curve has become slightly more flat here towards the end of the quarter. So we ended at 14.9%. But bear in mind that this is -- it's more difficult to reduce the percentage when your revenue is reducing compared to when your revenue is growing.

If we look at the gearing, we see a minor increase from -- a minor drop from Q3 despite the investment in Sonepar. But again, bear in mind that this is the seasonal effect from receivables. So we end at DKK 3.2 billion, even though we have the full balance sheet impact from Solar and no P&L effect from Sonepar except the minus DKK 11 million we used on the acquisition and the integration. Looking forward, you should expect this gearing to increase further, and this is well within our expectations that will happen and it stays well within the thresholds with the agreements we have with our financing sources. So we're fairly comfortable with it, even though you particularly should expect the gain to become very high at the end of Q1 and Q2.

Please turn to Page 12, guidance. Now in general, we think the uncertainty has increased throughout 2025, meaning we see greater uncertainty at the start of '26 compared to what we normally see and what we saw in -- when we came with the guidance from '25. And I would say the start did not offer any relief and our guidance, of course, reflects this uncertainty. We have a weak start, and that was, of course, to some extent, expected. I think also the weather is slightly against us. In the most likely scenario, the mid-range scenario, we expect all our markets to have a stagnant growth with installation being slightly positive and industry slightly negative. Partly, of course, because -- and particularly in Q1 because we have a very strong point of reference in Q1, so we expect it to wear off.

Solar Polaris has succeeded in winning yet another major solar park project, which will add additional DKK 275 million to the revenue. If you look at it in terms of organic growth, and bear in mind, they added quite some revenue in '24 -- '25 as well. It will add close to 1% organic growth to the total growth.

As also mentioned by Jens, we have made significant investments during the last years, meaning we can handle quite an increase in volume with only incremental cost. And I would say that the acquisition of Sonepar in Norway exemplifies this where we can add DKK 700 million in revenue, which we will handle at a very low cost once fully integrated.

Following the acquisition '26, this will also be a transition year, mainly for Solar in Norway and also partly in Sweden, where we will be moving out of Örebro and into our new logistics center in Kumla. And as shown in the figure here on the slide, you can see that we expect that to spend approximately DKK 35 million in restructuring costs, of which the DKK 20 million is related to the move to [ Kumla ] and then DKK 50 million on integrating the business we acquired in Norway. Bear in mind, we initially announced DKK 60 million, but we managed to accelerate the process. So it's basically unchanged. We have not changed our opinion on this.

Looking at '26, our guidance also reflects a minor decline in the gross margin, mainly driven by these ongoing pressures on sale prices and also less cycling inventory gains than what you would see in a normal -- more normal macroeconomic environment. Revenue, we expect to end between DKK 12.9 billion and DKK 13.4 billion with DKK 13.15 billion as the midrange. This means that the midrange corresponds to an organic growth of approximately 1%. You can say the top and the lower is approximately minus 1.5% versus plus 3.5%. So you can say the range is fairly wide. There is quite some uncertainty on what will happen.

If we look at the EBITDA, we expect a range between DKK 400 million and DKK 408 million (sic) [ DKK 480 million ], including the DKK 85 million in restructuring costs. Again, if we make it comparable with '25, you take the midrange we said that's DKK 440 million, you add DKK 85 million, that means that we basically expect an underlying performance of DKK 525 million versus DKK 503 million. So actually, we are expecting a small improvement. Bear in mind that the positive impact from the acquisition will not start to materialize before H2. That's part of it. We are absolutely convinced that when we move forward, this will contribute to increase the margin in Solar, whereas in '26, it will dilute the margin.

I think that was the last comment I had to our expectations.

Thank you, Michael. Now it's time for questions. Please.

[Operator Instructions]

It doesn't seem to be the case. Okay. Then I will allow myself to conclude that the webcast is over, and you may have a very nice day. Thank you for listening in.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Solar A/S Q3 Report 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jens Andersen, CEO. Please go ahead.

Thank you. Dear all on the line, a warm welcome to this third quarter webcast for the Solar Group. Together with me, I have my colleague, CFO, Michael Jeppesen. The agenda for today is a general update with some highlights in the quarter, then a short summary how we invest in future growth. Then Michael will present the financial highlights for the quarter and our guidance expectations for 2025. And finally, and hopefully, we will have a Q&A session.

Next slide, please. If we go into the highlights, revenue in Q3 decreased to DKK 2.8 billion, similar to an adjusted organic growth of minus 2.1%. When adjusted for Solar Polaris delivered to a major solar park project, organic growth amounted to minus 0.4%. Revenue in Q3 was in the low range of our own expectations.

Segment-wise, our organic growth amounted to minus 2.3% for Installation, which are the biggest segment and minus 6.2% for Industry and finally, a plus of 15.3% for Trade, mainly driven by Solar Polaris. If we then turn into the EBITDA, then I can say from first Q to third Q, we delivered an EBITDA of DKK 296 million, highly impacted by nonrecurring cost of DKK 65 million.

