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Introduction & Market Context
Alleima AB (STO:ALLEI) presented its second quarter 2025 results on July 18, revealing a challenging period marked by declining revenue and profitability amid mixed market conditions. The company’s stock responded negatively, falling 9.09% to SEK 73.50 following the presentation.
The Swedish specialty steel manufacturer reported that market sentiment remained weak in Europe and North America, while Asian markets showed solid but increasingly uncertain performance. Despite these challenges, Alleima emphasized that its broad market exposure helped reduce volatility, with continued momentum in several key segments.
"Mixed market demand, increased uncertainty, and FX headwinds impacted our performance this quarter," noted Göran Björkman, President & CEO of Alleima, during the presentation. "However, our broad exposure reduces volatility, and we maintain a good backlog in key segments."
Quarterly Performance Highlights
Alleima reported second-quarter revenues of SEK 4,765 million, representing an organic decline of 4% compared to the same period last year. The company’s adjusted EBIT fell to SEK 454 million from SEK 592 million in Q2 2024, resulting in a margin compression to 9.5% from 11.1%.
The results mark a sequential decline from Q1 2025, when the company reported revenue of SEK 5.2 billion and an adjusted EBIT margin of 10.5%.
As shown in the following chart of quarterly highlights:
Free operating cash flow reached SEK 347 million, down from SEK 486 million in the comparable period, primarily due to lower EBIT and higher capital expenditures related to growth initiatives. The company maintained a strong financial position with a net debt of negative SEK 33 million, essentially indicating a net cash position, though this represents a significant reduction from the SEK 1.7 billion net cash position reported in Q1.
Segment Analysis
Alleima’s performance varied significantly across its three business segments, with each facing unique market dynamics.
The Tube segment, which represents the largest portion of the business, experienced mixed market sentiment with an organic revenue decline of 5%. Despite these challenges, the segment maintained relatively resilient earnings with an adjusted EBIT margin of 11.2%, only slightly below the 11.7% reported in Q2 2024. The segment faced a significant FX headwind of SEK 81 million year-over-year.
The following chart illustrates the Tube segment’s performance:
The Kanthal segment, which focuses on industrial heating technology and medical applications, reported an organic revenue decline of 5% despite positive order intake growth. The segment maintained the highest profitability within the group with an adjusted EBIT margin of 16.7%, though this was down from 18.3% in the comparable period. Management highlighted continued momentum in the medical sector but noted challenges in Industrial Heating.
The detailed Kanthal segment performance is shown here:
The Strip segment demonstrated the most divergent performance, with strong top-line growth but significant margin compression. Organic order intake grew by an impressive 30% on a rolling 12-month basis, with organic revenue growth of 8%. However, the segment’s adjusted EBIT margin collapsed to 2.4% from 10.2% in Q2 2024, which the company attributed to a soft product mix, temporary performance issues, and costs related to inventory adjustments.
The Strip segment’s contrasting performance metrics are illustrated below:
Financial Position & Outlook
Despite the challenging quarter, Alleima maintained its financial stability with essentially no net debt. The company’s working capital increased to 36.1% of revenues compared to 32.7% in the same period last year, while return on capital employed excluding cash remained relatively stable at 9.2% versus 9.3% previously.
The following chart shows the company’s capital efficiency metrics:
For the third quarter of 2025, Alleima provided guidance indicating continued headwinds. The company expects a negative currency effect of SEK 115 million on operating profit compared to Q3 2024, along with a negative metal price effect of SEK 150 million. Management also noted that a prolonged maintenance stop is scheduled for the summer, which could impact production.
For the full year 2025, Alleima maintained its capital expenditure guidance of approximately SEK 1,200 million and estimated a normalized tax rate of 23-25%.
Sustainability Progress
Amid the financial challenges, Alleima highlighted its progress on sustainability metrics. The company reported improvements in health and safety, with its Total (EPA:TTEF) Recordable Injury Frequency Rate (TRIFR) decreasing to 5.6 from 6.9 on a rolling 12-month basis. The share of recycled steel in manufacturing increased slightly to 80.8% from 80.6%, while CO2 emissions decreased by 6% to 87 kilotons.
The company also reported progress in diversity, with the share of female managers increasing to 25.4% from 23.7% in the comparable period.
These sustainability metrics are illustrated in the following chart:
Market Reaction
Investors responded negatively to Alleima’s Q2 results, with the stock falling 9.09% to SEK 73.50 on the day of the presentation. The sharp decline suggests that the market was disappointed by the company’s performance, particularly the margin compression and sequential decline from Q1 2025.
The stock has traded in a 52-week range of SEK 63.65 to SEK 98.25, indicating significant volatility over the past year. The current price represents a substantial discount from the year’s high, reflecting investor concerns about the company’s near-term growth prospects amid challenging market conditions.
In summary, while Alleima maintains a strong financial position and continues to make progress on strategic initiatives, the company faces significant headwinds from mixed market conditions, currency effects, and segment-specific challenges. Management’s focus on growth initiatives in less cyclical and more profitable segments may provide a path forward, but investors appear to be taking a cautious approach until more concrete signs of improvement emerge.
Full presentation:
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