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Introduction & Market Context
Eltel AB (STO:ELTEL) presented its Q1 2025 financial results on April 30, marking a significant milestone with its first positive first-quarter result in a decade. Despite this achievement, the company’s stock fell 3.45% to 7.84 SEK following the announcement, reflecting investor concerns over declining net sales.
The Nordic infrastructure services provider reported a 3.8% decrease in net sales to EUR 169.6 million, though it achieved organic growth of 0.6% when excluding the impact of divested operations. The company’s strategic shift toward green energy transition and new market segments is beginning to show results, with new business increasing to 6% of total revenue from 2% in the previous year.
Quarterly Performance Highlights
Eltel’s Q1 2025 results demonstrated substantial improvement in profitability metrics despite the sales decline. Gross profit increased by 20% year-over-year to EUR 22.2 million, while adjusted EBITA turned positive at EUR 0.9 million compared to a EUR 4.0 million loss in Q1 2024.
As shown in the following financial highlights chart, the company achieved its seventh consecutive quarter of year-over-year adjusted EBITA improvement:
The company’s cash position also strengthened significantly, with cash flow from operating activities improving by EUR 22.4 million to EUR 17.5 million. Net working capital improved by EUR 17.3 million to EUR -76.3 million, while net debt decreased to EUR 103.6 million from EUR 114.9 million in the previous year.
Eltel’s comprehensive performance data reveals the contrast between improving profitability and declining sales:
Segment Performance Analysis
Eltel’s performance varied significantly across its geographic segments, with most regions showing profitability improvements despite mixed sales results.
Denmark & Germany emerged as the standout performer with an adjusted EBITA margin of 7.9%, up from 4.2% in Q1 2024. The segment benefited from a favorable business mix and strong operational execution, achieving an adjusted EBITA of EUR 2.4 million on sales of EUR 30.5 million.
Finland showed substantial improvement, swinging to an adjusted EBITA of EUR 1.7 million from a EUR 0.3 million loss in the previous year. The Finnish operations saw strong growth in green energy transition projects despite a decline in communication infrastructure work.
Sweden continued its positive trajectory with a 6.5% increase in net sales to EUR 53.1 million and an adjusted EBITA of EUR 1.5 million, representing its twelfth consecutive quarter of year-over-year improvement.
Norway remained the primary challenge for Eltel, with sales declining 9.4% to EUR 23.3 million and adjusted EBITA deteriorating slightly to EUR -1.8 million. The company continues restructuring efforts in Norway, incurring EUR 600,000 in personnel-related costs during the quarter.
The long-term trend in adjusted EBITA and gross profit demonstrates Eltel’s gradual recovery:
Strategic Initiatives and Progress
Eltel’s strategic transformation focuses on improving profitability in its core business while expanding into adjacent growth markets. The company reported significant progress in its green energy initiatives, with the first solar park in Sweden entering production and completion of projects in Denmark. Battery energy storage system (BESS) deliveries in Finland and Denmark represent another growth area.
The company outlined its strategic priorities as follows:
Implementation of this strategy is gaining momentum, with 6% of net sales now coming from new business areas and 17% of newly signed contracts in 2025 related to these growth segments. The company has successfully broadened its customer base, particularly in public infrastructure projects.
The following chart illustrates Eltel’s progress in executing its strategic initiatives:
Financial Targets and Outlook
Eltel maintained its medium-term financial targets, aiming for an adjusted EBITA margin of 5%, annual growth of 2-4%, and a leverage ratio between 1.5-2.5x net debt to adjusted EBITDA. The company has already achieved its leverage target with a ratio of 2.1.
Looking ahead, Eltel expects continued improvement in profitability as it executes its strategy. The company’s next quarterly report will be released on July 24, 2025.
CEO Håkan Dahlström emphasized the company’s role in enabling digitalization and electrification in Nordic society, stating in the earnings call that "We enable the digitalization and electrification of our society." He also affirmed the effectiveness of Eltel’s strategy and commitment to shareholder value.
While Eltel has made significant progress in its turnaround, challenges remain, including the continued underperformance in Norway and overall sales decline. The market’s cautious reaction to the results suggests investors are looking for evidence of sustainable top-line growth to complement the improving profitability metrics.
Full presentation:
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