Looking isolated at third quarter, the EBITDA amounted to DKK 110 million and was in the low range of our own expectation. Adjusted for nonrecurring income in only Q3, the underlying EBITDA margin amounted to 3.9%. If you want, you can see the results from the individual markets at Page 33 in our quarterly message.

As we speak, our Halmstad warehouse in Sweden has been vacated, and we are now operating our total Swedish business from one warehouse in [indiscernible]. This was originally planned to take place next year, but we managed to do the transition already in third quarter this year. Short about the guidance. Michael will turn into that later, but we expect a revenue now at DKK 12 billion and an EBITDA of DKK 460 million, which is in the low range of our previous EBITDA guidance of between DKK 450 million and DKK 510 million.

Next slide, please. Investing in future growth. As many of you may recognize, we announced Wednesday, 22nd October that we are in the process of acquiring Sonepar Norge. With this bold acquisition, we will be one of the leading electrical distributors in Norway with a combined revenue of DKK 2.5 billion after the merger. This is for us and also for our Norwegian team, a very transformative move in Norway. We expect closing early December and integration to be finalized by the end of first half year 2026.

Swedish warehouse in Kumla, as you all recognize, we have a big investment going on in Kumla. And when Kumla is operational in 2026, all our main market central warehouses will be fully automated and digitalized. In other words, we are close to the ending of a huge investment program that has been going on for the last 7 years. We have invested more than DKK 2 billion in central warehouses. And as I said before, that will change solar dramatically when we end up this big program.

The remaining investments in Kumla is DKK 70 million in Q4 this year and then finally, DKK 160 million in 2026. All in all, a gross investment of approximately DKK 600 million. Thus, our investments in automation, digitization and standardization, we think have set the stage for future growth and improve operational performance to new standards going forward. The 1st of October this year, we decided to upgrade our digital platform and the ambition is at least to be on par or -- and hopefully beyond our competitors.

The upgrade includes investments in new data platforms and AI to digitalize sales and strengthen customer insights. Furthermore, last but not least, to enhance customer experience through improved e-commerce features, including a new search engine and platform. And already in the first half year of 2026, the first customer segment will be able to use the new platform.

I will now give the word to you, Michael, for some insights. Please, Michael.

Thank you, Jens. Please turn to Page 6. Now revenue in terms of DKK decreased with 1.6% in the quarter, meaning that we came out with DKK 2.8 billion versus close to DKK 2.9 billion last year or equal to an adjusted organic growth of minus 2.1%. As also mentioned by Jens, the impact from Solar Polaris affected the growth positive with approximately 2 percent points, that meaning the remaining part of the business saw a headwind of approximately minus 4%.

Looking ahead, the effect from Solar Polaris will reduce for 2 reasons. One, the current project is coming to an end here in Q4. And in addition, the reference point, meaning the revenue they generated last year will increase substantially. So instead of lifting the organic growth between 2 to 4 percent points, we expect to see a negative impact from them in Q4.

If you look a bit on the main segments, Installation, only Poland, we did see real positive growth, but it's fair to notice that Denmark came in very, very close. Holland and Sweden faced more headwind. And I would say, particularly Sweden was a surprise to us. We did expect, as also communicated on several occasions that the Swedish market would start to pick up by now. It doesn't seem to be the case. We have fairly good insights in the Swedish market, and it's not because that we are losing market share.

As regard to Norway, this can be explained by the loss of one major customer, as also announced previously. We still believe that all markets will start to improve, also supported by the initiatives that we have kicked off.

If you look at Industry, once again, the main positive driver was Marine & Offshore in Norway, but actually also in Norway supported by utility and OEM and MRO. Unfortunately, not enough to set off the setback we saw in other countries. In Denmark, we did see headwind in all subsegments.

As regard to utility in Denmark, we see that the customers really have scaled down on their investments, and we actually expect this to last for the remaining part of the year, which also is reflected in our guidance for the year. MAG45 is still seeing 2-digit negative growth. However, for the first time this year, the order backlog has started to increase. It's still early days, but potentially, this could be the first positive sign of that we are starting to reach a turning point within MAG45.

Trade, particularly D&Y -- which is particularly -- which mainly is the D&Y did see headwind across all countries.

Now please turn to Page 7. The EBITDA of DKK 110 million in Q3 was in the low end of our expectations. If you look at the underlying EBITDA of DKK 180 million, there is a setback compared to the underlying margin last year. This can mainly be attributed to the loss of gross margin. If you look at the gross margin, we saw a decrease of 0.9% in the margin compared to last year, of which 0.3% can be explained by the dilution that we get from Solar Polaris.

The remaining part of the drop can be explained by fierce price competition in the market, but also a lack of the cyclic inventory gains that we traditionally see here in Q3. So compared to Q2, where we actually managed to strengthen the underlying margin, we did see a setback. We still, however, expect this to change in Q4 due to a huge range of initiatives that we have set in motion.

