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Introduction & Market Context
AQ Group AB (STO:AQ) presented its third quarter 2025 results on October 16, showing continued revenue growth despite facing headwinds in certain market segments. The company’s stock closed at 173.9 SEK, down 1.55% on the day of the presentation, but remains well above its 52-week low of 118.1 SEK.
The industrial manufacturer has maintained its track record of consecutive profitable quarters since its founding in 1994, with the latest results extending this streak to 11 consecutive quarters above its 8% earnings before tax (EBT) target. This performance comes amid a challenging environment for some of its market segments while others show robust growth.
Quarterly Performance Highlights
AQ Group reported an 8% increase in net sales for Q3 2025, reaching SEK 2,114 million compared to SEK 1,949 million in the same period last year. Operating profit (EBIT) increased by 2% to SEK 191 million, while profit after financial items (EBT) grew by 5% to SEK 187 million.
As shown in the following quarterly performance summary:
The profit margin before tax (EBT%) was 8.8%, slightly down from 9.1% in Q3 2024, but still above the company’s target of 8%. Profit after tax amounted to SEK 154 million (146), and earnings per share before dilution reached SEK 1.67 (1.60).
For the first nine months of 2025, net sales increased by 5% to SEK 6,748 million, while operating profit decreased slightly by 2% to SEK 624 million. The company maintained a strong equity ratio of 67%.
The company’s growth was driven by a combination of organic growth (+5%) and acquisitions (+7%), partially offset by negative currency effects (-4%). However, the organic growth rate of 4.6% fell short of the company’s 10% target, as illustrated in the following chart:
Strategic Initiatives and Growth Drivers
AQ Group continues to focus on high-growth industrial market segments, particularly electrification, defense, and medical technology. The company highlighted several significant new customer wins during the quarter, including HVDC control cabinets worth 7 million euros, solar inverter cabinets valued at 15 million euros per year, and transformers and inductors for data centers totaling 15 million euros so far.
The company’s strategic focus on data center infrastructure is particularly noteworthy, with medium voltage transformers for large data centers representing a growing business segment. This initiative, which began with design work in AQ Germany in 2018, now has orders on hand worth 15 million euros and includes a 2 million euro investment in 2025.
"We have high demand in grid electrification, defense and data centers," the company noted in its presentation, while acknowledging challenges in other segments: "Low demand from buses in North America, food equipment and transformers for ships in Europe."
AQ Group also highlighted its new Trafotek facility in Estonia, which provides 30% more space at the same cost as the previous building and features solar panels that can power a third of the factory’s yearly energy demand. The company expects good growth for the products manufactured at this facility in the coming years.
Acquisition Strategy and Integration
Acquisitions remain a key component of AQ Group’s growth strategy, with the company targeting 2-4 acquisitions per year. In Q3 2025, acquired growth contributed 7% to the company’s overall revenue increase, exceeding their 5% annual target.
The integration of recent acquisitions, particularly Mdexx (now renamed AQ Magnetronics), has presented challenges. The company reported that Mdexx’s total net sales have been lower than anticipated for 2025, and it diluted the group’s margin by 0.7% in the quarter. However, AQ Group has implemented several measures to improve performance, including a 10% reduction in personnel costs and a 2% reduction in purchasing costs. The company aims to reach AQ’s average margin at Mdexx by the end of Q4, though it acknowledges this target is challenging.
This focus on operational improvement extends to inventory management, where the company is working to increase inventory turnover from the current 3.0 turns/year to its target of 3.5 turns/year.
Financial Health and Cash Flow
AQ Group maintains a strong financial position with a net cash position of 429 million SEK as of Q3 2025. The company generated operating cash flow of 322 million SEK during the quarter, though this was down from 363 million SEK in the same period last year.
The following chart illustrates the company’s net cash from operating activities and net debt position:
The company’s earnings per share have shown consistent growth over the years, with a compound annual growth rate (CAGR) of 14% over the past decade. AQ Group aims to double its EPS every five years, a target it has successfully pursued as shown in the EPS development chart:
Forward-Looking Statements
Looking ahead, AQ Group remains focused on its long-term growth strategy while addressing near-term challenges. The company expects a slight increase in working capital by the end of the year as factoring arrangements at Mdexx and Riedel come to an end.
Operational improvements are ongoing, with particular attention to several sites experiencing capacity constraints, including facilities in Rockford, JIT Mech, Transformer Solutions (US), and Inductives Hungary. The company is also working to improve on-time delivery performance, which stood at 93% in Q3 versus a target of 98%.
AQ Group continues to evaluate acquisition targets, particularly in defense, electrification, and medical technology sectors, though management noted that closing deals "at the price level we want" remains challenging in the current market environment.
With its strong balance sheet, established track record of profitability, and strategic focus on growth markets, AQ Group appears well-positioned to navigate the mixed market conditions while pursuing its long-term growth objectives. However, investors will be watching closely to see if the company can improve its organic growth rate and successfully integrate recent acquisitions to maintain its impressive long-term performance trajectory.
Full presentation:
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