Bullish indicating open at $55-$60, IPO prices at $37
Introduction & Market Context
Boreo Oyj (HEL:BOREO) presented its Q2 2025 results on August 6, 2025, showcasing strong sales growth but facing profitability challenges. The company’s stock reacted negatively to the mixed results, dropping 5.06% to €15.95 following the presentation, despite having seen a 10.32% surge after its Q1 2025 results. This reversal suggests investors may have expected the strong Q1 momentum to continue into Q2.
The Finnish industrial company, which operates as a long-term owner of entrepreneurial businesses across seven countries, reported its performance against a backdrop of increasing economic uncertainty. While the company achieved impressive organic growth, the presentation acknowledged that "geopolitical and economic uncertainty are casting a shadow on the outlook."
Quarterly Performance Highlights
Boreo reported Q2 2025 sales of €40 million, representing a substantial 19% increase compared to Q2 2024, with organic growth accounting for 17% of this expansion. This marks a significant acceleration from the 4% organic growth reported in Q1 2025.
As shown in the following summary of key Q2 2025 metrics, despite the strong sales performance, profitability indicators showed some weakness:
The company’s gross margin remained stable at 31% compared to Q2 2024, but operational EBIT declined by 8% year-over-year to €2.2 million, resulting in a margin of 5.4% (down from 7% in Q2 2024). This represents a reversal from Q1 2025, when the company had reported a 28% increase in operational EBIT.
Boreo’s financial position charts illustrate the company’s performance against its strategic targets, showing mixed results:
The company’s leverage ratio stands at 2.3x (net debt to operational EBITDA), which falls within the target range of 2-3x. This ratio has improved due to the issuance of a convertible hybrid bond. However, the Return on Capital Employed (ROCE) of 8.4% remains well below the company’s 15% target.
Strategic Initiatives
During Q2 2025, Boreo continued to execute its acquisition-driven growth strategy, completing two strategic acquisitions that align with its ownership criteria of businesses with strong cash flows and entrepreneurial management.
The following slide details these acquisitions, which are expected to contribute to future growth:
The acquisition of Elfa Distrelec’s sales activities in Finland and the Baltics, completed on August 1, 2025, brings a high-service digital distributor with €15 million in annual sales and an attractive EBIT margin. The enterprise value of €5.5 million represents approximately 5x EV/EBIT, suggesting a reasonable valuation.
The earlier acquisition of Spetselektroodi AS, a distributor of premium welding equipment closed on May 8, 2025, adds €3.6 million in annual sales to Boreo’s portfolio.
To support its acquisition strategy, Boreo issued a €10 million convertible hybrid bond to Norwegian insurance company Protector Forsikring ASA:
This financial instrument strengthens Boreo’s balance sheet while providing flexibility, as it is classified as equity under IFRS accounting standards. The bond carries a fixed 4% interest rate until June 2030, with conversion rights at €19 per share over a four-year period.
Business Unit Performance
Boreo’s performance varied significantly across its two main business units. The Electronics business unit reported strong sales growth but faced profitability challenges:
The Electronics unit achieved 17% sales growth in Q2 2025, but operational EBIT declined to €0.8 million from €1.1 million in Q2 2024, with the EBIT margin decreasing to 5.6% from 8.7%. The presentation highlighted strong performance by Milcon and SSN divisions, with orderbooks growing from Q1 2025 levels.
In contrast, the Technical Trade business unit showed both sales growth and improved profitability:
Technical Trade reported 20% sales growth and a slight improvement in operational EBIT to €1.8 million compared to €1.7 million in Q2 2024. However, the presentation noted that revenue growth toward the end of the quarter led to an increase in receivables, affecting working capital metrics.
Forward-Looking Statements
Boreo’s business model continues to focus on acquiring and developing entrepreneurial companies with strong profits and cash flows:
The company maintains its strategic targets of 15% minimum annual average operational EBIT growth and 15% minimum ROCE, though current performance falls short of these ambitious goals. The net debt to operational EBITDA target of 2-3x is currently being met at 2.3x.
Boreo’s acquisition criteria remain focused on industrial B2B businesses with high cash conversion and asset-light business models:
Looking ahead, Boreo acknowledged that while order books support "decent performance in the short-term," uncertainty prevails in the market. The company’s presentation indicated that market conditions remain "moderate and stable," but the slight decline in profitability metrics suggests challenges in maintaining earnings growth in the current economic environment.
This cautious outlook represents a shift from the more optimistic tone in Q1 2025, when CEO Karri had expressed expectations for "a big rebound potential in our earnings" once market conditions improved.
Analyst Perspectives
While no specific analyst commentary was included in the presentation, the market reaction suggests investors may be concerned about the declining profitability despite strong sales growth. The 5.06% drop in Boreo’s share price following the presentation indicates that the market may be focusing more on the 8% decline in operational EBIT than on the impressive 17% organic growth.
The company’s current share price of €15.95 remains within its 52-week range of €9.12 to €17.55, but has retreated from recent highs. With a market capitalization of approximately €43 million based on previous reporting and a trailing twelve-month EBITDA of €9.53 million, Boreo continues to trade at relatively modest valuation multiples despite its growth trajectory.
As Boreo continues to execute its acquisition strategy and navigate economic uncertainties, investors will likely focus on whether the company can reverse the profitability decline while maintaining its strong sales momentum in the coming quarters.
Full presentation:
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