Despite our initiative both last year and also in year-to-date on cost containment and processes optimization and staff reduction, this was not sufficient to set off the drop we did see in revenue. So we did experience a slightly diluting effect on the margin from the cost side. We'll continue to have a strong focus on this. And as also announced, we did several initiatives in this quarter in order to reduce and ensure that we can strengthen the margin going forward.

We're very pleased, I would say, with the transition from Halmstad to [indiscernible]. It is, as Jens also said, moving ahead faster than anticipated, and it's also freeing up more cash than what we initially anticipated. And I think it should be noticed at the same time that the Swedish organization has managed to improve the service level towards our customer with this move. Loss on trade receivables remains under control.

Please turn to Page 8. Now a short look on the year-to-date. We have an organic growth of approximately 1%. But again, if we adjust for Solar Polaris, we are actually looking at minus 1.1%, but it's an average. It has accelerated in Q2 and Q3.

The main setback for the year-to-date can be explained by the drop in gross margin, but the initiatives have ensured that the cost in the underlying business, that means excluding the one-off cost, remains more or less flat, meaning we have been able to offset not only the setback in revenue, but also salary inflation and ordinary inflation. On a comparable basis, you can see we actually have a drop of 0.6% compared to last year, and you can -- it's more or less explained by the margin.

Please turn to Page 9. Operating activities came out with a plus of DKK 64 million. And if we take a closer look at that, we can see a continued reduction in inventory level, freeing up cash, which is in line with our expectation. Having that been said, the current level remains still above what we would see as the optimal point, meaning we'll continue our journey here. There is a minor increase in the accounts receivable, but that's basically seasonality [indiscernible] number.

Investing activities came out with DKK 94 million. We invested DKK 58 million in Kumla, that is the new central warehouse. And as Jens also mentioned, this will continue throughout the year where we expect to invest DKK 70 million, leaving DKK 160 million to be invested next year. And the main part of this will happen in H1.

Please turn to Page #10. If we look at the net working capital as an average for the last quarters, we see a continued reduction coming down from 15.5% last year to now 14.8% in Q3. So despite the negative growth, we've actually managed to reduce the investment in net working capital, not only in absolute figures, but also in relative figures. So we are very pleased with the trend. And we, of course, will continue to work on prolonging this effect.

Looking at the gearing level, we see an increase from 2.7 to 3.4, which is above our guidance on gearing, which is from 1 to 3. Assuming the acquisition will be approved early December, the gearing will remain in the same ballpark for the remaining part of the year despite the seasonality effect. But basically, what will happen is that you get a P&L effect from the acquisition of 1 month potentially, but you get the full balance sheet effect.

Looking ahead, we will do to the investments that we have [ done ] continue in the coming quarters before we gradually will start to reduce this due to an end to the investment program, as Jens also mentioned.

Now please turn to the last page, Page 11. We refine our guidance for 2025. Bear in mind that when we came out with the first guidance for the year, we expect the growth to take root in the second half. We revised that just after the summer vacation. And it seems that this is not really going to materialize. Hence, we will be in the low end of our guidance in terms of earnings.

We now expect a revenue of DKK 12 billion, where we previously were DKK 11.75 billion to DKK 12.25 billion, and we expect an EBITDA of DKK 460 million versus previously in the range of DKK 450 million to DKK 510 million. We're not directly affected by the tariffs that have been imposed by the U.S., but we can definitely not rule out any knock-on effects having a negative impact on our MRO OEM customers, which remains the main part of our Industry segment.

And this is also where we faced the most headwind for the year. And as you can also see in our segment report, it's the most profitable part of our business. We continue, of course, to monitor the market very closely, and we stick to our initial assumption that we'll see a continued recovery. But of course, the timing and the strength of it is absolutely unpredictable.

We do, however, have seen a few small, and bear with me, it is early days, green leaves within this area, where we now within the -- if we dive further down in the segments, we can see that the SME, which means the very small MRO OEM customers, they have actually started to grow now. So the main challenge is still the major -- the midsize and the large OEM customers where we are still seeing indexes around [ 80% ] or even below this level.

But the small ones have started to grow. They moved from [ 100% ] index to approximately [ 105%. ] Yes. And then in the lower right corner, you can see a like-for-like comparison with our guidance where we try to take out the one-off effect, meaning on a comparable basis, we now expect DKK 525 million versus last year DKK 565 million in EBITDA. Thanks.

Thank you, Michael. Then it's time for questions, if you have any, please.

[Operator Instructions]

We will take our first question, and the question comes from the line of Kristian Tornøe from SEB.

Yes. I have a couple of questions. So first question to your guidance. Just to clarify, Michael, you talked about potential 1 month of Sonepar Norway if the deal is approved. Is that included in your guidance? And can you quantify how much?

It's basically within the rounding areas because assuming it gets approved early December, the impact is going to be like 0.2%, 0.3% of the total revenue. So I would say that it's within the rounding areas. We do not -- even if it gets approved, which is still the underlying assumption, we do not expect any P&L effect from it whatsoever. So it's neglectable, I would say. It's beneath the threshold given that we give guidance in hundreds of millions DKK.

That is absolutely fair. Then again, to the guidance. So obviously, with a fairly exact guidance, your implicit Q4 guidance on revenue and EBITDA is fairly easy to calculate. I am, however, struggling slightly with the items in between because if you buy a gross margin in Q4 similar to what you had in Q3, you would need your fixed costs to decline substantially year-on-year and vice versa. If you assume unchanged fixed costs, your gross margin needs to come up substantially. So maybe just elaborate a bit on the assumptions between revenue and EBITDA for Q4.

It's absolutely a fair question to raise. And the underlying assumption is we will be able to strengthen the gross margin rather substantial. We launched a portfolio of initiative supported by some models that -- newly developed models that create higher transparency enable us better to benefit from, say, for the sake -- this is for illustration purpose only, if you have a step-wise increased bonus model with one supplier and a supplier of similar product doesn't have a similar, then this model can optimize where we should place our purchases.

So the guidance has taken part of this into consideration. In addition, similar to what we've done in other years successfully, we launched extraordinary supplier negotiations. And this is maybe one the -- I can also discuss how much money this will bring in. But we already now see the effect of the expected purchase of Sonepar in Norway, meaning that there are suppliers who start to reach out to us and certainly things that we could not do and they've been fighting over for months. Certainly now they just send a check.

I can give you an example, a supplier sent DKK 2 million or DKK 1.5 million, which we've been struggling for quite some months and certainly was paid. So we're starting to see a lot of good things coming through. So we are reasonably comfortable with it, I would say. Of course, there's always uncertainty. It's a future prediction. But if you look at the potential as we calculated it, compared to what we've taken into the guidance, there's also room for that everything will not succeed.

So it's based on the assumption that the gross margin will increase. Also bear in mind that the gross margin, I think this is important to note in Q3 was particularly low because we did not get these capital gains on the inventory that we normally would see. This has dropped to 0 in -- mainly in Norway and Sweden, but also in the other countries. We do not expect this pattern to repeat itself here in Q4.

At least we see the cover prices increase quite dramatically.

So just to follow up, I mean, this pattern which you described on the gross margin, are you already seeing that in your October numbers?

To a certain extent, we -- I'm not updating on all the companies here, but I know Denmark on these initiatives were ahead of the plan where they should be in October. And I would say if that trend continues -- I mean there was nothing in October on these initiatives that told us that this is not going to work. I would say, it actually confirmed it. I haven't seen the final October figure. That is the disclaimer here. But what we can see and what we get reported, we are ahead of.

Fair enough. That's quite clear. Maybe just on your fixed cost then we have seen that in the past 2 quarters trend up, say, 1% to 4%. I don't know there was some -- a bit of extraordinary in Q3, but is that still how we should think about your fixed cost in Q4, sort of a sliding inflationary increase then?

No. I wouldn't expect that, to be honest. So the main driver is not savings. It is the gross margin.

It will be for the remainder...

It will be. All right. And then maybe just on the gross margin, you highlight price pressure. So in this gross margin improvement you're expecting, is there an element of you assuming price pressure to ease? And more generally, how do you address price pressure? What's your strategy when prioritizing volume versus price?

Pricing is a difficult thing to predict. So we take it more or less customer-wise. And then, of course, there is a fierce price competition, especially because we have been close to -- in a non-inflation scenario. Now we see also from the vendors that price increases will start to materialize, and we also see the copper price going up. Whether that will be put into the market, that is always a big question to answer.

At least so far, we have seen, I would say, more or less a crazy or fierce competition among our competitors in all markets in order to gain volume. But one day, you need to have your cost to serve lower if you want to proceed with that way of doing business. And that's also why we have invested heavily in AutoStore and now also in our customer -- or digital customer platform, simply to lower our cost to serve to be the best-in-class to compete in -- if the market conditions will be as we have seen it in '24 and '25. So our revenues have [ lowered ] our cost to serve and therefore, still be able to compete if that is the new trend, so to say.

Understood. And then just maybe 2 questions on the Sonepar Norway acquisition. Can you give any flavor of what level of depreciation and amortization we should expect? And also how will revenue from this business flow into your Installation and Industry segment? What would be the split?

I can take the last question first. By far, the main part of it is Installation. On top of my head, I think it's approximately 85% and you have 10%, which is Industry and then 5% other. So this is how you should think of it. What was the first question, Kristian, I forgot?

So you've been clear on the EBITDA impact and the synergies, but what about depreciation and amortization?

Yes, sorry. We have not made a purchase price allocation yet. We need to get access to now to be able to do this in a clear way. But given that we basically hold the assets that we need, I would say, depreciation on property, plant and equipment shouldn't change anything whatsoever. So it's basically a matter of the allocation of the purchase price if parts of it will be registered as customer list and the rest at goodwill. And to be honest, we simply don't have these figures yet, no.

Okay. And when should we expect that clarity? Would you have it when you close? Or should we wait until your full year report?

I think you should wait until we report on Q4, assuming we close in Q1 -- sorry, 1st of September.

Yes.

Excellent. And then just my very last question, I promise here. Solar Polaris, just to be crystal clear, there are no expected revenue from any solar projects in Q4. Was that what you're saying?

It's wearing off substantially. And last year, they were performing more or less on the level we've seen in the last couple of quarters this year. And this is why you get quite a negative effect within the quarter.

Okay...

Due to the...

Sure. No, that makes sense. And is there a pipeline here? Would it be fair to assume solar projects in our '26 estimates? Or what -- I mean, how are you thinking...

Let's see. We are working on some huge ones, but so far, they're not in the book. But as we speak, we have our quotation out with some very big ones. So let's see if we succeed or not.

But basically, again, as we discussed, doesn't carry that much operational leverage. So even if they win a project for the sake of the rationale of DKK 100 million, you shouldn't expect an EBITDA effect of more than 5 plus/minus. I mean it's in that...

It's a rough business.

We are in. So I would looking at the total, it doesn't matter that much. And to a large extent, they have very low fixed cost and very high variable cost. That's basically what I'm trying to say. So on the group, it doesn't matter that much, not in terms of EBITDA. It can have an impact on a more substantial impact on the revenue clearly.

No, I fully understand. But obviously, I'd like to get my revenues estimate as quantified...

Yes. So we share it. But I mean, it's more -- if you win it, you get maybe DKK 100 million, DKK 200 million in revenue. And if you don't, you get like 0. So there's nothing in between there basically. And they don't have a size where they run 10 projects in parallel, can't even 1, maybe 2 major projects in parallel. That's pretty much...

That's where we are right now.

They still have some small projects that are running, but that's very, very limited revenue that you can expect from that. But they're more profitable in terms of percentage at least, not in real currency.

[Operator Instructions]

Your next question comes from the line of Alexander Borreskov from DNB Carnegie.

Kristian asked a lot of good questions, but just maybe following up on his -- you speak about this lack of cyclical inventory gains, which is not the first time we've discussed that over the past, let's say, 12 to 24 months. Do I understand you correctly that you expect this to improve because you are seeing suppliers already pushing through price increases? Or is it more based on the fact that copper prices are increasing and you then expect suppliers to increase? Yes. That would be my first one.

I would say both. We see people -- sorry, we see suppliers coming up with, I would not say, major price increase, but at least inflation-wise, more or less back to normal. We haven't had that picture in all countries, but at least we see that in Denmark for the moment. So we expect not -- maybe not back to a normal situation, but at least some way, it will be normalized over the coming months.

So it's not that we expect that we go back, as you may remember, in 2020, '21 and '22, where I think at the peak, we had additional DKK 200 million coming up of this on its own. And that's definitely not the case. So it's more [ I think today ] expect it gradually to turn back to what we can call a normal level.

And if I remember correctly, a normal level is in the DKK 20 million to DKK 40 million range?

Did you ever tell that? I simply can't remember just because it varies a lot from country to country how it works, and there's quite some seasonality in it as well. So it's a bit of a puzzle whenever you do your estimates trying to get this right. I simply can't remember.

Fair enough. And then just on the sales price pressure, the pressure you're seeing, is that general across categories? Are there any particular categories that are seeing price pressure like we saw with solar panels a couple of years back?

Good question.

I would say, all in all, there is a fierce competition also in a way that we haven't seen for many years going on. That also means that some at least will have a huge problem if they don't structure their business in another way. I would assume. But let's see, at least we saw that in the PV business that they are more or less beating all of our competitors.

And we will, I think, over time, see the same pattern within technical wholesale if prices are not into a more decent level compared to the cost to serve. And that's why we are so focused on cost to serve until we see hopefully a normalization. If not, we will keep on focusing on our cost to serve.

Yes. And that would then be my second question on this pressure sort of what can you do within -- so what's in your hands to do to mitigate this? Or is it just a question of waiting for market competition to pick up?

No, that's cost to serve. At least there we can do a lot, and we are doing a lot. And we're ending up our central warehouse program when Kumla is finished, and that will help quite a lot. And then at the same time, Sonepar is coming into Norway. And of course, over time, hopefully, we'll get a lot of scale, especially in our operations by doing that.

It's also a matter of working with the mix...

It's also a matter of a few new customer groups. But of course, we are hit by -- we are pretty dependent on industry, and that's where we see a lot of problems right now. And hopefully, that will not last for a long time, but at least that's for us a problem customer mix-wise.

Okay. That's very clear. And then I think I have -- this is probably a micro question, but the 2025 revenue guidance was narrowed to the midpoint, but the organic growth guidance was actually revised to, you can say, the higher end of the range. Is that purely FX? Or is that because you, for instance, have some product pruning that's excluded from your organic growth?

No, no, no. That's basically 3 reasons and well spotted. First of all, notice that when we give an expected growth rate, and this also goes to the range, it's an approximate figure. That means if we say 4%, it can just as well be 4.49% as it can be 3.5%. So there is slack in the end of it. You cannot say it's exactly 4%.

Secondly, there is -- as you say, there is an FX effect clearly that explains bits and pieces of it. And last but not least, we give guidance in hundreds of millions. And I've been reflecting a bit on this here, but I expected the question. And I think it's good that we stick to the hundreds. But maybe when we get to the last quarter, we get this accordion effect. It all piles up into one quarter, we should go down to DKK 50 million on it instead of -- so I think that's the 3 main reasons for, Alexander, that you cannot breach it completely.

Did it make sense?

Okay, that makes sense. Yes, absolutely. And then just a final question from my side. You had -- you revised your 2026 EBITDA target at the full year report to above 5%. Given what you're seeing with sales price pressure, and I understand you expect to see the cyclical inventory gains improve. But do you still find that target achievable with where the market is today? Because your guidance for this year implies an EBITDA margin of 3.8%, if I'm not mistaken. So it's quite a significant improvement year-over-year.

True. And basically, for the time being, it's a bit unclear where we will end in 2026. We have 2 major moving targets here. We have the acquisition, which will have a substantial negative impact in the first year due to all the restructurings. Second, we will close down [indiscernible] and move to Kumla, Initially, this was expected to take part in the later part of 2026. As we are ahead of schedule, we'll not get the full weight of it as we see things right now.

But I think it's -- there's simply too many moving parts here because I agree if you look at the 3.8% and you look at the cost we've taken up, they'll add approximately 0.8%. That doesn't bring you up there. And then you know there's going to be salary inflation, there's going to be cost inflation. On the other hand, there might also be growth. But it's simply too early days for us to say anything particular. But I agree from where we're standing right now, it looks to be much -- it looks more difficult than in Q1, for instance, that was absolutely achievable.

So I think we will simply have to be a bit more patient on that one and wait until we come out with our exact 2026 guidance, where we'll try to be as clear as we can...

That's possible.

Yes, about also the move on Kumla, what do we expect that to have an impact and the timing of it. And similarly, we also try to give our best estimate on the integration of Sonepar and the financial impact it will have and to the extent possible, we try to break it down in quarters as well, but it has quite an impact on the figures.

There are no further questions from the phone lines. I would like to hand back for any webcast questions.

First online question is in connection with the acquisition of Sonepar Norway, could you elaborate on which specific commercial and operational synergies you expect? And how soon you anticipate the acquisition will start contributing positively to the EBITDA margin?

Okay. Well, basically, there is not much new since we gave the initial announcement. We are still absolutely comfortable with the synergies we have announced, and we stick to it that this is an issue of looking at the supplier base, and I hinted to it that we're already starting to see benefits of it even though it's not approved yet. But it's also a matter of gaining scale, economy of scale within our handling and distribution of products and back office in general.

We are mapping out even though it's not approved, which branches we expect to keep and which we expect to merge. And bear in mind, it could be Solar people will have to move to a Sonepar branch. It will be Sonepar people moving to a Solar branch, but it might also be that we keep both or move to a third new location, and that is being mapped out. But in a nutshell, we don't have much new knowledge. We're very comfortable with the synergies.

In terms of when we will start to see a positive gain, you have to wait until the later part of 2026, assuming that the approval is early December. On that note, I can say that we have received information from the competition authorities that the application is complete. It doesn't mean it's approved, but basically means that they have all the information that they need in -- I think it was the beginning of this week, late last week, we got that message.

Second question, what specific initiatives have you implemented to improve margins in 2026?

I assume it's the EBITDA margin that the question refers to. Yes, we have launched some growth initiatives, as I also hinted to, where we're trying to target various niches, both product-wise, but also in terms of customers in order to accelerate growth and thereby gain scale. There's no doubt that one of the things that has had a dilutive effect on our margins is we lost scale. You can see it in the Q3 actually.

We have carried out a lot of cost initiatives trying to offset the growth in cost by changing structures, procedures. And we'll, of course, continue to do that. In addition, we launched a lot of margin initiatives. We are doing some specifics here in Q4. But on a more long term, it is a matter of working with -- amongst other things, the mix, which will probably be the main contributor, but also other initiatives will be brought in. So you can say we're working on all parameters in order to strengthen the EBITDA margin, not only in percentage but also in terms of euro.

Third question. You call Sonepar deal a transformative deal for Norway. Beyond scale, what differentiations that combined Solar, Sonepar company competitively in the Norwegian market?

Yes. I think it is transformative because we will be able to serve the customers, not only 12,000 SKUs or number of products. We will double that to 25,000. We will lower the cost to serve. We have an automated AutoStore solution in our central warehouse. In Sonepar, it's more manual. We will be close to #1 in Norwegian market. Right now, we're in the middle of the field of competitors. With that move, we will be at least close to the #1 in the market within Electrical.

So I think and I hope, at least also to our A-brands suppliers that they will see us as an exciting place to be combined with our digital way of doing business. So I think that is more or less the overall framework for this acquisition, I would say.

Fourth question, given the current margin pressure and limited top line momentum, how are you prioritizing between cost discipline and growth investments?

That is always a balancing act. I would say I've been here for many years. And I would say that has always been the case in Solar. It's a very cyclic industry. It goes up and down. It's like a roller coaster industry to be in. But at least we cannot run the company from quarter-to-quarter. We need to look into how to invest cleverly. And we have done that, I think, I hope, and I hope you agree.

We have invested DKK 2 billion in AutoStore over the last 7 years closing up with Kumla. And now we turn into a new customer platform that should help our customers to ease their findability and will also extend the use of AI quite dramatically. And then, of course, we need to look into ourselves, hopefully see a market come back to a more normalized situation, but we cannot make a strategy or an ambition on unlock. So that's also why we always do activities despite the headwind we are facing right now. But in my mind, cost to serve has to go down to be among the best in the coming years.

And a final question. You're right that the savings initiatives will correspond to an EBITDA margin increase of 0.8 percentage points for '26. But you mentioned other initiatives will dilute this positive effect. Can this be interpreted as the expected EBITDA margin will increase less than 0.8 percentage points for '26?

I think the short answer is no, but it was just to point out that the 0.8% is all other things equal, but we do know for a fact that they are not. And we need, of course, to work with a lot of other initiatives in order to ensure that we strengthen the margin. We -- it's still early days, but I mean, you always have salary inflation. There's nothing new in it. I would say the main challenge for the last couple of years has been that we've been unable to put this on top of the prices.

Bear in mind that the prices in various categories increased quite substantially in '21, '22 and to some extent, '23 as well, where we didn't put anything on top of. We just pass on the price increases we got from the suppliers. But I would say with the current market, it's been very difficult for us to add anything more to the prices. So it's up to us also to start to generate some growth, and that is really a focus area for us. And again, as also [indiscernible] mentioned on the gross margin, we need to start to increase this, amongst other things, to work with the mix because there are definitely things that is going in the other direction as well as your question indicated clearly.

No further questions.

Okay. Then from here, we will thank you for listening in, and have a great and nice day. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Solar acquisition of Sonepar Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Jens Andersen, CEO. Please go ahead, sir.

Thank you. A warm welcome to this extraordinary webcast. Together with me here in Vejen, I have my colleague, CFO, Michael Jeppesen. As announced this morning, we have signed an agreement with Sonepar to acquire Sonepar Norway, indeed a transformative step for Solar Norge as well as the Solar Group.

Could we please go to Page 1. The acquisition of Sonepar Norge is a bolt-on acquisition, positioning the combined businesses as one of the leading electrical distributors in the Norwegian market, offering efficient sourcing and services, mainly within electrical ventilation and climate energy solution. Together, the 2 or in the future, one common will offer a portfolio of 25,000 SKUs or products and generate an annual revenue of approximately DKK 2.5 billion.

The history of Solar Norge A/S goes back to year 2000. At that time, we acquired the company from Siemens who strategically wanted to step out of electric distribution. As I recall it, the revenue at that time was around DKK 600 million. Since then, the company has tripled the revenue organically, mainly on industry to DKK 1.8 billion and always been a good contributor to our earnings in a very or very highly competitive market. We are convinced that this transformative step up for Solar Norge A/S is a new chapter in our history in the Norwegian market. And with our automated CVE facilities or central warehouse facilities in Solar Norge based on AutoStore and recently updated with SAP S/4HANA as ERP system, our ability to create economic upscale is stronger than ever and we expect significant opportunities to develop this combined business, drive growth and enhance earnings over the coming years.

I will now give the words to Micheal. Please, Michael.

Thank you, Jens. Please turn to Slide #3. As Jens also stated, we are very pleased with this opportunity. There are several good reasons for this. Firstly, Sonepar comes with highly skilled employees, combined with a platform that enabled us to strengthen our position, mainly within installation, but also to a lesser extent, within industry, meaning we see this as a perfect fit. We know from past experience that Solar and Sonepar share the same common values, making the integration a lot easier, not only for the employees in both companies, but also for the customers that we serve.

I do actually meet former Sonepar employees every day here in Vegen. So it is really culturally wise also a perfect fit. As we speak, we are finalizing the plans for shipment integration to ensure that we deliver on the promised benefits before the end of H1 2026. As always, in these cases, we need to await the approval from the competition authorities. We expect this to follow shortly, enable us potentially to close the deal early December this year.

Please turn to Page 4. From a customer perspective, we also see the integration to carry substantial benefits. As we together have a stronger network of branches, ensuring a strong presence locally. This is, of course, an overlap, meaning that in some locations, Solar will move to Sonepar. In other locations, Sonepar will move to Solar or, in some instances, to a completely new occasion depending on what is the best fit.

As Jens also touched upon briefly. This enabled us to increase our product offer not only by expanding the number of available products that we make available to the market but also to increase the depth within the things we hold on stock. In addition to this customers of Sonepar will, in the future, gain access to our concept and our solution selling, which also should give them new and interesting opportunities.

Although Sonepar actually is a highly digitalized company, we do believe that the combined business will benefit from the improvements of all the investments we have made in the recent years in upgrading our systems, but also in the investments to come that Solar will do in the future. So we do truly believe in our payoff stronger together. So from a customer perspective, we expect 1 plus 1 to actually give 3.

Thank you.

Thank you, Michael. Now it's time for questions. If you have any, please.

[Operator Instructions]

And the questions come from the line of Kristian Tornøe, from SEB.

A couple of questions from my side. So firstly, on the DKK 60 million in synergies, can you elaborate what they are based on?

Yes. We have done a thorough analyses of the situation, and it will gain us some scale efficiency within the IT but also within the operation and our distribution setup. If you drive a truck you pay the same whether it's 50% filled up or whether it's 70% or 90% filled up, the price tag is basically the same. And as you know, on average, that has a carrier cost of like 4% of our revenue approximately that we're spending on this. So we can see the additional revenue will travel almost for free.

So -- and also we need to be merging the departments together and thereby also gain benefits. And in addition, we also expect to get additional benefits from the upstream because, in particular, within installation, this will really strengthen our business rather substantial. So we're fairly comfortable with this since its main -- since it's almost only based on cost synergies.

Yes. And then out-of-store solution, we can easily, I would say, put 10% to 20% more volume through the out-of-store without any further expansion on employees. So at least the cost to serve there is pretty low.

Okay. And then maybe to follow up. So you have a central warehouse, Sonepar Norway has a central warehouse. Will you need 2 central warehouses? And if not, is there any potential for sort of material asset divestments in this process as well?

There are no assets to be disposed off. Sonepar's facilities are rented and is -- and the runway on that rental agreement is not that long. So it's actually a perfect bid. And then of course, we will, over time, move to one -- we have a principal or running one [indiscernible] and we do hold the capacity to do it.

Makes sense. And then you highlight DKK 700 million in revenue for Sonepar and DKK 1.8 billion for your Norwegian business. How much of an overlap is there? So I guess what I'm asking is the cannibalization risk here?

There is a cannibalization risk. And -- but it's fairly limited the way we see it but you cannot complete the rollout that there will be some cannibalization. We have a reasonable idea, but -- you also know due to competition now that we cannot get a completely clear picture of this with names and everything else in it. But there is a minor risk definitely Kristian, but we think the case can also absorb a minor risk. But it also holds some opportunities the other way around, where we can actually gain additional sale to existing customers at Sonepar, but also the other way around because the Sonepar brings in the ability for us to sell new products to existing customer base. So I think it's a plus and minus game here.

The number of products that at least has doubled up compared to Sonepar situation today. We are approximately 25,000 now, there were 12,000. And then we'll see how much we need to have on our shelves going forward in order at least to increase the basket size or share of wallet at existing customers but also Sonepar customers.

That makes sense. And then maybe just the last question from my side. Were there any other bidders in -- potential bidders here? I mean, how much of the structural process has still been from Sonepar's side?

The truth is we don't know. I have to ask Sonepar about that. They'll tell you -- probably not. We have no idea.

No clue at all.

We are now going to proceed with our next question questions come from the line of Alexander Borreskov, from DNB Carnegie.

Maybe just a follow-up on Kristian's question on warehousing. So if I remember correctly, you rented extra warehouse capacity in Norway before you announced this acquisition. So if you are to move towards one central warehouse, will you need to increase capacity in your existing warehouse? Or will you go out and need to rent additional capacity? Or how does that sort of stack up?

The short answer is no. No. We have sufficient -- we have sufficient capacity. And over time, you also have land for building more or extend the existing warehouse in [indiscernible] . So we still have further land maybe in 5 or 10 years from now, but so far, so good.

Okay. That's very clear. And then maybe just one more question from my side. Do you see any similar assets to Sonepar Norway in Sweden and/or the Netherlands that would be of interest to you sort of going forward?

We always have a heat map looking into the different markets, but at the moment, no. And if we will, keep it to ourselves. But of course, we have a heat map, yes. We follow that closely.

We have no further questions on the phone line. So I'll hand back to you for any webcast questions that you may have.

Okay. From what I can hear, we are -- we have no further questions. So I'll thank you for joining us here today and for us, very special days. So have a really nice day. And Yes, look forward to what will happen in the coming years or months for us because I think it's really transformative, this asset deal. Thank you. Bye.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.